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🦘 What is Australian GST?

Goods and Services Tax (GST) is Australia's value-added tax of 10% applied to most goods and services. Introduced in 2000, GST is collected by businesses and remitted to the Australian Taxation Office (ATO).

Key Point: GST is a consumption tax paid by the end consumer. Businesses collect it on behalf of the ATO and can claim back GST they pay on business purchases. The rate is a flat 10% on most taxable supplies.

GST Basics

GST Rate:

Standard rate: 10%
Price excluding GST: $100
GST amount: $100 × 10% = $10
Price including GST: $110

Calculating GST:

Add GST (GST-exclusive to GST-inclusive):

Price excluding GST × 1.10 = Price including GST
Example: $500 × 1.10 = $550

Remove GST (GST-inclusive to GST-exclusive):

Price including GST ÷ 1.10 = Price excluding GST
Example: $550 ÷ 1.10 = $500
GST amount: $550 - $500 = $50

Or use the fraction method:

GST amount = Price including GST × 1/11
Example: $550 × 1/11 = $50

Who Must Register for GST?

Mandatory Registration:

  • Turnover ≥ $75,000: Must register within 21 days
  • Non-profit organisations ≥ $150,000: Higher threshold
  • Taxi/rideshare drivers: Register regardless of turnover

Voluntary Registration:

  • Businesses below $75,000 can choose to register
  • Benefits: Claim GST credits on purchases, appear more established
  • Costs: Compliance burden, quarterly BAS reporting

GST-Free vs Input-Taxed vs Taxable

Category GST on Sales Claim GST on Purchases Examples
Taxable (10%) Yes Yes Most goods/services
GST-free (0%) No Yes Basic food, exports, health
Input-taxed No No Financial services, rent

GST-Free Items (No GST Charged)

Basic Food:

  • Bread, milk, eggs, meat, fish, vegetables, fruit
  • NOT restaurant meals, takeaway, confectionery, soft drinks

Healthcare:

  • Medical services, hospital care, prescription medicines
  • NOT elective cosmetic surgery, vitamins (unless prescribed)

Education:

  • Course fees for primary, secondary, tertiary education
  • NOT commercial training, hobby courses

Exports:

  • Goods exported out of Australia
  • Services provided to overseas recipients (with conditions)

Other GST-Free:

  • International transport
  • Precious metals (gold, silver, platinum for investment)
  • Going concern business sales
  • Farmland sales

Input-Taxed Supplies

These don't have GST, and you can't claim GST on related purchases:

  • Financial supplies (lending, borrowing, credit cards)
  • Residential rent (not commercial)
  • Sale of existing residential property
  • Some insurance products

How GST Works Through Supply Chain

Example: Manufacturing to Consumer

Stage Sale Price GST Collected GST Paid Net GST to ATO
Manufacturer $110 ($100+GST) $10 $0 $10
Wholesaler $165 ($150+GST) $15 $10 $5
Retailer $220 ($200+GST) $20 $15 $5
Consumer Pays $220 - $20 -
Total to ATO $20

Each business only pays GST on the value they add. Consumer pays full $20 GST.

💡 Key Difference: GST vs NZ GST

Australia: 10% rate, many food exemptions
New Zealand: 15% rate, very few exemptions (broader base, simpler)
Both are value-added taxes collected through supply chain.

⚠️ Common GST Mistakes

Charging GST when not registered: Illegal, must be registered first
Not charging GST when required: Still owe ATO even if didn't collect
Claiming personal purchases: Only business purchases qualify
Wrong classification: Misclassifying taxable vs GST-free items

🔢 GST Calculations

Example 1: Adding GST to Prices

Retail store pricing products:

Product cost (ex-GST): $45.00
Markup: 100%
Sell price (ex-GST): $90.00
Add GST: $90 × 1.10
Final price: $99.00
GST amount: $9.00

Example 2: Removing GST from Invoice

Invoice shows $550 including GST:

Total including GST: $550.00
Divide by 1.10: $550 ÷ 1.10
Amount ex-GST: $500.00
GST component: $550 - $500 = $50.00

Or use fraction method:

GST = $550 × 1/11 = $50.00

Example 3: Business Activity Statement (BAS)

Quarterly BAS for small business:

Sales (GST Collected):

Item Amount Inc. GST GST
Taxable sales $88,000 $8,000
GST-free exports $15,000 $0
Total GST collected $8,000

Purchases (GST Paid):

Item Amount Inc. GST GST Credit
Inventory $33,000 $3,000
Rent (commercial) $11,000 $1,000
Equipment $5,500 $500
Utilities $2,200 $200
Total GST credits $4,700

BAS Calculation:

GST collected on sales: $8,000
Less: GST credits claimed: $4,700
Net GST payable to ATO: $3,300

Example 4: Mixed Business (Taxable + GST-Free)

Bakery selling both:

Sales Breakdown:

Product Sales GST Status GST
Fresh bread (basic food) $10,000 GST-free $0
Cakes/pastries (not basic) $8,800 inc GST Taxable 10% $800
Coffee (prepared food) $6,600 inc GST Taxable 10% $600
Total GST on sales $1,400

Purchases (Apportionment Needed):

Total GST credits: $2,500
40% of sales are GST-free
Can only claim 60%: $2,500 × 60% = $1,500

Net Position:

GST collected: $1,400
GST credits: $1,500
Refund from ATO: $100

Example 5: Import Calculations

Importing goods into Australia:

Goods value (customs): AUD $10,000
Customs duty (5%): $500
Taxable value: $10,500
GST (10% of taxable value): $1,050
Total to pay: $11,550

GST-registered businesses can claim the $1,050 GST back on their BAS.

Calculation Tips

Quick Mental Math:

  • Add 10%: Multiply by 1.1
  • Remove GST: Divide by 11 to get GST component
  • Check: GST should be ~9.09% of GST-inclusive price

Common Prices:

Ex-GST GST Inc-GST
$100 $10 $110
$500 $50 $550
$1,000 $100 $1,100

🌍 Real-World Australian GST Examples

1
Tradie Business Setup

Electrician starting business in Sydney

Year 1 Revenue Projection:

Expected revenue: $90,000 (inc GST)
Above $75,000 threshold → Must register
Revenue ex-GST: $90,000 ÷ 1.1 = $81,818
GST to collect: $8,182

Typical Job:

Labour: $500
Materials: $300
Total ex-GST: $800
GST (10%): $80
Invoice customer: $880

Claiming GST Back:

Bought materials for $330 inc GST
GST credit: $330 ÷ 11 = $30
Net GST: $80 - $30 = $50 to ATO
2
Online Retailer

E-commerce store selling to Australians

Monthly Sales:

Sale Type Amount GST
Australian customers $44,000 inc $4,000
Export to NZ $8,000 $0 (GST-free)
Export to USA $5,000 $0 (GST-free)

BAS Summary:

GST on sales: $4,000
GST on purchases: $2,200
Net payable: $1,800
3
Cafe Mixed Supplies

Melbourne cafe with dine-in and takeaway

Weekly Sales:

Item Sales Inc GST GST Status GST
Coffee (all taxable) $3,300 10% $300
Meals (dine-in taxable) $2,200 10% $200
Bottled water $550 10% $50
Bread (basic food) $400 GST-free $0
Milk (basic food) $300 GST-free $0
Total $6,750 $550

Key point: Coffee and restaurant meals are always taxable. Unprepared basic foods (bread, milk for takeaway) are GST-free.

4
Property Developer

Developer building new apartments

Sale of New Apartment:

Sale price: $660,000 (inc GST)
Price ex-GST: $660,000 ÷ 1.1 = $600,000
GST collected: $60,000

Development Costs (GST Credits):

Expense Amount Inc GST GST Credit
Construction $440,000 $40,000
Materials $110,000 $10,000
Professional fees $33,000 $3,000
Land (input-taxed) $150,000 $0
Total credits $53,000

Net Position:

GST collected: $60,000
GST credits: $53,000
Net GST payable: $7,000

Note: Land is input-taxed (no GST on purchase, no credit). New residential property sales are taxable. Existing residential property sales are input-taxed.

🎯 Test Your Knowledge

Complete this quiz on Australian GST

1. What is the Australian GST rate?
5%
10%
15%
20%
2. A business must register for GST if annual turnover is:
$50,000 or more
$75,000 or more
$100,000 or more
$150,000 or more
3. To add GST to a price, you:
Add 10% of the price
Multiply by 1.10
Divide by 1.10
Multiply by 0.10
4. An invoice total is $550 including GST. The GST component is:
$55
$50
$45
$60
5. Which item is GST-free?
Restaurant meal
Coffee
Fresh bread (basic food)
Soft drinks
6. Input-taxed supplies mean:
You charge GST and claim credits
No GST charged, no credits claimed
Charge GST but no credits
No GST but can claim credits
7. You collect $5,000 GST on sales and paid $3,000 GST on purchases. You owe ATO:
$5,000
$3,000
$2,000
$8,000
8. Exports of goods from Australia are:
Taxable at 10%
GST-free (0%)
Input-taxed
Exempt from GST system
9. Residential rent is:
Taxable at 10%
GST-free
Input-taxed
Taxable at 5%
10. BAS (Business Activity Statement) is lodged:
Weekly
Monthly (all businesses)
Quarterly or monthly depending on turnover
Annually

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