The GST Threshold Mindset Limit

Does the thought of having to deal with taxes hold your business back? Have you mentally set your income limit to stay under the GST tax threshold (or VAT or sales taxes threshold)? If you have you’ve created a GST threshold mindset limit. Another money block to add to your list.

Do you think that staying under the registration threshold (like $75k in Australia) means you are safe from the potential dangers of having to keep your finances in order? Honestly?

Whether consciously or unconsciously you are setting up a mindset limit, a block to earning more than $75k. And if you work it out (which we will) you’ll find it doesn’t leave you very much as a living wage.

Is $75k enough?

Firstly let’s talk expenses, for most service-based businesses I’d suggest 10% is a fairly reasonable, slightly low, estimate. That would be $7499 to cover your home office use, stationery, a couple of subscriptions, a chunky training program or course, a spot of outsourcing, business admin stuff like fees, and maybe some networking and mindset support. Remembering for every additional amount you spend on business expenses means less available for you as take-home pay.

That leaves $67,500 for you to take home. Then we deduct income tax, which will depend on your specific circumstances (dependents, medicare levy, offsets, super contributions etc). An average figure is around $12,500 leaving $55,000 as take-home pay.

However, if you think retirement is important you’ll want to contribute to superannuation. The rate for employees is 10% of total pay but we’ll say 10% of the take-home pay to be conservative. That’s another $5,500.

Now you just under $50k per year, or $952 per week, to cover all of your living expenses, any savings, any investments and any unexpected expenses (like when the car needs to be fixed).

If you are working 25 hours a week to earn that it’s around $40 an hour.

Is that what you started a business for? I’m fairly sure there are less risky, less confronting, less intensive, more stable ways to earn $45 an hour (and get paid for holidays and superannuation).

If the $75,000 isn’t your threshold I would encourage you to do your calculations and see what weekly paid you’d have after expenses, taxes and retirement savings.

The Key Question

How can you unlock that GST threshold mindset limit?

The first step is starting to believe it’s safe, that the world won’t end, our business won’t fall apart and we won’t get into trouble if we need to register.

Then start to practice with what’s needed to address your fears.

  • if your main fear is around keeping up to date with your bookkeeping then make it a regular appointment that gets prioritised (and I’d suggest using software, not a spreadsheet).
  • if your main fear is having to increase your prices by 10-28% then start slowly increasing them now. A few percentages this month, another few percentages in the next quarter.
  • if your main fear is having the cash to pay the tax bill then start a separate GST account. You can then immediately transfer the appropriate percentage into the account when you receive the cash and start to build a cash buffer to ease the worry.
  • if your main fear is not understanding what you need to do then start researching. Talk to a bookkeeper, accountant or someone you trust who understands taxes and can explain them in a way you understand.

By starting to do these things BEFORE you need to register you will ease those troubling thoughts. And you won’t need to panic because you’ll be ready for your registration day.

Have you unwittingly subscribed to the GST threshold mindset limit? Is it safe for you to earn more than $75k? What’s the main fear you need to start addressing so your business can thrive?

Need Help?

If you need help tackling your GST threshold mindset limit and getting that practice in order to ally your fears then get in touch for a free chat about how we could work together.

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