Well, this is a bit exciting.
You’re registering for GST which means either one of two things:
a) you’re already earning $75,000* per annum; or
b) you’re 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.
If you’re 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 or not of whether they themselves are registered and can claim it back.
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!).
This is a fair, reasonable and friendly email. It is offering them an opportunity to budget and notify their accounts team, then go one step further in providing a big old kettle full of value by “absorbing” the GST yourself for a short while.
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. You may want to omit the final link from Xero, particularly if they are likely to be registered for GST themselves – but a small business client may find this helpful. Use your discretion and gut here.
A big congratulations again from the VA Lead Network team, and good luck!