GST core
GST-inclusive price
A GST-inclusive price is the total price that already contains the 10 per cent GST, and the GST part is one-eleventh of that total.
A GST-inclusive price is the final amount a customer pays, with GST already built in. If an item is advertised at $110 including GST, then the GST is $10 and the price before GST is $100. This is how most prices are presented to consumers in Australia, because the law generally requires prices for consumers to include all taxes and charges.
To find the GST in an inclusive price, divide by 11, which is the same as multiplying by one-eleventh. To find the price before GST, divide the inclusive price by 1.1, or subtract the GST amount. Many people make the mistake of taking 10 per cent off the inclusive price, which gives the wrong answer. For example, 10 per cent of $110 is $11, but the GST is only $10.
Inclusive pricing also matters when you set prices. If you want to net a certain amount after GST, you must work from the GST-inclusive price. A business that wants to receive $200 for a taxable sale needs to charge $220 including GST. If you charge $200 and forget to add GST, the $200 is treated as GST-inclusive, so your actual revenue is reduced by the GST of $200 / 11 = $18.18.
Tax invoices must show GST in a way that makes the figures clear. For a taxable supply of less than $1,000, the invoice can say that the total price includes GST, without needing to separately show the amount. For larger amounts, or where some items are GST-free, the GST must be shown separately or each item identified.
Common misunderstandings include confusing GST-inclusive prices with GST-free prices, and believing every price you see already includes GST. Business-to-business quotes are often exclusive, so always check. Another mistake is incorrectly rounding. The GST should be calculated on the invoice total or per item in a way that is consistent with the GST law and your invoicing system.
Always state clearly whether your quotes and price lists are inclusive or exclusive, to avoid disputes with customers and mistakes in your accounts. This page is general information only, so confirm any special situations with the ATO or a registered tax professional.
Worked example
A retailer sells a jacket for $176 GST-inclusive. The GST in the price is $176 / 11 = $16. The GST-exclusive price is $176 - $16 = $160. Checking: $160 x 1.1 = $176. If the retailer sells ten jackets, GST collected is $160 in total and GST-exclusive sales are $1,600.
Practical tips
- To remove GST from an inclusive price, divide by 11 for the GST, not take 10 per cent off the total.
- Always say clearly on quotes and invoices whether prices include GST.
- Round only at the invoice total or in a consistent way for each line, so your figures reconcile with your accounting software.