Sole trader GST for small income business in Australia (aside from main salary)

Question

Trying to find out how to handle this case. Next year will be even more fun as I've moved to New Zealand.

For tax purposes, I'm a resident in Australia for FY2018. All good.

I earned x as salary, which I can do the tax calculations on and all is good there.

However, I also registered a small side hustle business as a sole trader with an ABN. I've made a small profit on that through PayPal payments.

How do I calculate GST (if any) to pay on that? I earned less than the 75k threshold on the sole trader business, but does my other earnings (normal salary) come into play for the threshold?

Any ATO links that handle this case would be really appreciated.

Answer 1

Note: I am neither an Australian nor a registered tax practitioner. This is not tax advice.

As far as I can tell, while any net income from the side-business would be lumped-in with your regular salary for income tax purposes, your regular salary will not be added to your business turnover for GST-threshold purposes.

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First, note that as a sole trader, any profit from your side-business (income less allowable expenses) is reported on your regular income tax return alongside your normal salary. From the Sole Trader page on the Australian Taxation Office (ATO) website:

As a sole trader, you:

• use your individual tax file number when lodging your income tax return
• report all your income in your individual tax return, using the section for business items to show your business income and expenses (there is no separate business tax return for sole traders)
• apply for an ABN and use your ABN for all your business dealings
• register for Goods and Services Tax (GST) if your annual GST turnover is $75,000 or more
• pay tax at the same income tax rates as individual taxpayers and you may be eligible for the small business tax offset

However, all mention of the A$75k threshold for GST talks about business turnover (that is, total income before expenses), not "(personal) income in general". For example, from the Register for Goods and Services Tax (GST) page of the ATO website:

You must register for GST if:

• your business has a GST turnover of $75,000 or more

  [...]

GST turnover is your business's gross income, not your business's profit.

Further, the page on Working out your GST turnover, which goes into more detail about what "GST Turnover" means, states:

Your GST turnover is your gross business income (not your profit), excluding any:

• GST included in sales to your customers
• sales that aren't for payment and aren't taxable
• sales not connected with an enterprise you run
• input-taxed sales you make
• sales not connected with Australia.

and:

When working out your projected GST turnover, don’t include:

• amounts you receive for the sale of a business asset (such as the sale of a capital asset)
• any sale you make, or are likely to make, solely as a consequence of ceasing to carry on an enterprise, or substantially and permanently reducing the size or scale of an enterprise.

My reading of all the above is that, as the full name – Goods and Services Tax – would imply, the GST threshold is only concerned with the sale of goods (or services) made by the business. Although "personal income from other sources" is not explicitly mentioned as an exclusion, the fact that income from the sale of a business asset, or from a full or partial sale of the business itself is excluded, very strongly suggest that non-business-related income (i.e. your regular salary) does not count.

Final Word

While researching the above, I came across the ATO Community website – a question and answer board run by the Australian Taxation Office – so decided to ask "Does regular income affect GST threshold?" there. A reply – seemingly from someone at an Australian accountants firm confirms the above:

Short and sweet - business income only is counted