GST trips up a lot of tradies starting out. It's not complicated once it clicks, but getting it wrong means either short-changing yourself or landing a surprise bill. Here's the plain-English version. (This is general information, not tax advice, check your own situation with your accountant or the ATO.)
When do you have to register?
In Australia you're generally required to register for GST once your business turnover reaches $75,000 a year (or you expect it to). Under that, registering is optional. Once you're registered, you charge 10% GST on top of your prices, and you can claim back the GST on your business purchases.
What changes when you're registered
- You add 10% GST to your quotes and invoices.
- Your invoices need to be valid tax invoices, showing the GST amount (or that the total includes GST), your ABN, and for sales over $1,000, the customer's details.
- You lodge a BAS (usually quarterly) and pay the GST you collected, minus the GST you paid on business expenses.
- You can claim GST credits on tools, materials, vehicle costs and other business purchases.
Quoting: GST-inclusive or exclusive?
Decide how you present prices and be consistent. For everyday customers (homeowners), quoting a GST-inclusive total is clearest, they see the real number they'll pay. For trade or business customers, ex-GST is common. Whatever you do, make it obvious on the quote so there's no argument at invoice time.
Common mix-ups
- Charging GST when you're not registered, you can't, and calling something a 'tax invoice' when you're not registered is wrong. Just 'invoice' is correct.
- Forgetting GST is not your money, you're collecting it for the ATO. Set it aside so BAS time isn't a shock.
- Pricing as if the GST is profit, your margin is on the ex-GST price, not the total.
The pricing trap on the day you register
This is the one that catches people. If you were charging a homeowner $100 an hour and you register for GST, your price does not stay $100. That $100 now has to include GST, so you keep $90.91 and hand $9.09 to the ATO. Same job, same hour, nine per cent pay cut, unless you move your price to $110.
Which way you go depends on who your customers are. Businesses claim the GST back, so it costs them nothing and you should simply add it. Homeowners can't, so a rise is a real rise to them, and you have to decide whether to absorb some of it. What you must not do is register and quietly keep quoting the same numbers, because you've just given yourself a pay cut and won't notice until BAS time.
What actually changes
- You charge 10% on top of your prices and hold it for the ATO, it was never yours.
- You lodge a BAS, usually quarterly, whether or not you had a good quarter.
- You claim back the GST on what you buy: tools, materials, fuel, the ute.
- Your invoices become tax invoices and must carry your ABN and the GST amount.
That third point is the part people forget in the panic. If you buy a lot of materials and gear, the credits you claim back can offset a decent share of what you collect, which is why some tradies register before they have to.
Put money aside as it lands
The GST you collect is not income and spending it is the most common cash-flow disaster in the trade. Move it out of the account it lands in, the same week, every week. A quarter's worth of GST discovered on the day a BAS is due has ended more small trade businesses than any bad job ever did.
Where Agentize fits
Tell Agentize once whether you're registered for GST, and it handles it on every quote and invoice, the right calculation, shown clearly, every time. Plans from $49 a month, cancel any time.