Registration
Voluntary GST registration
Voluntary GST registration is when a business whose turnover is below the registration threshold chooses to register for GST so it can claim input tax credits, accepting the duty to charge GST on sales.
Voluntary GST registration means registering for GST when you are not required to. It is available to any business that has an ABN and carries on an enterprise, even if its turnover is well under $75,000, or $150,000 for non-profit organisations. Many start-ups choose to register early because they know they will cross the threshold soon, or because they have large set-up costs.
The main reason is input tax credits. Once registered, you can claim the GST included in the price of business purchases, provided you hold valid tax invoices. A business that buys equipment, stock or professional services in its first months can recover a meaningful amount, which may produce a GST refund on its first BAS. Without registration, that GST is simply a cost of doing business.
The trade-off is that you must charge GST on your taxable sales, report it, and lodge BAS regularly. If your customers are other registered businesses, this has little effect, because they can claim the GST back. If your customers are individuals, charging GST either raises your prices by 10% or reduces your margin if you keep prices the same, which can matter in competitive markets.
Voluntary registration also brings obligations around invoices, record keeping and timing. You need to issue tax invoices when asked for taxable sales above $82.50, keep records for five years and lodge BAS on time. Late lodgment can lead to penalties and the general interest charge. Because registration takes effect from a specific date, you must apply GST from that date, and you cannot choose to charge it on only some customers.
You can later cancel the registration if your turnover is below the threshold and is expected to remain below it, but cancelling can bring GST consequences for assets you still hold, so the decision needs thought. It is not a switch you flip each quarter based on convenience, and the ATO expects consistency.
Common mistakes include registering without first thinking through the pricing effect, and assuming registration means you can claim credits on private expenses. You can only claim for purchases made for your enterprise. Another mistake is forgetting that you can only register if you carry on an enterprise, and that hobbies and some casual activities do not qualify.
This is general information only. Whether voluntary registration suits you depends on your customers, costs and plans, so discuss it with a registered tax professional or the ATO.
Worked example
Jess is setting up a coaching business and expects first-year sales of $40,000 excluding GST. She buys $11,000 of GST-inclusive equipment and software. If she registers voluntarily, she can claim $11,000 divided by 11, which is $1,000, in credits. She must then charge GST on her fees, so a $100 session becomes $110 to customers, or she keeps $100 inclusive and receives $90.91 before GST.
Practical tips
- Compare the credits you could claim with the effect of adding 10% to your prices if your customers are mostly individuals.
- Once registered, charge GST on all taxable sales from the effective date and issue compliant tax invoices.
- Plan before cancelling later, because GST may apply to assets you still hold.