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GST Australia: What is it and how to calculate it

taxes

Guide To GST In Australia: What Is It & How GST Rates Work

By QuickBooks Australia

Published on July 16, 2024Updated on January 20, 2025

Most goods and services that are sold in Australia are subject to the Goods and Services Tax (GST). This tax was introduced on 1 July 2000 to replace multiple state and federal taxes with a single, broad-based consumption tax.

Here, we’ll explain the Goods and Services Tax and look at how it affects small businesses in Australia. We’ll also discuss the current GST rates in Australia and provide calculation guidance.

Keep reading to find out more, or jump ahead to a specific section:

What is GST in Australia?
What is the GST rate?
How GST Works in Australia
How to Calculate GST
What’s the Difference Between GST & VAT?
Why You Need To Register For GST
Where To Register Online
What Items are Exempt from GST?
Do You Include GST in Tax Deductions?
How To Report GST
Accounting For GST
How to Manage GST with QuickBooks

What is GST in Australia?

Goods and Services Tax (GST) is a value-added tax applied to the sale of most goods and services.

GST applies to most products or services sold for domestic consumption, though some essential items, such as basic food, healthcare, and education, are exempt. Since 1954, more than 160 countries have implemented GST or Value-Added Tax (VAT) in some form.

Businesses with an annual turnover of $75,000 or more must register for GST with the Australian Taxation Office (ATO), while smaller businesses can choose to register voluntarily.

What is the GST rate?

The current rate of GST in Australia is 10%. Therefore, if your products or services cost $200, and you charge GST, your customer would pay $220. The additional $20 is the GST, which should be paid to the ATO. While you collect GST from your customers, you are not the one keeping that extra money; it is remitted to the ATO.

How GST Works

So, how does the GST work?

When the GST was introduced in Australia, it replaced various taxes like sales tax, excise duty, and some state-level taxes – consolidating them into a single 10% tax on most goods and services.

Today, Australian businesses must add GST to the sale price of their products or services, with the customer paying the total amount including GST. The business collects the GST and passes it on to the government.

For example, if a business charges $100 for services, they would add 10% GST ($10), making the total charge $110. The $10 GST is passed on to the ATO.

If a business is registered for GST, they must report both the GST they collect on sales and the GST they pay on business-related purchases when submitting their tax returns.

How to Calculate GST

To calculate the total amount of Goods & Services Tax on items sold or consumed, you can follow any of the two easy processes we have outlined below:

1. Adding GST

To add GST to an existing product or service, you need to multiply the amount by the current GST rate in Australia, i.e. 10% (0.1).

For example:

Price, excluding GST: $200

x 0.1 =

GST: $20

Total including GST: $220

2. Subtracting GST

If you want to find out the pre GST price of an item or service, divide by 1.1 (110%)

For example:

Price, including GST: $220

/ 1.1 =

Price, excluding GST: $200

(GST amount = $20)

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What’s the Difference Between GST & VAT?

The primary difference between GST (Goods and Services Tax) and VAT (Value-Added Tax) lies in their implementation and terminology, though both are similar in structure.

GST is the term used in countries like Australia and Canada, and it is generally applied as a single, flat rate on goods and services at each stage of production or distribution. VAT, on the other hand, is commonly used in European countries and other parts of the world.

While the mechanisms are similar, the main difference is that GST often applies to a broader range of goods and services, and in some cases, VAT can involve more complex multi-stage taxation across different sectors. However, both systems ultimately pass the tax burden onto the consumer.

Why You Need To Register For GST

Businesses must register for GST if their annual turnover is $75,000 or more (or expected to be). Below this threshold, registration is optional but allows businesses to claim GST credits on purchases.

New businesses expecting to exceed the threshold should consider registering early, but it's not required until they reach it. Not-for-profits have a higher threshold of $150,000, while ride-sharing, taxi, and limousine drivers must register regardless of turnover.

To avoid penalties, businesses should monitor their revenue – as registration is required within 21 days of exceeding the threshold.

Where To Register Online

You can register for GST online via the ATO's Business Portal, the Australian Business Register's website, or through myGov if you’re a sole trader. When registering for GST, you’ll need an Australian Business Number (ABN). You can apply for an ABN, register your business name, and set up PAYG withholding at the same time if needed.

What Items are Exempt from GST?

Some goods and services are GST-free in Australia.

These include:

Basic food items such as fresh fruit, vegetables, meat, bread, and milk (processed foods and snacks usually attract GST).
Certain education courses and materials, including accredited school and university courses.
Medical and healthcare services, including doctor visits, hospital treatments, and some prescription medicines.

Do You Include GST in Tax Deductions?

If your business is registered for GST, you can only claim tax deductions on the net amount (excluding GST) of a deductible purchase, as the GST portion is claimed separately as a GST credit. This prevents businesses from receiving tax relief twice. However, if your business is not registered for GST, you cannot claim GST credits – so in this case, you can claim the full GST-inclusive amount as a tax deduction.

How To Report GST

GST is typically reported quarterly but can be monthly for businesses with an annual turnover over $10 million (or by choice for cash flow benefits). Businesses report GST collected on sales minus GST paid on purchases via a Business Activity Statement (BAS). The difference is either paid to the ATO or refunded if credits exceed liabilities.

BAS lodgment deadlines:

Monthly: Due 21 days after each month’s end.
Quarterly: Due by the 28th of the following month after each quarter.

Watch our guide on how to prepare and lodge BAS using QuickBooks:

QuickBooks Online tutorial showcasing how to prepare and lodge your BAS

Accounting For GST

For sales over $82.50 (including GST), GST-registered customers must receive a tax invoice to claim GST credits. If requested, you must provide one within 28 days.

Invoices for sales over $1,000 must include:

‘Tax Invoice’ label
Seller’s name, ABN, and date
Buyer’s name and ABN
Description, quantity, price, GST amount, and total price

For sales under $1,000, buyer details are not required. Using invoice templates can simplify compliance.

GST is accounted for on either a cash or accrual basis:

Cash basis: Records GST when payments are received or made (better for small businesses).
Accrual basis: Records GST when invoices are issued or received (mandatory for businesses with over $10 million turnover).

Manage GST with QuickBooks

QuickBooks' GST tracking software helps businesses track, report, and manage GST efficiently. It allows users to add and edit tax rates, making it adaptable for different countries. QuickBooks is pre-filled with local GST tax rates in multiple regions and automatically calculates GST for invoices and expenses.

At the end of each reporting period, QuickBooks generates an up-to-date tax summary, simplifying BAS lodgment and tax filing. Businesses can categorise expenses, track GST on income and purchases, and even scan receipts via smartphone for easy record keeping.

QuickBooks also offers customisable financial reports, including balance sheets, cash flow statements, and profit and loss statements. Plus, businesses can integrate GST with Single Touch Payroll (STP) and electronically lodge BAS directly from QuickBooks.

Ready to get started? Take a look at our plans and pricing.

Frequently Asked Questions

What is GST in Australia?

How much is GST in Australia?

Do I need to register for GST in Australia?

How much does it cost to register for GST in Australia?

How much GST do I charge in Australia?

Do you have to pay GST if you earn under $75,000?

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Online Tax Return Guide: How to Lodge a Tax Return in Australia

June 5, 2024

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Guide To GST In Australia: What Is It & How GST Rates Work

What is GST in Australia?

What is the GST rate?

How GST Works

How to Calculate GST

1. Adding GST

2. Subtracting GST

Grow Your Business with QuickBooks

What’s the Difference Between GST & VAT?

Why You Need To Register For GST

Where To Register Online

What Items are Exempt from GST?

Do You Include GST in Tax Deductions?

How To Report GST

Accounting For GST

Manage GST with QuickBooks

Frequently Asked Questions

Related Articles

Looking for something else?

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