You look at your business accounts. You see $80,000 in sales. Then you remember something. “Isn’t the GST registration threshold $75,000?” So you start wondering: “Am I already required to register for GST?” This is where things can get confusing.
You may hear the terms business turnover, GST turnover, sales, and revenue being used as if they all mean the same thing. They don’t always mean the same thing. Let’s make it simple.
What is business turnover?
In everyday business language, turnover usually means the total sales or revenue generated by your business over a period. For example, imagine you run a small cleaning business. During the year, you invoice customers: $90,000. You spend: $50,000 on wages, supplies, fuel and other expenses. Your profit is: $40,000.
Your business turnover is generally based on your $90,000 of sales, not your $40,000 profit. This is an important distinction. Turnover is not profit.
What is GST turnover?
GST turnover is a specific term used for GST purposes. The ATO uses GST turnover to work out whether a business needs to register for GST. For most businesses, the GST registration threshold is $75,000. But you cannot simply look at your total bank deposits and say: “That’s my GST turnover.”
GST turnover is calculated using specific GST rules. Some amounts are included. Some amounts are excluded. That is where the difference becomes important.
So, are business turnover and GST turnover the same?
Sometimes they may be very close. Sometimes they may be different. Think of it this way: Business turnover is a general business term. GST turnover is a tax term with a specific meaning. Your accounting software might show sales of $80,000. But that does not automatically mean your GST turnover is exactly $80,000. You need to look at what makes up those sales.
What generally counts towards GST turnover?
GST turnover generally looks at the value of supplies you make in the course of your business. This can include:
- Sales of goods.
- Sales of services.
- Other business supplies.
- Certain GST-free supplies.
This last one surprises many business owners. A sale can be GST-free and still count towards your GST turnover. So, No GST charged does not always mean the sale is excluded from GST turnover. These are two separate questions.
GST-free does not mean “doesn’t count”
Let’s say your business makes: $60,000 taxable sales and $20,000 GST-free sales. You might think: “Only $60,000 has GST, so I am below the $75,000 threshold.” Not necessarily.
GST-free supplies can still be relevant when calculating GST turnover. So you need to consider the GST turnover rules rather than only looking at the GST you charged.
What about GST itself?
GST is not counted as part of your GST turnover. Let’s say you make a taxable sale of: $55,000 including GST. The GST component is: $5,000. The amount before GST is: $50,000.
The GST itself is not added again to your GST turnover. This is another reason why simply using the total amount received from customers can give you the wrong answer.
What about business expenses?
This is an easy one. Your expenses do not reduce your GST turnover in the same way they reduce your profit. Imagine: Sales: $100,000, Expenses: $70,000, Profit: $30,000.
Your expenses may reduce your profit to $30,000. But they do not simply reduce your GST turnover from $100,000 to $30,000. So don’t use your profit and loss calculation as a substitute for checking GST turnover.
What about a business loan?
This is another common source of confusion. Your business receives a: $50,000 bank loan. Your bank balance goes up by $50,000. But you haven’t made $50,000 in sales. It is a loan.
So you don’t simply add that $50,000 to your business turnover or GST turnover. The same principle applies to other amounts that are not business sales. Money coming into your bank account does not automatically mean turnover.
Current GST turnover vs projected GST turnover
There is another important part to understand. The GST rules look at both current GST turnover and projected GST turnover. Current GST turnover generally looks at your turnover for the current month plus the previous 11 months.
Projected GST turnover generally looks at the current month plus the next 11 months. This means your expected future business activity can matter. You don’t always have to wait until your actual sales cross $75,000.
Here’s a simple example
Imagine you run a small construction business. Your sales so far have reached: $65,000. You then sign a large contract. Based on the contract and your expected sales, you now expect your GST turnover to cross the threshold.
This is the point where you should stop and review your GST position. Don’t wait until the money has already hit your bank account. Your projected turnover may be important.
Why does the difference matter?
Because getting the number wrong can have consequences. If your GST turnover means you are required to register, you generally need to register for GST. Once registered, you may need to:
- Charge GST on taxable sales.
- Issue appropriate tax invoices.
- Keep GST records.
- Lodge BASs.
- Pay any net GST owing.
So this isn’t just an accounting definition. It can affect your actual tax obligations.
A quick comparison
| Business turnover | GST turnover |
|---|---|
| General business term | Specific GST concept |
| Often refers to total sales or revenue | Calculated under GST rules |
| Used for business reporting and analysis | Used to determine GST registration obligations |
| Not the same as profit | Not the same as profit |
| May include amounts that are treated differently for GST | Certain amounts are specifically included or excluded |
The two numbers can be the same. But you should not assume they always are.
What should you do as a business owner?
Don’t make GST turnover something you only check when your accountant asks for it. Keep an eye on it throughout the year. If your business is approaching $75,000, take a closer look. Review what your sales actually consist of. Check your current turnover.
Look at your expected turnover. And don’t forget about GST-free sales and other amounts that may affect the calculation. If you are unsure, ask your accountant to check your GST turnover before you cross the threshold.
The bottom line
Business turnover tells you how much business you are doing. GST turnover is the specific calculation used for GST purposes. They can look very similar. But they are not necessarily the same.
And when you are close to the GST registration threshold, that difference matters. So the next time you look at your accounts and see $75,000 or more in sales, don’t immediately assume you know your GST position. Take a closer look. Work out what those sales actually represent. Because with GST, the number on your report is only the starting point.
