Why You Should Register for GST **NOW** (And How It Can Reduce Your Costs SIGNIFICANTLY)

Are you avoiding registering for GST because you’re not sure what registration means or entails?

Fair enough.

There are a few compliance hurdles that come with registration. Having to file GST returns, having to pay GST to the Inland Revenue, and a host of other small compliance matters.

Alas, the pros will outweigh the cons when it comes to registering for GST. Read on.

Registration

You can register for GST at any time. You do not need to exceed the $60k/annum turnover threshold. The trigger is that you expect to generate sales more than $60k in the next twelve months. Therefore, it’s about how ambitious you can be, rather than your actual sales level 🙂

Now the beauty of GST registration is that it allows you to claim back GST on all of your purchases. Not just your business running costs, but also the assets that your business purchases; motor vehicles, computers etc.

It’s true that you also need to charge and collect GST on the goods and services that you sell, however, I’ll explain why this is a non-issue.

GST is not your money. The GST you collect on sales must be passed over to the tax man. You must treat this GST as theirs from the beginning. You are collecting this tax for them. Cheeky of them, but we can’t do much about it.

That means, any GST claimed on your purchases is YOURS TO KEEP. You pay the tax man the difference between the GST you collect and the GST you claim.

For example, if you collected $100 in GST on your sales this month, and claimed $30 on your purchases, you only pay the tax man $70. This means the $30 remains in your bank account.

Things get messy when you start treating GST as your own money. So don’t do it.

The Reward

As I state above, GST can be claimed on your purchases and that GST is yours to keep.

Let me show you the power of GST claims with an example.

Let’s say you have annual sales of $1,000,000. That means you will have collected $150k in GST on this sum.

Say your running costs for the year were $400k. The GST claimed on this is $60k.

The difference of $90k ($150k less $60k) is paid to the Inland Revenue.

Now here is where things get interesting. Because you were able to keep the $60k, that means your true cost of doing business for the year was only $340k. $60k less than if you weren’t GST registered!

The profit you get to keep is $660k vs $600k if you weren’t registered.

Now, keep in mind at this level of sales you would need to be registered for GST regardless, however, I’ve used round numbers to illustrate the concept.