GST core
Projected GST turnover
Projected GST turnover is your expected GST turnover for the current month and the next 11 months, used to work out whether you must register for GST before you actually reach the threshold.
Projected GST turnover looks forward rather than back. It is your reasonable estimate of the sales your business will make over the current month and the following 11 months. If that estimate reaches the registration threshold, you are generally required to register for GST at that point, even if your actual sales so far have been much lower.
The forward-looking test exists because many businesses start small and then grow quickly, or have a lumpy sales pattern. A new business that signs a large contract may know that it will exceed the threshold well before the money arrives. Under the law, you need to register when you can reasonably expect your turnover to meet the threshold, which is $75,000 for most businesses and $150,000 for non-profit organisations.
How do you work out a projection? Use real information. Look at confirmed contracts, orders, past sales, seasonal patterns and the way your business is trending. Your projection should be reasonable and not simply a guess or a deliberately low figure. If one large sale is expected, include it in the month in which you expect to make it. If a one-off event is unlikely to recur, you may consider whether to include it, but only on reasonable grounds.
There is a useful exception in practice. If your turnover would pass the threshold only because of a one-off sale, for instance selling an asset outside your normal course of business, that sale does not generally count. Similarly, a sale of an input-taxed item does not count. So the projection is about sales you expect to make as part of your normal enterprise.
If your projected turnover meets the threshold, you should apply for registration promptly. ATO guidance is that you generally need to register within 21 days of the point at which you know you are required. If you are late, you may owe GST on sales since the day you should have registered, even though you did not charge it to customers, which can be a significant out-of-pocket cost.
The test needs to be reviewed regularly. A projection made at the start of the year may no longer be accurate after a big win or a loss of a major client. Keep a short written note of how you arrived at your estimate and update it. The projection can also work in your favour, because a business that falls below the threshold and expects to stay below may be able to cancel its registration.
This is general information only. The current thresholds and your specific facts matter, so check ato.gov.au or consult a registered tax professional if you are close.
Worked example
Ravi starts a bookkeeping business in July. In the first month he earns $4,000, but he has signed contracts that will bring $90,000 in sales, excluding GST, over the next 12 months. His projected GST turnover for the current month plus the next 11 months is above $75,000, so he must register for GST even though his actual sales so far are well under the threshold.
Practical tips
- Base your projection on contracts, orders and past trends, and keep a written note of how you calculated it.
- Register promptly once you expect to reach the threshold, because late registration can leave you liable for GST you never charged.
- Re-run the projection when something big changes, such as a new contract or a lost customer.