Most owners have heard there is a $30,000 line for GST. Fewer know how the test actually works, and the details are where the problems start.
The threshold is not annual
The common assumption is that you check your revenue once a year and register if it was over $30,000. That is not the rule.
The test looks at your worldwide taxable revenue across four consecutive calendar quarters. Calendar quarters, not your fiscal year. At the end of March, June, September and December you total the previous four and compare that number to $30,000.
Because the window rolls, a business can cross the line in the middle of a year that ends below $30,000 in total, and a business can stay a small supplier through a calendar year where revenue was uneven.
There are two ways to cross it
Across four quarters. Your four quarter total passes $30,000 but no single quarter did. You stop being a small supplier at the end of the month following that quarter. You charge GST from your first sale after that, and you have 29 days from the effective date to register.
Inside one quarter. You pass $30,000 within a single calendar quarter. This one is abrupt. You stop being a small supplier on the day of the sale that took you over, you must charge GST on that sale, and you have 29 days to register. There is no grace period.
The second version is the one that catches people. A consultant who normally bills $6,000 a quarter lands a $32,000 project in the spring and is registered from the day of that invoice, whether they knew it or not.
What counts toward the number
Taxable supplies, including zero rated supplies, made by you and anyone you are associated with. It is revenue, not profit, so your expenses do not reduce it. Costs you incurred on a client’s behalf and then rebilled generally count too.
The amounts you collect as GST itself do not count, and neither do sales of capital property.
What happens if you missed it
The obligation existed whether or not you noticed. The CRA can assess the GST you should have collected, which means paying it out of revenue you have already spent, plus interest and possibly penalties.
If you think you crossed the line some time ago, this is worth taking to an accountant rather than handling alone. There are ways to deal with it, and they work better when you raise it first.
Registering before you have to
You can register voluntarily while still under $30,000, and there are two reasons owners do.
The first is input tax credits. Once registered, you can recover the GST you pay on business purchases. If you are buying equipment, software or subcontracted work, that adds up.
The second is that your prices stop jumping. Adding 5 percent to an established client’s invoice the day you cross the threshold is an awkward conversation. Charging it from the start is not.
The trade off is real though. You now file returns on the schedule the CRA assigns you, and you are responsible for collecting and remitting correctly. If your customers are consumers rather than registered businesses, that 5 percent also makes you slightly more expensive.
What to do this week
Put a recurring reminder in your calendar for March 31, June 30, September 30 and December 31. On each of those days, total the previous four quarters of revenue.
If you are registered, open a separate savings account and move the GST across every time a client pays you. It is not your money, and treating it as though it is makes remittance day much easier.
Setting this up properly from the start is part of what the DIY Bookkeeping Setup and Training Package covers, including how to track the threshold and set GST aside inside your own books.
This article is general information, not tax advice. Rules and thresholds change, so confirm your situation against the CRA’s current guidance or with your accountant.
