How do you calcuate your GST using the quick method? Am I eligible to use it?
The GST quick method is a simpler way of calculating your GST balance owing. You only need to know your total taxable sales. It's great for small businesses that don't have many operating expenses.
To calculate, you owe GST at 3.6% of your total sales less 1% on the first $30,000.
There are a few eligibility criteria. The most important is that sales need to be under $400,000.
People that benefit the most are usually consultants who invoice once a month and have minimal expenses, as well as businesses that don't incur a lot of expenses.
Imagine you have $100,000 in revenue. You collect GST at 5%.
Apply the total of $105,000 with the quick method rate of 3.6%. You are given an annual credit of up to $300 (1% of the first $30,000).
You would owe $3,480 [$105,000 x 3.6% - $300] rather than $5,000, less the GST paid on any expenses.
We often see clients save $1,000 to $2,000 a year just by using the quick method.
You also get to claim GST paid on capital expenditures. So if you purchase a truck for your business, you can still claim that GST.
View CRA's detailed quick method information.
Some professions do not qualify for the quick method — make sure you aren't one of them.
Here is a list of professions who CANNOT qualify for the quick method:
- Persons that provide bookkeeping, financial consulting, tax consulting or tax return preparation services in the course of the person's commercial activity
- Persons that provide legal, accounting or actuarial services in the course of their professional practice
- Listed financial institutions
- Charities
- Public institutions
- Non–profit organization with at least 40% government funding in the year (qualifying non–profit organizations)
- Municipalities or local authorities designated as a municipality
- Public colleges, school authorities, or universities, that are established and operated other than for-profit
- Hospital authorities, facility operators, or external suppliers
Talk to your accountant to see if the quick method is the best fit for you,