Can Small Businesses Claim Back GST?
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You should always consult an accountant for accurate and up-to-date information regarding GST. This article is a guide only and does not take into consideration current legal requirements, nor has it been written by anyone with an Australian accounting background.
Business owners face a multitude of different taxes imposed by the Australian Government. One such tax that many business owners forget about is GST. Paying GST is common for business owners, but did you know there is a credit you can take to reduce your liability?
Claiming the offsetting credit for GST can be done when filing and paying GST. However, if you have already filed your returns, you can go back and claim the credit and enjoy some tax savings.
What Is GST?
Goods and services tax, referred to as GST, is a tax on goods and services sold within Australia. This tax is imposed on most business owners and usually hovers around 10%. Business owners will generally register for GST in the business formation stage; however, it can be registered for at any point. There are certain items that are excluded from the GST tax including:
- Basic food items
- Some educational courses
- Some medical and healthcare services
- Some prescriptions
- Precious metals
- Water, sewer, and drainage services
For a complete list of non-taxable items, visit the Australian Government’s website. The Australian Government does allow businesses to claim a credit for GST if the following conditions are met:
- The purchase is for running your business and will not be used to create taxed supplies
- The purchase price includes GST
- You are required to provide payment for the items purchased
- You have a qualifying tax invoice from a supplier
If these conditions are met, you are able to claim an offsetting credit for GST.
Can You Go Back And Claim GST?
The regulations surrounding GST credits can be confusing, which is why some business owners forget to claim the offsetting credit. When this happens, there are a few different courses of action you can take. The first stipulation to claim a GST credit is that you must be registered for GST. You can’t claim the credit without paying any taxes in. Next, understand that you can’t claim a credit for tax-exempt items, such as food.
How Do You Claim Prior GST?
If you have already filed your annual GST return, you may be able to correct it on next year’s return or file an amended return. Both of these options can be complex so be sure the credit amount is worth any additional legal fees and time you put into it. When you are correcting a GST mistake on an activity statement, you may be able to waive any penalties imposed. However, it’s generally easier to correct mistakes on the next statement rather than go back and amend.
Claiming the credit for GST is important to understand as a business owner to maximize tax saving potential. However, this is not the only consideration as a growing business. In fact, understanding your insurance is equally as critical.
Weighing your current insurance coverage for areas of improvement can be done by using our instant quote generator, where you can get an estimate on market-leading insurance in seconds! Simply enter your occupation and expected revenue to get started!