The $75,000 GST threshold: what happens the month you cross it

Most sole traders know the number. Fewer know that the threshold is not a line you cross when the twelve-month total ticks past $75,000; it is a line you cross the moment you can reasonably see that it will. That difference is the whole story of this post, which walks through what happens in the month a growing business meets the GST registration threshold, in the order it happens.

We will follow a mobile mechanic, because the numbers are easy, but the sequence is the same for a designer, a cleaner or a consultant.

Month zero: the two tests

GST registration is compulsory when your GST turnover meets the threshold under either of two tests.

• Current turnover: this month plus the previous eleven months is $75,000 or more.
• Projected turnover: this month plus the next eleven months is likely to be $75,000 or more.

GST turnover is gross business income, excluding GST itself, input-taxed sales and sales of capital assets, but including GST-free sales. It is not profit, and wages from a job do not count. Non-profits use $150,000. Rideshare and taxi drivers register from the first dollar regardless. Our guide to the $75,000 threshold has the detail.

Our mechanic has been billing about $5,500 a month, so $66,000 a year. Under the threshold, not registered, invoices with no GST. Then a fleet customer signs up.

The month it happens

In March, with the new fleet work, she bills $7,800. Her last twelve months total $68,300. Under the current test she is still below the line.

But the fleet contract will run all year. This month plus the next eleven at roughly $7,800 is around $93,000. Under the projected test she has met the threshold, in March, even though the trailing total will not pass $75,000 until about June.

This is the part people miss. The ATO does not expect you to wait for the trailing twelve months to prove it. If you can reasonably project that the next twelve months will reach $75,000, the obligation starts now. A signed contract, a new regular customer, a price rise across the board, or simply three months in a row well above your old run rate are all reasons to run the projection.

The 21-day clock

From the day you meet the test, you have 21 days to register. Registration is free and takes minutes through ATO online services (Tax, then Manage, then Registrations), the Australian Business Register, or your agent. The how to register for GST guide walks through the screens.

You will choose three things.

• A start date. It can be today, a near future date, or a date in the past. Our mechanic picks 1 April, the first of the next month, so her first BAS period is clean.
• A reporting cycle. Quarterly, for almost everyone.
• An accounting basis. Cash, for almost everyone: GST is reported when money moves, so the BAS matches the bank statement.

The ATO confirms the registration, ABN Lookup shows Registered for GST from the start date, and the first activity statement appears in online services for the period 1 April to 30 June, due 28 July.

The same week: prices and invoices

From the start date, every taxable sale carries 10% GST, and every invoice for one must be a tax invoice. Two decisions follow.

Prices. Business customers claim the GST back, so for the fleet customer the mechanic quotes the same price plus GST and nobody minds. For private customers she has a choice: add 10%, or absorb it and take a margin cut of about 9%. Most sole traders selling to the public do a bit of both, rounding some prices up and holding others. Whatever you decide, decide it before the start date, not after the first confused customer.

Invoices. The words Tax invoice, your ABN, the date, a description, and the GST amount or a statement that the total includes GST. Sales of $1,000 or more also need the buyer's identity or ABN. Update the template once; see tax invoice requirements.

The same week: the GST account

One eleventh of every GST-inclusive payment she receives from now on is not hers. The simplest way to make that true in practice is a second bank account and a weekly transfer. By the time the BAS is due in July, the money is sitting there. Skipping this step is the single most common way a first BAS becomes a cash-flow crisis.

The first quarter: the other side of the ledger

Registration is not only a cost. From the start date, the GST on business purchases is claimable. The mechanic buys parts, consumables, tools and fuel; the GST inside those purchases, at her business percentage, comes off what she owes. In a quarter where she buys a $4,400 scan tool, that is $400 back on that item alone.

Two things to check early.

• Tax invoices for anything over $82.50. She needs them to claim the credit. Supplier accounts, hardware stores and fuel receipts all qualify; photograph and attach them.
• Purchases made before registration. Equipment and stock bought in the months before the start date and still on hand may carry claimable GST under the pre-registration rules. Worth a question to the accountant before the first BAS; it can be real money.

The first BAS

On 1 July the April to June statement is live in ATO online services. If the mechanic has been uploading her statements monthly, the three labels are already totalled: G1 total sales including GST, 1A the GST on them, 1B the GST on purchases. She reviews the flagged lines, confirms the figures, copies them across, and pays by 28 July using the payment reference number. Our first BAS checklist is the long version.

There is usually no PAYG instalment on a first BAS. That arrives after the next tax return, when the ATO sees a year of business income and starts collecting the following year's tax quarterly. Set aside for it anyway; the PAYG instalments guide explains the first-year squeeze.

The version where you notice late

Now the other timeline. Same mechanic, same fleet contract, but she does not run the projection. In September she looks at her numbers, sees $82,000 for the trailing twelve months, and registers.

The ATO can backdate the registration to the date she should have registered, in March. Every taxable sale from March to September carried GST that she did not charge. She now owes it: about 9% of six months of income, either absorbed or recovered from customers who will mostly say no. Penalties and interest can apply on top.

The difference between the two timelines is one calculation in March. It takes a minute, and it is worth doing every time your income steps up.

A running total, not a June surprise

The only reliable way to catch the threshold early is to see the rolling twelve-month figure all the time. FlowFi shows it on the dashboard whether or not you are registered, built from the bank statements you upload, and it also shows a simple projection from your recent months. When the projection passes $75,000, you know the month it happens, not the month after.

If you are already there, register this week, pick a clean start date, set up the GST account, and let the first BAS build itself from your statements.

FlowFi tracks your rolling turnover before you register and prepares every BAS label after. Upload a bank statement, review, copy into ATO Online. 14-day free Pro trial, no card. Start at flowfi.com.au