Sole Trader and GST Guide For Beginners

As a sole trader, GST can feel like extra paperwork just for the sake of it. However, once you know how the goods and services tax works, it’s basically a rhythm. All you need to do is register, charge GST on taxable sales, track what you collect and what you pay on business purchases, then report it in a business activity statement (BAS).

Do I need to register for GST as a sole trader?

Not every business needs GST registration. But you must register for GST when your total business income (i.e. turnover) clears the GST threshold of $75,000 (not profit, not net income). Once you’re required to register, you have 21 days to do so.

You also have to register regardless of turnover if you provide taxi or limousine travel for passengers (including ride-sharing). Any sole trader looking to claim fuel tax credits must also register for GST with the ATO.

Beyond the above, if you run a non-profit organisation, GST rules revolve around a higher threshold ($150,000). You can also register voluntarily, but there are rules about how long you must remain GST-registered.

Also worth noting is that you only register once, even if you run more than one business under your name. You’ll need an Australian Business Number first.

GST turnover and the number that matters

Your GST turnover is based on sales — your gross revenue or business income — not your profit after business expenses. The ATO looks at turnover using a rolling 12-month window. In short, your situation will be determined by your current GST turnover (this month plus the previous 11 months) as well as projected GST turnover (this month plus the next 11 months).

If you’re starting a new business, the GST turnover test matters a lot. If you reasonably expect to cross the threshold, it’s time to register for GST before you actually receive the income.

How to register for GST

Once you have an ABN, you can register for GST through the ATO using their GST online services, or get help from a registered tax adviser or BAS agent. The ATO will confirm your GST registration details and the date your registration will start.

If you’re a non-resident carrying on an enterprise in Australia, you might need to come up with some proof of identity requirements as part of the process. After that, you’ll just need to keep good records, track any and all GST charged and GST paid, and then lodge your business activity statement (BAS) for each GST period.

The rules around charging GST

Most taxable goods and services in Australia attract 10% GST. You can quote a GST-inclusive price, where the total price includes GST, or quote an exclusive-of-GST price and add GST on top. Either way is fine, as long as your customer understands the total price and the calculated GST component.

In other words, you collect the tax component on your customers’ sales, hold it and then pay GST to the ATO when your BAS is due. The most common rookie mistake is spending that money and then scrambling to cover the total GST later on, leading to poor cash flow.

What to include on your tax invoices

If you’re GST-registered and make a taxable sale, your customer is entitled to request a tax invoice. For most transactions, you should provide one anyway. For taxable sales over $82.50 (including GST), the invoice needs to meet the ATO’s tax invoice rules.

At minimum, a valid tax invoice should include:

• The words ‘tax invoice’.
• Your business name and ABN.
• The date, goods or services sold, quantities and total price.
• The GST amount payable or a statement like ‘total price includes GST’ when GST is exactly 1/11 of the total.
• For invoices of $1,000+ (incl. GST), the buyer’s identity and ABN.

Cash accounting basis vs accrual accounting basis

When you register, you’ll usually choose when to account for GST in one of two ways:

• Cash basis: Report GST when you receive payment (cash in) and claim GST credits when you pay suppliers (cash out).
• Accruals basis: Report GST based on invoice dates, even if you haven’t yet been paid.

For plenty of sole traders, cash basis helps with your cash flow management because you’re not paying GST on money you haven’t actually received. Accruals, on the other hand, can suit larger business activities, but it can pinch if clients are late.

BAS, GST credits and refunds

Your BAS is where you report what you collected and what you can claim back. Ultimately, it’s just GST collected on sales minus GST credits that equals your net GST payable (or a refund).

If your claimable GST is higher than what you collected during the period, you could receive GST refunds. This is useful for businesses buying equipment, stocking up, spending heavily on setup costs, or other capital expenditure activities (CapEx).

GST-free sales and special cases

Some sales are GST free under Australian law. If you’re GST-registered, you’ll still need to record those sales, but the GST component is $0. Bear in mind that this matters for GST purposes and correct BAS reporting, especially if you sell a mix of GST-free and taxable items.

If you’re unsure, check the ATO website or speak with your tax agent.

GST for sole traders in a nutshell

It is important to remember that GST is about tracking and reporting the tax component of your sales, not your profitability. Keep an eye on your rolling turnover, use tax invoice templates, choose the right accounting method, invest in good accounting software, and get help early if you’re close to the threshold.

That’s how you’ll keep GST predictable and your cash flow steady for years to come.