GST for Australian #SaaS founders: here’s what you need to know

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Summary: While the EU has a relatively defined VAT regime on purchase of goods or services online, the same cannot be said of Australia. SaaS companies in Australia can find it confusing when it comes to paying tax. What should SaaS startups in Australia know about taxes?



GST for Australian SaaS FoundersSince 2011, retailers in Australia have been pushing the federal government to impose sales tax on online purchases. The argument is that non-taxation of online purchases makes it expensive for local merchants to compete against their overseas counterparts. Business tax in Australia is known as the Goods and Sales Tax (GST).

SaaS Startups and GST

In Australia, most goods and services consumed in the country are charged a 10% GST. This equivalent of EU VAT is levied both on goods and services bought on and offline. Australian SaaS companies need to register for GST to comply with the country’s tax rules.

Companies that register for GST:

  • Have to include GST in the price of sales to their customers.
  • Can claim credits for the GST included in the price of their business purchases.

While every player in the supply chain pays GST, it is consumers who lose since they cannot claim GST credits.

SaaS companies are exempted from paying GST until annual turnover reaches or surpasses $75,000. If your company grosses $75,000 or more, you will have to register for GST. You will then be required to include GST in the price of your service and issue customers with a tax invoice on purchase. All GST collected should be paid to the Australian Taxation Office (ATO) when you lodge your business activity statement (BAS).

Recording GST for your SaaS Startup

You can record GST easily to keep your SaaS company in good books with the ATO. Here are some tips to help you manage your GST obligations:

  • Use business accounting software that produce tax invoices automatically and generate reports of payable GST and credits at BAS time.
  • You can better align your GST liabilities with your SaaS business cash flow using the “cash accounting” method.
  • Deposit the GST in a separate bank account.

GST Tax Invoices

The GST you collect should be sent to the ATO. The tax invoices you send need to include certain information depending on whether the services you provide cost less than $1000 or more than $1000.

i)  Invoices for sales of less than $1000

If the cost of your service is less than $1000, you need to include the following minimum information in your invoice:

  • Indicate that the document serves as a Tax Invoice
  • Your company identity
  • Your Australian business number (ABN)
  • The date the tax invoice was issued
  • Description of the service packages sold, including the quantity (if applicable) and the price at which they were sold.
  • Total GST amount or total cost of service inclusive of the GST

ii)  Invoices for sales of $1000 or more

If you have service packages that cost $1000 or more, the information you submit to the ATO for the sales should include the following:

  • Indicate that the document serves as a Tax Invoice
  • Your company identity
  • Your Australian business number (ABN)
  • The date the tax invoice was issued
  • Your customer’s name or ABN
  • Description of the service packages sold, including the quantity (if applicable) and the price at which they were sold.
  • Total GST amount or total cost of service inclusive of the GST.

With both invoices, the GST can be shown separately. Alternatively, if the amount of GST to be paid is exactly one-eleventh of the total price, a statement such as “The total price includes GST” can be included.

Get more information on tax invoices at the following links:

Lodging your BAS (Business Activity Statement)

To claim GST credits, you need to lodge an annual GST return with the ATO. . You can lodge and pay your BAS in person, by mail or electronically. Payments should be made on time to avoid interests and penalties.

Generally, your BAS will be issued about two weeks before the end of the reporting period. For GST, this period us usually every three months. The final date for lodging and paying will be shown on your BAS.

More information on lodging a BAS is available at the following links:

Summary of Australian GST for SaaS Startups

  • SaaS Startups grossing annual revenues of $75,000 or more need to register for GST.
  • GST is added to the price of the service.
  • GST is not charged to overseas customers.

Are you a SaaS startup in Australia? Tell us about the tax challenges you are facing.


Posted on December 5, 2013

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