Why being GST compliant is important for your business – Retriever Services

Why being GST compliant is important for your business

Goods and Services Tax (GST) is an indirect tax applied on the supply of goods and services in Australia. It is imperative for businesses to stay up-to-date with their GST payments as non-compliance can result in penalties and fines from the Australian Taxation Office (ATO). Keeping up to date with GST payments not only ensures compliance with tax laws but also has several benefits for your business:

  1. Avoids Penalties and Fines: Late payment or non-payment of GST can result in significant fines and penalties from the ATO. The ATO can charge interest on late payments and even penalise businesses for making false or misleading statements on their Business Activity Statements (BAS). Keeping up to date with GST payments helps businesses avoid these penalties and fines and maintain a good relationship with the ATO.
  2. Maintains a Good Credit Rating: Late or non-payment of GST can negatively impact a business’s credit rating. This can make it difficult for businesses to obtain loans or secure contracts with suppliers and customers. Keeping up to date with GST payments and maintaining a good credit rating allows businesses to take advantage of financial opportunities that may arise.
  3. Enhances Cash Flow Management: Accurate record-keeping and timely payment of GST helps businesses better manage their cash flow. Businesses can avoid large, unexpected tax bills by keeping their GST liability up to date. This can help businesses plan for future expenses and ensure that there is sufficient cash flow to meet these obligations.
  4. Supports Accurate Financial Reporting: Keeping up to date with GST payments supports accurate financial reporting. Accurate financial reports are crucial for businesses to make informed decisions and plan for the future. By ensuring that GST payments are up to date, businesses can ensure that their financial reports are accurate and reliable.
  5. Helps Avoid Costly Errors: Inaccurate or incomplete record-keeping can result in costly errors when calculating GST liability. The ATO can disallow expenses that are not supported by appropriate records and can impose penalties for false or misleading statements on a BAS. Your TAX or BAS agent is critical in this area – make sure you are using a TAX or BAS agent who is up to date in the best and latest methods for keeping on top of your GST reporting and payments.
  6. Avoid personal liabilities: The ATO has now made through recent law changes directors of businesses personally liable for GST debts. This means that if your company runs up a large GST debt and then fails, the ATO will commence recovery action against you personally.

So, how can businesses ensure that they keep up to date with their GST payments? Here are some best practices to follow:

  1. Understand The Laws: It is essential to have a thorough understanding of the rules, rates, and regulations that apply to your products and services set by the ATO. This can help businesses ensure that they are paying the correct amount of GST and avoiding penalties and fines.
  2. Accurate Record-keeping: Detailed records of all sales, purchases, and expenses related to GST should be kept for at least five years as required by the ATO. Accurate record-keeping is essential for calculating the correct amount of GST owed and filing accurate BAS returns.
  3. Register for GST: If required, register with the ATO by filling out an application form, providing financial information, and obtaining an Australian Business Number (ABN). Registering for GST allows businesses to legally collect and pay GST on their sales.
  4. Calculate GST Owed: Calculate the GST owed on sales and purchases based on the applicable tax laws and regulations set by the ATO. Keep track of your GST liability and make sure to pay it on time.
  5. File GST Returns: File GST returns through Business Activity Statements (BAS) at the appropriate frequency as required by the tax laws and regulations set by the ATO. For most businesses this will be quarterly or monthly. Make sure to file BAS returns on time and pay the GST owed.
  6. Keeping up with changes: Stay informed of changes in tax laws set by the ATO to avoid penalties and fines and stay compliant.
  7. Seeking professional help: If managing GST proves challenging, seek assistance from a tax agent, bookkeeper or accountant. They can provide valuable guidance and support in navigating the tax laws and regulations set by the ATO.

In conclusion, proper management of GST is important for businesses in Australia. By following these best practices, businesses can stay compliant with tax laws set by the ATO, avoid penalties and fines, and benefit from professional guidance and support if needed through the filing of BAS returns.

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