Tax guide: Understanding GST for Sole Traders

If you haven’t been collecting GST when required, you may face penalties from the Australian Taxation Office (ATO). It’s essential to track your turnover and register for GST if you exceed the threshold to avoid penalties and ensure compliance.

GST (Goods and Services Tax) is a 10% tax added to the price of taxable goods and services sold in Australia. As a sole trader, you are responsible for collecting GST from your customers and remitting it to the ATO. This process involves issuing tax invoices that clearly show the GST amount.

To claim a GST credit, you must have a tax invoice from your supplier that clearly shows the amount of GST paid. The goods or services you are claiming must have been purchased for your business use and not for private or domestic purposes. It’s important to keep accurate records of your purchases and GST payments to support your claims.

As a sole trader, you may incur GST expenses when purchasing goods and services for your business operations. These GST payments can be offset against the GST you collect on your sales (input tax credits). Sole simplifies this process by automatically tracking GST paid on business expenses and helping you claim these credits when preparing your BAS. This ensures you only pay GST on the net value of taxable supplies, reducing your overall tax liability.