Should I register for GST?

As a family day care educator, the child care services that you provide are “GST-free”. This means that you do not charge GST on fee income earned from providing care.

A family day care educator can however claim a GST refund on expenses incurred in running your family day care business. Some of those expenses, like fresh food are also GST free, however other expenses like resources (toys, arts and crafts etc.) will have GST charged on them, and as a result you are entitled to claim the GST that you have paid .

For example:

Registered for GST
Emily a Family Day Care Educator is registered for GST. She earns $50,000 per annum and incurs expenses of $11,550 incl. GST and expenses of $13,000 which are GST free. Below is a calculation of her taxable income for the year.

Description $
Fee Income 50,000
Expenses – GST Free (13,000)
Expenses – GST Input Paid
*the GST of $1,050 will be claimed as a GST input credit and is not included in Emily’s taxable income calculation
(10,500)
Net profit (Taxable income) 26,500
Tax on taxable income
Note – includes Medicare Levy, excludes the sole proprietor 5% rebate, limited to $1,000
1,662

Given that Emily has been able to claim a GST refund of $1,050 her net tax payable amounts to $612.

Scenario B: Not registered for GST

Ruby a Family Day Care Educator is not registered for GST. She earns $50,000 per annum and incurs expenses of $11,550 incl. GST and expenses of $13,000 which are GST free. Below is a calculation of her taxable income for the year.

Description $
Fee Income 50,000
Expenses – GST Free (13,000)
Expenses – GST Input Paid
*there is no GST input credit claimed, so the total expense          (including the GST) is deductible for tax purposes
(11,550)
Net Profit (Taxable income) 25,540
Tax on taxable income
Note – includes Medicare Levy, excludes the sole proprietor 5% rebate, limited to $1,000
1,414

Ruby is unable to claim a GST input tax credit. As a result her net tax payable is $1,414.

In some instances taxable income will lie below the tax paying threshold of $18,200 and therefore any GST input tax claimed will be a cash inflow to you.

DISCLAIMER: The above are scenarios only and your circumstances may differ. You should consult with a tax agent before deciding to register for GST.

Leave a Reply