GST core
Supply
A supply is anything you provide to another party, such as goods, services, advice, rights or a grant of property, and it is the basic event on which GST is charged.
Supply is the central concept in the GST system. It is defined very widely to mean any form of supply whatsoever. That includes a supply of goods, services, advice or information, a grant, assignment or surrender of a right, a financial supply, an entry into an obligation to do something or refrain from doing something, and a supply of real property. If you provide something to someone, in the course of your enterprise, it is probably a supply.
A supply is not automatically taxable. For GST to apply, the supply must be made for consideration, made in the course or furtherance of an enterprise, connected with Australia, and made by an entity that is registered or required to be registered. It must also not be GST-free or input-taxed. So the first step is identifying that there is a supply, and the second step is classifying it.
Supplies can be made in many ways. Selling a product over the counter is an obvious supply. So is a consultant's time, a subscription to software, a licence to use a trademark, a lease of premises or a sale of a business asset. Even agreeing to stop doing something, such as a restraint on competing, can be a supply. This breadth is deliberate, so that the tax captures the full range of commercial dealings.
Because supply is so wide, classification becomes the real work. A single transaction can include more than one supply, for example a product with free delivery, or a package that includes both taxable and GST-free items. Whether the parts are separate supplies or a single combined supply affects how GST is applied. The concept of a mixed or composite supply addresses this, and the correct approach depends on the facts.
Timing of the supply matters for BAS reporting. Under accrual accounting, GST on a supply is generally reported when the invoice is issued or payment is received, whichever comes first, while under cash accounting it is reported when payment is received. The supply itself might be made earlier or later, but the reporting rules follow the accounting method, which is why consistent methods are valuable.
A common misunderstanding is that a supply must involve a sale of physical goods. It does not. Another is believing that a gift is never a supply. Gifts made without consideration are generally not taxable, but there are exceptions, and some arrangements that look like gifts include a benefit that counts as consideration. Care is needed in each case.
This information is general only. If you are unsure whether something you provide is a supply, or how it is classified, confirm with the ATO or a registered tax professional.
Worked example
Pia, a registered web developer, builds a website for $3,000 plus GST and supplies hosting for $50 a month plus GST. The website build and the monthly hosting are separate supplies. For the build she charges $3,000 plus $300 GST, a total of $3,300. Each month she charges $50 plus $5 GST, a total of $55, and reports the GST on each invoice.
Practical tips
- Break a transaction into its parts to decide whether it is one supply or several, since GST treatment can differ.
- Remember that supplies include services, rights and licences, not just physical goods.
- Use consistent invoicing so each supply is clearly described and priced.