Registering for GST
As a business owner if you provide good or services you will have to register for GST. A lot of business owners get confused about what the best method to register for GST is. Basically if your business has a turn over of less than two million dollars the choice is yours. You can register for either method. However, if your business has a turn over that exceeds two million dollars then you must report for GST on an accrual basis.
Whats the difference between Cash Basis and Accrual GST
If you are reporting GST on a cash basis then you are purely reporting your sales and your expenses of what goes in and out of your bank. The problem with this method is that if you have a lot of suppliers or have made some large capital acquisitions, you might not be able to claim the GST input credit.
As an example: we had a client that was on a cash basis that purchased a large vehicle in excess of 100 thousand dollars. Because they were on a cash basis they couldn't claim the GST input credit for that purchase until they had paid for the vehicle which was in a subsequent BAS period.
If the client had of been on an accrual basis they could have entered that invoice into their system and actually claimed the 10 thousand dollar GST input credit against their income for that current period.
In summary if you are a small business and don't have any accounting systems in place it maybe that the cash method is best for you due to being a lot easier. However, as you get larger and reach that threshold, then the accrual method of reporting GST will be the preferable way to go.
Books Onsite can help
If you need help with your accounting please contact our friendly staff via our contact form or by calling us on 1300 2BOOKS.
