GST core
Goods and Services Tax (GST)
GST is a broad-based tax of 10% on most goods, services and other things sold or consumed in Australia, collected by registered businesses and passed on to the Australian Taxation Office.
Goods and Services Tax, usually shortened to GST, is a tax on consumption. It was introduced under A New Tax System (Goods and Services Tax) Act 1999 and is charged at a flat rate of 10% on most goods and services sold or consumed in Australia. The price you see on a shelf or an invoice often already includes it, which is why many people never think of it as a separate amount.
Although customers bear the cost, the tax is collected by businesses. A business that is registered for GST adds 10% to the price of its taxable sales, keeps track of what it has collected, and reports that amount to the ATO, normally through its Business Activity Statement. In return, the business can claim back the GST it paid on purchases that were used for its enterprise. These claims are called input tax credits, and they stop the tax from stacking up at every step of the supply chain.
Not everything is taxed in the same way. Some supplies are taxable and carry GST. Others are GST-free, such as most basic food, many health and education services, and exports. A third group is input-taxed, which includes financial supplies and residential rent. For input-taxed items the seller charges no GST but also cannot claim credits for the related purchases. Knowing which bucket a sale falls into is the most important skill in getting GST right.
Whether you must register depends mainly on your GST turnover. If your turnover is $75,000 or more, or $150,000 or more for a non-profit organisation, you must register. Taxi and ride-sourcing drivers must register no matter how small their turnover. Below the threshold registration is optional, and some businesses choose it so they can claim credits on their costs.
The arithmetic is simple once you learn the two directions. To add GST to a price, multiply by 1.1. To find the GST inside a GST-inclusive price, divide by 11, which is the GST fraction of one-eleventh. Mixing these up, for example by taking 10% off a GST-inclusive total, is one of the most common mistakes and gives the wrong answer every time.
Individuals pay GST every time they buy taxable goods, but they do not lodge anything unless they are running a business. Overseas visitors, imported goods, digital services bought from offshore suppliers and sales of new homes can all have their own GST rules, so it is worth checking the specific situation rather than assuming a general answer applies.
The financial year for most reporting runs from 1 July to 30 June, and BAS periods are commonly quarterly, although monthly and annual options exist. Late lodgment or late payment can lead to penalties and the general interest charge. This page is general information only, so confirm how GST applies to your own circumstances with the ATO or a registered tax professional.
Worked example
Sam runs a registered graphic design business and charges a client $2,000 for a logo project. GST is 10% of $2,000, which is $200, so the invoice total is $2,200. Sam also bought a $550 GST-inclusive monitor for the business. The GST in that price is $550 divided by 11, which is $50. On the BAS Sam reports $200 collected and claims $50 as a credit, so the net amount payable to the ATO is $150.
Practical tips
- Always check whether a price is GST-inclusive or GST-exclusive before you calculate. Divide by 11 to extract GST from an inclusive price, and multiply by 1.1 to add it to an exclusive one.
- Keep a valid tax invoice for purchases over $82.50 (GST inclusive), because you generally cannot claim the credit without one.
- Do not assume an item is taxable just because it is sold in a shop. Basic food, many health supplies and exports are GST-free, so check the category first.