GST: What it is and how to calculate it

ABOUT GST

What is GST?

Goods and Services Tax (GST) is a 10% tax put onto most goods and services provided in Australia. The Australian Taxation Office (ATO) collects GST from businesses. The government then uses the money to pay for public services throughout the country. 

Not everything for sale in Australia has GST attached to it. Some goods and services are exempt, including certain medical products and services, foods and education courses.

Check the ATO's website for more information.

REGISTERING FOR GST

Do I need to register for GST?

You have to register your business for GST if: 

  • your business sells goods and services that aren't GST-free
  • you run a business or enterprise with an annual turnover of $75,000 or more
  • you run a not-for-profit organisation with an annual turnover of $150,000 or more
  • you are a taxi or ride-sharing driver – regardless of what your annual turnover is.
You need to register for GST within 21 days of any of the above applying to your business.

How to register for GST

When registering for GST, you need to provide your Australian Business Number (ABN).

There are several ways to register your business for GST, including:

For more information, visit this ATO guide.
CALCULATING GST

How to calculate GST

Once you're a GST-registered business, you need to add GST to all your prices. Here's an easy formula for calculating it: 

calculator

Your price x 1.1 = Price including GST

For example, $45 x 1.1 = $49.50

You can also use MoneySmart's GST calculator to double-check your workings. 

What is GST turnover?

Your GST turnover is your total business income (not your profit), minus:

  • GST included in sales to your customers
  • sales that aren't for payment and aren't taxable
  • sales not connected with an enterprise you run
  • input-taxed sales you make
  • sales not connected with Australia.

Automate your GST admin with accounting software that does the work for you

FOLLOWING GST REGULATIONS

When to issue GST invoices

When you make a taxable sale of more than $82.50 (including GST), you have to give your customers a tax invoice so they can see the amount of tax being added to the total cost, and so they can claim GST credits if they're a GST-registered business too.  

There are 9 key pieces of information you need to include in your invoices:

  • The words 'tax invoice' should be somewhere clear on the page
  • The buyer's identity or ABN (optional if the sale is less than $1000)
  • A brief description of the goods or services you've sold 
  • Date invoice was issued
  • The seller's name
  • Your ABN
  • The pre-GST price
  • The amount of GST added
  • The total cost to your buyer 

Your GST reporting obligations

You have to tell the ATO how much GST you've collected from your sales income by reporting your GST in your Business Activity Statement (BAS). How often you report your GST depends on your annual turnover. 

Monthly reporting 

If your GST turnover is $20 million or more.

Quarterly reporting 

If your GST turnover is less than $20 million, and the ATO hasn't told you that you must report monthly.

Annual reporting

If you've voluntarily registered for GST and your GST turnover is less than $75,000 ($150,000 for not-for-profit organisations).  

In some instances, you can choose a different GST reporting and payment cycle. For more information about this, visit this ATO page.

How to claim GST credits

A GST credit is the GST amount included in the price of goods or services you purchase for the running of your business. 

GST-registered businesses can claim back GST credits if: 

  • The purchase was made to help run your business (e.g. stationery, inventory or work tools)
  • The purchase doesn't relate to input-taxed supplies 
  • The purchase price included GST 
  • You paid for, or will be liable to pay for, the goods or services purchased 
  • You have a tax invoice from the seller for purchases more than $82.50 
  • A customer leaves you in bad debt when they don't pay for your goods or services

You claim GST credits in your Business Activity Statement (BAS). 

Be sure to keep and store your invoices and receipts so you can claim all the GST credits you're entitled to. 

For more information about claiming GST credits, visit this ATO page.

 

GST TIPS

GST tips for small businesses

As a GST-registered business, issuing tax invoices, collecting GST from customers and sending information to the ATO alongside your BAS can be a bit of a handful. Here are some tips to make things a little simpler:

Put aside the GST you collect

Store these funds in a separate bank account so you're not caught out when it comes to paying the ATO.

Digitise your business activities to make them easier

Use business accounting software for your business admin to increase efficiency and accuracy.

Keep your receipts

Make sure you're vigilant when it comes to keeping receipts from purchases that are eligible for GST credits. All of those small amounts of money you get back will add up to big savings!

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