The GST Quick Method is available to smaller businesses and is easier, quicker and saves money as compared to the normal method of GST filing.
And since all GST registrants must file GST on either an annual, quarterly or monthly basis it can save a lot of time as well as money.
Effective for reporting periods beginning after 2012 certain businesses can elect to use the GST quick method if their annual gross revenues are under $400,000. This is an increase from the previous level of $200,000. Gross revenue includes both the revenue and the GST on your invoices.
Instead of sending in all of the GST you collect less the input tax credits you pay, you send in 2.6% of the first $30,000 of gross revenue and 3.6% of the gross revenue after that. You get to use these reduced rates in lieu of claiming ITC’s on expenditures. However, if you purchase a capital asset, like a vehicle or piece of equipment, you are still able to claim the ITC on that purchase.
Generally, the GST quick method calculation has saved many of our clients $1,000 or more each year under the previous threshold of $200,000 and the savings will likely increase to as much as $3,000 or more per year if your revenue is close to the new threshold amount. As well, the GST quick method, as the name implies, is quicker and easier to use than the general method in most cases.
Here is an example of the impact of switching to the quick method for an average small business:
The GST quick method has resulted in savings of $1,460 when compared to the general method.
If the actual expenses that have GST are less than $50,000 then the savings will be even more. However if the expenses with GST are more than $50,000 then the savings will be less. Either way, the savings can be substantial and are annual savings not just a one time amount.
Most service based companies and some businesses that purchase and resell goods are eligible to use the quick method.
If you’re not sure if you are registered for the GST quick method or the general method let us know and we’ll be happy to look into it for you. And we can easily facilitate the change to the quick method with the Canada Revenue Agency (CRA) if desired.
If you would like to speak to someone at KWB about the specific impact that switching to the GST quick method would have on your business please call us at 780-466-6204 or click here to send us an email and we will be happy to get back to you.
Thanks to David Wickenberg of KWB Chartered Accountants for providing this content.