by: Christopher Raynal
One of the decisions that all businesses have to make not long after starting up is when and if to register for GST.
The first consideration is do you have to register? In New Zealand, the threshold is turnover or sales of $40 000, while it is $50 000 in Australia. However, that does not have to be the end of the story.
If the business is profitable, and it registers for GST, it will be likely to pay GST to the taxation authority. Being profitable is not a bad thing. Quite to the contrary. However, it does change the scenario from a loss-making business, where you might choose to register for GST in order to claim the GST refunds. This provides another source of capital for a growing, loss-making business. This was the subject of an earlier article.
Your business competes with other businesses. If your turnover or sales are close to the threshold, or not far past it, you might consider not registering for GST. In the case of being over the threshold of $40 000 for New Zealand, or $50 000 for Australia, you might consider breaking up your business into two discrete business units.
If your business is competing with larger businesses that have to pay GST, imagine the benefit to your business if you can offer a price that does not include GST? Or imagine if you charge the same price as other businesses but do not pay GST. The unpaid GST component represents increased profit.
So how do you achieve this? Although taxation laws do allow business operators to manage and organize their business affairs to suit themselves, this usually means the particular business structure or entity chosen and the management style implemented. It is not carte blanche to do anything you feel that is in your interests.
More >>>
