What is the quick method?
The quick method of accounting for GST/HST is another option for small businesses to reduce paperwork and simplify GST/HST reporting. It eliminates the need to track GST/HST input tax credits (ITCs) and only work off of your gross sales number.
How does it work?
On every invoice, you will still charge GST/HST, but you will remit only a portion of the GST/HST back to the CRA based on a prescribed rate. For example: You will charge GST/HST at the full rate on your invoice but may only remit 75% of that to the CRA. CRA gives eligible small businesses the opportunity to simplify their tracking of expenses and GST.
The rates prescribed vary and you may be subject to multiple rates depending on the nature of your business. Please consult your tax professional for further details or contact us.
What about my input tax credits?
You will no longer be able to claim the ITCs on most purchases because you are keeping a portion of the GST/HST you are charging to customers. However, you can still claim ITCs on capital purchases such as:
- Real property and property improvements
- Eligible capital property
- Capital property such as vehicles and computers
You are also entitled to a 1% credit on the first $30,000 of eligible supplies that you collected GST on in the fiscal year. If you did not make $30,000 in the fiscal year you cannot carry forward the unused amounts.
Who can elect?
You can elect for the quick method if you meet the following criteria:
- Worldwide revenue is not more than $400,000 gross per year, this includes all associated persons
- You did not elect to remove the quick method within 365 days
- You have been in business for 365 days before your reporting period
- You are a new registrant and you can expect your revenues to be less than $400,000 in the year.
- You are not categorized under the list provided by the CRA on RC4058(E) Rev.17
How do I elect to use the quick method and when?
First you should determine if the quick method is beneficial to you. This depends on if the ITCs you normally remit to the government are more or less than the quick method remittance rates.
You can elect for the quick method through the CRA online, by filing form GST74.
Contact us today and come in for a coffee to discuss your GST needs and to determine if the quick method is beneficial to you.