Is your company GST registered?

Is your company making the most out of the GST it pays on purchases?

At the time of incorporation, the last thing on a small business owner's mind is GST. When you incorporate, a government business number is automatically generated, but you need to physically register for other accounts such as payroll and GST. 

GST registration is not mandatory until your income reaches $30,000 (there are exceptions, but it's complicated). 

When you're starting a new business venture, the likelihood of income reaching that threshold is questionable. Sometimes, no revenue is generated until months after revenue has been incurred. But you're still incurring expenses and paying GST on them.

So what? You pay it on everything. It's a sunk cost. 

Not really...

If you lease a property, you're paying GST on top of the rent. In downtown Vancouver, the monthly expense can exceed $10,000 per month. You're paying $500 on top of that for GST. If the premises is still undergoing renovations, you're not making any money but still have to pay rent. 

Sure you can expense the GST paid, but at the corporate tax rate of 13% (subject to change), you're only saving $65 per month on any taxes payable at the end of your fiscal year. 

If you are registered, you'll get some, if not all of it back. In most cases:

Expenses > Revenue = GST refund = Increase in cash flow

There's a catch...

You have to be registered at the time the expense is incurred in order to claim the amount on your GST return. 

Have more questions? Contact us