GST core
Taxable supply
A taxable supply is a sale made in the course of an enterprise by a business registered or required to be registered for GST, connected with Australia, and which is neither GST-free nor input-taxed.
A taxable supply is the core building block of the GST system. It is a sale of goods, services, property or something else of value, made for consideration, that triggers an obligation to charge GST at 10%. When a registered business makes a taxable supply it must include GST in the price and report that GST on its BAS.
Under the legislation, a supply is generally taxable when four conditions are met. First, you make the supply for consideration, which usually means you are paid. Second, you make it in the course or furtherance of an enterprise that you carry on. Third, the supply is connected with Australia. Fourth, you are registered or required to be registered for GST. If any of these is missing, the supply is not taxable. In addition, the supply must not be GST-free or input-taxed, because those are separate categories.
This definition catches far more than shop sales. A plumber's labour, a consultant's advice, a retailer's clothes, a cafe's coffee, a landlord's commercial lease and a software subscription are all typically taxable supplies. Even a sale of a business asset, such as a delivery van, can be a taxable supply if the business was registered and the van was used in its enterprise.
The seller works out the GST by multiplying the GST-exclusive price by 10%, or by dividing the GST-inclusive price by 11. The GST collected is reported at label 1A on the BAS, while the total sales amount, including GST, is reported at label G1. The customer, if registered and buying for business purposes, may be able to claim an input tax credit for the same amount.
Timing matters as well. If you account on a cash basis, GST is generally reported when you receive payment, while on an accruals basis it is generally reported when you issue the invoice or receive payment, whichever happens first. Which method you use can change which BAS period a sale falls into, though it does not change the total tax payable over time.
One common misunderstanding is that only registered businesses make taxable supplies, which overlooks the fact that someone who is required to register, but has not, still has the legal obligation. Another is believing that small sales below a threshold are never taxable. The test is based on your GST turnover, not on the size of a single sale.
This overview is general information only. Whether a particular supply is taxable can depend on detailed rules, so check with the ATO or a registered tax professional if the situation is unclear.
Worked example
Tom is a registered electrician. He completes a job and charges $1,500 plus GST. The GST is 10% of $1,500, which is $150, so the invoice total is $1,650. The sale is a taxable supply because Tom is registered, it relates to his business, it is in Australia and it is neither GST-free nor input-taxed. On his BAS he reports $150 at label 1A and $1,650 at G1.
Practical tips
- Check all the conditions before you decide a sale is outside GST. Being unregistered below the threshold is different from being required to register.
- Quote prices clearly as GST-inclusive or exclusive on quotes and invoices so customers are not surprised.
- Use accounting software tax codes consistently so every taxable sale flows through to label 1A without manual fixes.