Get it right, and you’ll be on your way to making it big as a compliant GST small business. Get it wrong, and you may find yourself struggling to meet back pay demands.

So how can you navigate the seemingly overwhelming and often expensive nature of GST as an SMB? With a little guidance and direction, you’ll discover that the ins and outs of GST are not as complicated as they seem — especially with the right technology.

GST stands for goods and services tax, a broad-based value-add tax imposed on certain goods, services, and items that are sold to, sent from, or used within Australia. Most businesses build GST into the cost of their goods and services, allowing them to meet tax liabilities by taking 10% off the top of their profits.

The GST tax is 10%, and is usually paid in regular BAS statements (also known as business activity statements). These may be paid monthly, quarterly, or annually, collecting 10% from each item in your taxable goods category. If you pay more GST than you collect, you will be issued a GST refund for business expenses.

Note that not all goods and services are subject to GST. Medical supplies, educational services, and childcare are the most notable of these. Other items that are exempt include salaries and wages, fresh or unprocessed food, and certain types of real estate.

Do small businesses have to pay GST? This depends more on size than anything else, although there are a few additional factors to consider.

Your business will need to register for GST if:

• You earn a GST turnover of $75,000 or more (gross income minus GST)
• If you expect your new business to reach a $75,000 GST turnover within year one
• You provide taxi travel, limousine rides, or ride-sourcing services (regardless of your GST turnover

If you do not reach or meet any of these requirements, you may still choose to register for GST. This may provide additional benefits, such as fuel tax credits or a more professional business appearance. In either case, optional registration will require your business to be registered for GST for at least 12 months.

Backdating could be devastating to your business profits and cash flow, which is why it’s important to supervise your liabilities correctly to protect your bottom line.

Managing GST correctly begins with three simple rules:

1. Remain aware of regulatory changes regarding GST

Stay up-to-date on any changes that may impact your GST standing. Keep an eye out for changing rates or newly introduced legislation that may change your tax liabilities or payment expectations. The ATO provides multiple resources that may help you stay abreast of changes.

2. Automate your GST calculations as much as possible

Automated accounts payable is a boon for SMBs, freeing up more time to focus on other elements of your business. Tools like Xero allow users to create secure GST records that follow default or custom tax rates, sorting specific transactions into different groups according to eligibility or type.

Here’s how to calculate GST for business with Xero:

• Set up the GST rate in your system
• Xero automatically records the tax per transaction
• Generate a report that automatically prepares a return for BAS submissions

Xero’s solution for GST is even more powerful when integrated with Marmalade.

3. Consult with a professional tax adviser or BAS agent

When in doubt about your GST expectations, it’s a good idea to check in with a registered tax official or BAS agent. These experts can help you make informed decisions regarding cash flow planning, or point you toward software solutions that may help alleviate stress. It’s always better to be safe than sorry.

As you know, this may cost hundreds if not thousands of dollars. You should and must consider time-tested strategies that prevent GST from affecting your business in the future.

You may want to consider alternative cash flow options like Marmalade to manage GST from an invoicing perspective. Marmalade is an innovative invoice payments platform that allows small businesses to ‘cash in’ (receive early payment) invoices when you want. It’s easy to integrate with Xero to create and view GST amounts at any time, then automatically generate BAS statements without underestimating your liabilities through human error.

Having a GST bill to pay in your quarterly BAS statement can have a dramatic effect on your business cash flow. However, by leveraging modern tools and instant cash-flow opportunities, your business can remain GST compliant without skipping a beat.