Well, this is a bit exciting.
You are registering for GST, which most likely means either one of two things:
a) you have already earned $75,000* in 12 consecutive months; or
b) you are on track to earn $75,000* in the near future.
*correct at time of publishing – check out the ATO website for current requirements
So congratulations!
If you don’t yet know, GST is the additional tax that the government requires you to collect on behalf of your clients for services rendered (your VA wizardry), and pay directly to the Australian Taxation Office – usually quarterly.
It’s basically the government saying, “Hey, you seem savvy in business – so you do some of our tax collection work for us.” This being said, the short answer is: yes, you should pass the additional 10% of each invoice (clearly marked as GST) onto your client.
Why?
Because they can claim the GST they’ve paid back as a GST credit when they lodge their own BAS (the report that details GST paid/owed) – just like you can claim the GST you’ve paid for services or goods rendered to you.
When your clients who are registered for GST pay the GST on your invoice to you, it reduces the GST they need to pay the ATO, so they are not actually paying anything additional by the end of each BAS period. They are simply changing who they pay that portion of GST to.
If you are registered for GST (and you must if you earn over the threshold), it has to be paid.
As nice as it sounds for you to absorb the 10%, it is your client’s obligation to pay the GST owed on your services should you issue an invoice with GST, regardless of whether they themselves are registered and can claim it back for a reduce BAS bill.
Don’t worry, this is a normal part of running a business on both sides and paying the appropriate taxes due – they will not be upset that you have to fulfil your obligations, but just in case, we’ve put together a template below that you can use to notify them.
Feel free to tweak it to suit your brand’s tone of voice (or yours if you are the brand!)
Hi <Client Name>,
I hope you are well!
My business has hit a growth stage where I am now obligated to register for, and charge, GST.
This will come into effect as of <Effective Date>, and all invoices from that date will have a GST component (10% of the service fee) added to them.
We have at least three payment cycles until then, so you will not be charged the GST component on any of these invoices.
Please let me know if you need any further clarification, but otherwise, thanks for your time, and I’m looking forward to continuing to grow our successful partnership.
Best regards,
<Name / Signature>
This is a fair, reasonable and friendly email. It is offering them an opportunity to budget and notify their accounts team.
Note: you may not need to do this – simply plan well in advance and make sure you’re not registered for GST until you start actually charging it.
Again, a big congratulations from the Virtual Assistant Lead Network team, and good luck!