Answer
The GST quick method is a simplified accounting option available to Canadian small businesses like KWB, allowing them to calculate and remit their GST/HST more easily. Instead of tracking the GST/HST paid on every individual purchase and collected on every sale, businesses using this method apply a specific remittance rate to their total sales, making tax compliance less burdensome. This method is particularly beneficial for businesses with lower input tax credits, as it can streamline their bookkeeping processes significantly.
Overview
This guide outlines how the GST quick method simplifies tax compliance for eligible businesses. It details the criteria for using this method and its benefits for streamlining financial operations.
The article also includes a labeled real-world hypothetical featuring a small business owner, Sarah, to illustrate how the GST quick method can apply in practice.
- GST Quick Method: The GST quick method offers a simplified approach to calculating and remitting GST/HST for eligible small businesses, as detailed in our guide to understanding the method.
- Common Questions: Find answers to frequently asked questions about the GST quick method and its application for Canadian small businesses in our FAQ section.
Understanding the GST Quick Method for Your Small Business
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.
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.
FAQ
To help you better understand this streamlined approach to sales tax, we’ve compiled answers to common questions about the GST quick method and its implications for small businesses.
| Question | Answer |
|---|---|
| How does the GST quick method simplify accounting for small businesses in Edmonton? | The GST quick method simplifies accounting for small businesses in Edmonton by letting them remit a fixed percentage of their sales for GST/HST, instead of tracking GST/HST on most purchases. This significantly reduces paperwork and streamlines GST/HST return preparation, saving valuable time and effort for Edmonton entrepreneurs. |
| How does the GST quick method specifically improve time efficiency for small businesses in Edmonton, Alberta? | The GST quick method improves time efficiency for small businesses in Edmonton, Alberta by simplifying GST/HST calculations. Instead of tracking GST/HST on every purchase, businesses remit a fixed percentage of sales, drastically cutting down on bookkeeping and administrative time. This allows Edmonton business owners to focus more on operations and growth rather than complex tax preparation. |
| What specific criteria determine if an Edmonton business is eligible for the GST quick method? | To be eligible for the GST quick method in Edmonton, your business must have annual taxable supplies (including GST/HST) of $400,000 or less in any four consecutive fiscal quarters within the past five fiscal quarters. Note that specific criteria may vary for businesses providing legal or accounting services. |
| For which Edmonton small businesses might the GST quick method prove less financially advantageous? | The GST quick method is generally less advantageous for Edmonton small businesses that frequently incur substantial input tax credits (ITCs) on their purchases. Businesses with high operating expenses or significant capital expenditures would likely benefit more from the regular GST method, which allows them to claim all eligible ITCs. |