GST: Understand What You Are Collecting

After a strong month, it's easy to look at the business bank balance and assume it's all yours to spend. It usually isn't. We regularly help business owners separate what the business has genuinely earned from the GST it has collected on the ATO's behalf — which makes cash management easier and removes the unpleasant surprise that can arrive with BAS.

What you're collecting isn't all income

If your business is registered for GST, the GST you collect on taxable sales generally has to be reported and remitted to the ATO.

Take an invoice of $1,100. Around $100 of that is GST. It sits in your bank account, but it isn't additional business income and it isn't available to spend — you're holding it until your next BAS.

Treating that portion as revenue is one of the more common reasons businesses find themselves short when lodgement comes around.

GST works in both directions

It's not only about what you collect. When you purchase eligible goods or services for the business, you may be able to claim a credit for the GST included in the price.

Those credits reduce the net amount payable to the ATO, which is why keeping accurate records of business purchases matters as much as tracking your sales. The figure you owe is the difference between the two, not the total you collected.

Don't let GST become a cash flow problem

The pattern we see most often is straightforward: money comes in, it gets spent, and no allowance is made for the GST portion sitting inside it. BAS time arrives and the cash has to be found from somewhere — often alongside PAYG withholding and superannuation obligations falling due at the same time.

It's an avoidable problem, and the fix is simple.

Set the GST aside

Move the GST you collect into a separate account on a regular basis — weekly, fortnightly or monthly, whatever suits how your business operates.

Two things happen when you do. First, the money is there when BAS is due. Second, your main account starts reflecting what the business actually has available, which makes every other financial decision clearer.

Staying on top of it

Managing GST across the quarter is far less work than reconstructing it at the end. Keep your bookkeeping current, review what you're collecting and paying as you go, and know roughly what you'll need to set aside.

CSCG can help keep your GST and bookkeeping accurate and up to date, so you have a clear picture of your business finances at any point in the quarter. Visit www.cscg.com.au or call 9974 8333 to organise an obligation free consultation with one of our specialists.