GST is Australia’s goods and services tax: a flat 10% tax added to the price of most goods and services sold in the country. GST stands for Goods and Services Tax. Businesses registered for GST collect it on their sales, claim back the GST they pay on purchases, and send the difference to the Australian Taxation Office (ATO).

That short answer covers the “what”. The rest of this guide covers the “how”: how GST actually works, who has to register, how to report it on your BAS, and the mistakes that cost small business owners money.

General advice only. This article does not account for your personal circumstances. Speak to a registered tax agent before acting on it.

What GST Is and What It Stands For

GST stands for Goods and Services Tax. It is a broad-based consumption tax that applies to most things you buy and sell in Australia. The Australian Government introduced it on 1 July 2000, when it replaced the old wholesale sales tax system.

The key thing to understand is who actually pays the goods and services tax. GST is paid by the end consumer, but it is collected and passed on by businesses. If your business is registered for GST, you are effectively an unpaid tax collector for the ATO: you add GST to your prices, hold it, and hand it over. It is not your money and it never was, which is why treating it like revenue is one of the fastest ways to land in trouble.

How Much Is GST? The 10% Rate

GST in Australia is 10%. That rate has not changed since GST began in 2000, and it applies uniformly across the goods and services that are taxable.

To work out the GST amount inside a GST-inclusive price, divide the total by 11. So a $110 invoice contains $10 of GST. To add GST to a GST-exclusive price, multiply by 10%. A $100 sale becomes $110 with $10 GST added on top.

Not everything is taxed at 10%. Some sales are GST-free and some are input-taxed, which we cover further down.

How GST Works: Collect on Sales, Claim Back on Purchases

GST works on a credit system, and this is the part most people get wrong. You do not pay GST of 10% on everything you sell. You pay the difference between the GST you collect and the GST you have already paid.

There are two sides to it:

• GST on sales. When you make taxable sales of goods or services, you add 10% GST to the price and collect GST from your customer.
• GST credits on purchases. When you buy goods or services for your business, the price usually already includes GST. You can claim GST credits for that, also called input tax credits.

At the end of your reporting period, you subtract the credits from what you collected. If you collected more than you paid, you send the difference to the ATO. If you paid more GST than you collected, you get a refund. GST refunds are common for businesses with big setup costs in their first year.

A Simple Worked Example

Say you run a small design studio. Over a quarter, your taxable sales come to $22,000 including GST, and you spend $5,500 including GST on software, equipment and contractors.

Item	Amount (inc. GST)	GST portion
GST collected on sales	$22,000	$2,000
GST paid on purchases (input tax credits)	$5,500	$500
GST you owe the ATO		$1,500

You collected $2,000 in GST and paid $500, so you send the ATO the $1,500 difference. You are never out of pocket for the GST itself, because the tax is ultimately borne by your customers, not you.

Who Needs to Register for GST? The $75,000 Threshold

You must be registered for GST if any of the following apply:

• Your business has a GST turnover of $75,000 or more a year.
• You run a non-profit organisation with a turnover of $150,000 or more a year.
• You provide taxi, limousine or ride-sourcing travel (such as Uber or DiDi), regardless of your turnover. You must be registered before your first trip.
• You want to claim fuel tax credits for your business.

GST turnover means your gross revenue from sales: your business income before expenses, excluding GST itself and certain other amounts. If your revenue is on track to cross $75,000 in the current or coming 12 months, the threshold is met. Watch it closely as your revenue grows, because the obligation starts when the run rate says so, not when the financial year ends.

If you are not required to register, you can still choose to be registered for GST voluntarily. That can make sense if you want to claim GST credits on your setup costs, though it also means you charge GST and lodge a BAS.

Time limit: once you are required to register, you have 21 days to do it. Register late and you may still have to pay GST on sales made since the date you should have registered, even if you never collected GST from your customers. That comes straight out of your pocket.

How to Register for GST

Registering is straightforward. You need an Australian Business Number (ABN) first, since GST registration is linked to it. You can register:

• Online through the ATO’s Business Portal or myGov linked to the Australian Taxation Office
• By phone with the ATO
• Through your registered tax or BAS agent, which is the easiest route if you would rather not deal with it yourself

You only need to register once. Once you are registered for GST, you stay registered until you cancel it, and you must charge GST and lodge activity statements from your registration date.

GST-Free and Input-Taxed Supplies

Not every sale carries GST. There are two categories where you do not charge the 10%, and the difference between them matters because it changes whether you can claim credits.

GST-Free Sales

On GST-free sales you do not charge GST, but you can still claim GST credits on the purchases you make to produce them. Common GST-free goods and services include:

• Most basic foods (bread, milk, fresh fruit and vegetables, plain meat are all GST free products)
• Most health and medical services
• Most education courses
• Exports of goods and services
• Some childcare and religious services

Input-Taxed Sales

On input-taxed sales you also do not charge GST, but you cannot claim GST credits on related purchases. The two main examples are:

• Financial supplies, such as lending money, bank fees and providing credit
• Residential rent, when you rent out residential premises for accommodation

Selling only GST-free or input-taxed goods can affect whether you need to register and what you can claim, so it is worth confirming your product’s treatment before you set your prices.

Tax Invoices, Record-Keeping and Cash Flow

Being registered for GST changes your paperwork. Your invoices become tax invoices, and to be valid a tax invoice must show your business name, your ABN, the date, a description of the items sold, and the GST amount, or a statement that the total price includes GST. Get the format right once in your invoicing software and every one of your regular invoices will be compliant automatically.

Recording GST properly also protects your cash flow. Track the GST amount you collect separately from your revenue, and match GST credits to business expenses as you go, rather than reconstructing them at BAS time. The GST you hold is a liability, not income, and businesses that park it in a separate account rarely get caught short when the payment is due.

How to Report and Pay GST: The BAS

You report GST to the ATO through your Business Activity Statement (BAS). Your BAS shows the GST on your sales, the GST credits you are claiming on purchases, and the net GST amount you owe or are owed. It may also cover PAYG withholding and PAYG instalments if they apply to you.

Cash vs Accrual Accounting

There are two methods for accounting for GST, and the one you use changes when GST hits your BAS:

• Cash basis. You account for GST in the period you actually receive or make a payment. Most small businesses use this because it lines up GST with real cash flow, so you are not paying GST on invoices your customers have not paid yet.
• Accrual (non-cash) basis. You account for GST in the earlier of when you issue or receive an invoice, or when payment is made. This can mean you pay GST before the cash arrives.

Reporting Cycles

How often you lodge depends on your GST turnover:

• Monthly if your GST turnover is $20 million or more
• Quarterly if your GST turnover is under $20 million, which covers most small businesses
• Annually if you are voluntarily registered and your turnover is under $75,000 ($150,000 for non-profits), in which case you lodge an annual GST return

For a full walkthrough of dates and lodgement, see our guide to BAS statements and keep our weekly tax tables handy for PAYG figures.

Common GST Mistakes to Avoid

• Spending the GST you collect. It is not income. Set it aside in a separate account so you are not scrambling at BAS time.
• Registering late. Cross $75,000 in revenue and you have 21 days. Miss it and you may owe GST you never collected.
• Claiming credits without a valid tax invoice. For anything over $82.50 including GST, you need a valid tax invoice to claim GST credits.
• Claiming GST on GST-free or input-taxed buys. No GST was charged, so there is nothing to claim back.
• Claiming the full amount on expenses with a private use component. If something is used partly for private purposes, you can only claim the business portion.
• Poor record-keeping. You must keep records, including tax invoices, for five years.

Frequently Asked Questions

Getting your GST registration, tax invoices and BAS right from the start saves a lot of stress at tax time. If you would rather hand it across, our team can set up your GST and manage your BAS as part of our small business tax planning services.