Your Side Hustle Just Became a Business: Do You Need to Register for GST?
Plenty of small businesses start as something casual: a side hustle, some freelance work, a market stall that took off. But once your turnover reaches $75,000 in a 12-month period, GST registration stops being optional. Here is how to tell if you have crossed the line, and what happens if you have.
The $75,000 rule, explained
You must register for GST once your GST turnover, your gross business income rather than your profit, reaches $75,000 or more within a 12-month period. That threshold rises to $150,000 for non-profit organisations. Importantly, this is not just about your income over the past 12 months, it also covers your projected turnover for the next 12 months. If you can see a big contract or a busy season coming that will tip you over the line, you need to register before you get there, not after.
Working it out month by month
The ATO expects you to track two figures: your current GST turnover, which is this month plus the previous 11 months, and your projected turnover, which looks ahead to the next 11 months. A sole trader with steadily growing sales might find their current turnover is still under $75,000, but if they can see it climbing past the threshold within the year ahead, the registration requirement kicks in on the projected figure, not just the historical one. It pays to check both, not just look backwards at what you have already banked.
You have 21 days once you hit the threshold
Once your current or projected turnover reaches $75,000, you have 21 days to register. You will need an ABN first if you do not already have one, and registration can be done through Online services for business, by phone, or through a registered tax or BAS agent. It is worth checking your turnover monthly if you are getting close. Waiting for your accountant to notice at tax time is too late.
What happens if you do not register in time
This is the part that catches people out. If you should have registered and did not, the ATO can still hold you liable for GST on the sales you made from the date you were required to register, even if you never charged your customers GST on those sales. That means the GST effectively comes out of your own margin, on top of possible penalties and interest. Backdating a late registration is possible, generally up to four years, but it does not undo the fact that GST was owed on sales you have already made.
Registering early can also work in your favour
If your turnover is under $75,000, registering is optional, but it is not always a bad idea. If you have significant GST on business expenses like equipment, stock or tools, registering lets you claim GST credits back, which can improve your cash flow even before you are required to charge GST on your own sales. The trade-off is the extra reporting: once registered, you generally need to stay registered for at least 12 months and start lodging BAS.
Turnover creeps up faster than most business owners expect, especially in a growing business. A quick, regular check against the $75,000 threshold, rather than an annual surprise, is the difference between a smooth GST registration and an unexpected tax bill.
Not sure whether your turnover means you should register for GST, or want help weighing up registering early? Get in touch and we will work through the numbers with you.
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