You are running your business. Sales are picking up. Things are going well. Then you hear: “You need to register for GST when your turnover reaches $75,000.” That sounds simple. But then comes the obvious question. “What exactly counts as GST turnover?”
This is where many business owners get confused. GST turnover is not simply the money sitting in your bank account. It is also not your business profit. Let’s break it down.
What is GST turnover?
Your GST turnover is basically the total value of the business sales you use to work out whether you need to register for GST.
For most businesses, the GST registration threshold is $75,000. For eligible not-for-profit organisations, the threshold is $150,000. There are also special rules for certain businesses, such as taxi and ride-sourcing operators. The important thing is that GST turnover is calculated under specific GST rules. So you cannot simply look at your annual profit and use that number.
GST turnover is not your profit
This is probably the easiest way to understand it.
Imagine your business makes: Sales: $90,000. Your business expenses are: $60,000. Your profit is: $30,000. You might think: “My profit is only $30,000, so I am nowhere near the $75,000 GST threshold.”But that is not how it works.
Your GST turnover can be based on your $90,000 of business sales, not the $30,000 profit. So you may already be over the GST registration threshold. This is why looking only at your profit can be misleading.
What is included in GST turnover?
Generally, you look at the value of your business supplies when calculating GST turnover. This can include things such as:
- Sales of goods.
- Sales of services.
- Income from business activities.
- Certain other supplies made in the course of your business.
But there are important exclusions. That is why the GST turnover calculation is not always as simple as adding every dollar that comes into the business.
What is excluded from GST turnover?
Some amounts are not included when working out GST turnover. For example, GST itself is not included in your GST turnover. Certain supplies that are not made in the course of your business are also excluded. There are also specific rules for input-taxed supplies, supplies that are not connected with Australia, and other amounts.
This is why it is important to look at the type of transaction. Not just the amount.
Current GST turnover vs projected GST turnover
This is one of the most important things to understand. The ATO looks at two concepts: Current GST turnover and Projected GST turnover. Your current GST turnover looks at your business turnover for the current month plus the previous 11 months. Your projected GST turnover looks at the current month plus the next 11 months.
You generally need to consider both when determining whether GST registration is required. And there is an important point here. You cannot simply wait until your sales have already crossed $75,000. Your expected future sales can also matter.
Let’s look at an example
Imagine you start a new business in July. For the first few months, things are slow. Your sales are around $4,000 per month. Then you sign a large contract. Your expected sales for the coming months increase significantly. You now reasonably expect your GST turnover to cross $75,000.
Even though your actual sales may not have reached $75,000 yet, you should check whether you are now required to register for GST.This is why keeping an eye on your projected turnover matters.
What if your turnover goes up and down?
This happens all the time. Business is rarely perfectly consistent. You might make $3,000 one month. Then $15,000 the next month because you completed a large project. A quiet month follows. That does not automatically mean you are below the GST threshold. GST turnover looks at a rolling period. So you need to consider the relevant 12-month periods rather than just looking at one financial year.
What about GST-free sales?
This is another area where things can get confusing. A sale can be GST-free and still count towards your GST turnover. For example, certain GST-free supplies can still be included when calculating GST turnover. So don’t assume: “There is no GST on this sale, so it doesn’t count towards my GST turnover.”
Those are two different questions. One question is whether you charge GST on the sale. The other is whether the sale counts towards your GST registration threshold. Always consider both.
What about sales of business assets?
You may sell a business asset from time to time. Perhaps you sell an old vehicle. Or replace some equipment. The GST treatment can depend on the circumstances. Certain sales of capital assets are treated differently when calculating GST turnover. So don’t automatically add every asset sale to your turnover calculation without checking the rules.
What about loans and money put into the business?
Not every amount that comes into your bank account is business turnover. Suppose you receive a $50,000 business loan. Your bank account has increased by $50,000. But that does not mean you have made $50,000 in sales. The same idea applies to certain owner contributions and other non-sales transactions.
This is why: Bank deposits ≠ GST turnover. You need to identify what each amount actually represents.
Why does GST turnover matter?
Because it can determine whether you need to register for GST. For most businesses: $75,000 GST turnover threshold = GST registration becomes important. If you are required to register, you generally need to register within the required timeframe. You may then need to charge GST on taxable sales, keep appropriate records and lodge BASs.
So GST turnover is not just another accounting number. It can trigger real tax obligations.
A simple example
Let’s say you run a small marketing business. Over the relevant period, you have: Business sales: $70,000 GST-free sales: $10,000, Business expenses: $40,000. Business loan received: $20,000. Your profit is not what you use to determine GST turnover. The business loan is not a sale either.
And the GST-free sales may still count towards GST turnover. So you need to look at the GST rules rather than simply adding up bank deposits or looking at your profit and loss statement.
Keep watching your turnover
This is probably the best habit you can develop. Don’t check your GST turnover once a year. Check it regularly. Especially if your business is growing. If you are sitting around $60,000 or $65,000, don’t wait until you hit $75,000. Look at where your business is heading. Do you have new contracts coming in? Are sales increasing? Are you expecting a large project? These things can change your GST position quickly.
The bottom line
GST turnover is basically about your business supplies, not your profit. And it is not simply the amount of money that comes into your bank account. For most businesses, the $75,000 threshold is the number you need to keep in mind. But the calculation involves specific GST rules.
So if your business is getting close to the threshold, don’t guess. Review your turnover.Look at your current and expected sales. Check which amounts are included and excluded. And if you are unsure, speak to your accountant or tax adviser. It is much easier to deal with GST before you cross the threshold than to discover later that you should have registered months ago.
