WTF is GST for Electricians? | 128

If you’re starting your electrical business and holding off on GST because it feels like “big business stuff”, this one’s for you. I break down what GST actually is, how BAS works, and why waiting until $75K turnover is short-sighted. 

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Transcript

Collect even more tax for the tax man. Welcome to Simplified Sparky Marketing.

This podcast is going to be about GST.

Now, if you're a seasoned business owner, you're registered for GST and you understand the ins and outs of it, I would advise you to go to any other podcast. Go back to the start of the podcast. There's loads of other podcasts there. This podcast has been made particularly due to one of my members, Aiden — thank you very much for the inspiration for the episode.

Common sense isn't so common, and basic knowledge isn't so basic. I think that's where I have to take a step back sometimes and realise people don’t know everything. And that’s obviously the purpose of this podcast — why you listen — to get educated in your electrical business.

One huge thing I’ve noticed is newbie businesses — startups, fresh, wet behind the ears — are not registering for GST. Which I disagree with, and I’ll get into that.

In this podcast, I’m purely going to speak about GST, what it is, what a BAS is, and why I think you should register from the absolute get-go of starting your electrical business — not waiting until the threshold.

GST stands for Goods and Services Tax.

It’s the same as VAT in the UK or Ireland — Value Added Tax. What it is, is an additional tax added to everything you sell, essentially, or buy. So when you buy something, that business will be registered for GST, so they will have charged it. When you sell something, you charge it. It operates as a balance.

Let’s break it down.

When you charge an invoice for your electrical work — let’s say it’s $1,000 plus GST — that becomes $1,100. The 10% on top is $100.

You submit that invoice and, let’s say you’re working for another business. They can then claim that $100 because you’re GST registered.

Vice versa — you buy a product. Let’s say it’s a tool and it’s $1,100. That includes $100 GST and $1,000 for the tool itself.

So what’s happened there?

You’ve invoiced out $1,100.
 You’ve received $1,100.
 You’ve spent $1,100.

The GST passes through. It balances.

Now — why am I adamant that startup businesses should register for GST from the get-go?

Because startup is a big expenditure zone.

You buy your vehicle.
 You might buy new tyres.
 You’re shelving the van.
 Putting racks in.
 Buying stock from suppliers.

All of that is inclusive of GST. So if you’re not registered, you’re essentially paying 10% more than you need to.

I think people hesitate because they think it’s “big boy stuff”.

It’s not.

It’s essential stuff.

There is a threshold. That threshold is $75,000 turnover. That is turnover — not profit.

Once you hit $74K and you're about to send the next invoice, you’re scrambling to register. That’s panic mode. That’s not setting yourself up properly from day one.

Registering for GST is free. If you're capable with the ATO portal, you can do it yourself. But I would advise using your accountant to do it. Make sure it’s bulletproof. That everything’s set up correctly. It can be done in a day or two.

If you want a successful electrical business, you should be smashing through $75K in your first year. Way over that.

When you register your business, I recommend a company structure or trust structure. Speak with your accountant. A good accountant — because the wrong one will lead you astray.

Get out of sole trader.
 Register as a company.
 Register for GST.

When you start a business, that’s when you’re spending money. That’s when claiming matters most.

On startup, it feels amazing getting money back on BAS because you’ve spent so much. But long term, you don’t want refunds. You want to be paying GST. The more GST you pay, the more successful you are.

Don’t look at this like, “What can I claim back?”

It balances.

PowerPoints, lights, switches, smoke alarms, switchboards — all 10% GST. You’re effectively getting 10% additional margin if you’re registered properly.

Uniforms.
 Logo.
 Subscriptions.
 Software.

You can claim the GST component.

But — if you’re buying from overseas — America, UK, Ireland — you can’t claim GST because they’re not registered here. That’s a small detail people miss.

Now let’s talk BAS.

BAS stands for Business Activity Statement. Usually lodged quarterly.

Inside your BAS:
 – GST collected
 – GST paid
 – PAYG withholding (if you have staff)
 – Other tax obligations

Your GST collected minus GST paid equals what you owe or get refunded.

If you buy a vehicle for $22,000 inclusive of GST, that’s $2,000 GST. If you’re not registered, you just paid $22K. If you are registered, effectively that vehicle cost you $20K.

That’s the difference.

This whole episode came from Aiden joining mentorship and me asking, “Are you registered for GST?”

He said no.

I said you should be.

He spoke to his accountant. He’s now registered.

Another problem with waiting —

Let’s say you build a client base.

Then suddenly you hit $75K and now you must add 10%.

Now you’re explaining price increases.
 Or worse — you absorb it.
 You take a 10% hit.

And 10% in electrical is fatal.

The only downside I see is lodging BAS quarterly.

But with the right software — like Xero — and the right accountant, it’s straightforward.

I work on a subscription model with my accountant. Fixed monthly fee. BAS lodged quarterly. Company and personal tax returns done at end of financial year. No surprises.

Make sure you structure that properly.

This is not financial advice.

This is an electrician speaking from experience.

If you want tailored advice, speak to your accountant.

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