GST core
GST fraction
The GST fraction is 1/11, the proportion of a GST-inclusive price that is GST. Multiplying a taxable, GST-inclusive amount by it gives the GST contained in that amount.
A GST fraction is a fixed figure used to work out how much of a price is GST when the price already includes the tax. With GST at 10%, the fraction is 1/11. That comes from comparing the GST of $10 with the total price of $110 on a $100 sale. The GST is therefore one part in eleven of the final price, which is why people also call it the one-eleventh rule.
The fraction is useful because most real-world records show what was actually paid, not a neat GST-exclusive price. A bank statement, supplier receipt or cash register total will typically show the full amount. By multiplying that figure by 1/11, you reveal the GST component without needing to know the underlying price. Dividing by 11 produces exactly the same answer, so use whichever feels more natural.
In the law, the GST fraction also shows up in the way credits are measured for certain special purchases. For example, when a registered business buys eligible second-hand goods from someone who is not registered, the credit is calculated using the fraction applied to the price paid. It is also the basis for working out GST on a margin or on a sale where only part of the price is subject to tax.
For a business reporting on a Business Activity Statement, the fraction helps with reconciling figures. If your sales ledger shows GST-inclusive totals, multiplying by 1/11 should agree to the amount you report as GST on sales. If it does not, something is mis-coded, perhaps a GST-free sale treated as taxable, or a sale that was entered twice. Using the fraction as a quick reasonableness test can save time at BAS lodgment.
The fraction depends on the GST rate, which has been 10% since the tax started and is set by legislation. If the rate ever changed, the fraction would change too, so it is not a number to hard-code in your head for all time. For current practice, 1/11 is correct for taxable supplies.
It applies only to the taxable part of a price. If an invoice mixes taxable and GST-free items, the fraction should be applied only to the taxable total. And if a supplier has not charged GST at all, for instance because it is unregistered, you cannot use the fraction to invent a credit that was never paid.
Where amounts need to be rounded to the nearest cent, the way the figure is rounded can create small differences between your records and a supplier's invoice. Those are usually immaterial, but consistent treatment is important. This is general information only, so check your own situation with the ATO or a registered tax professional.
Worked example
A plumber buys a pump for $825 and the supplier invoice shows the price as GST-inclusive. Using the GST fraction, the GST is $825 multiplied by 1/11, which is $75. The price excluding GST is $750. If the plumber is registered and uses the pump in a creditable way, $75 is the credit that goes to label 1B on the BAS, provided there is a valid tax invoice.
Practical tips
- Remember the fraction is 1/11, not 1/10. Using one-tenth overstates the GST in any inclusive price.
- Use the fraction as a quick check on ledger totals before lodging a BAS, because a mismatch often signals a coding error.
- Apply it only to the taxable portion of a mixed invoice, and never to amounts on which no GST was charged.