Most goods and services sold or consumed in Australia are subject to a Goods and Services Tax (GST) of 10%. This tax is similar to a Value Added Tax (VAT) used in other countries.
Introduced in 2000 as part of major tax reforms, GST replaced the old wholesale sales tax and became a central feature of the Australian tax system.
For small businesses, GST registration is not always required when starting out. However, once annual turnover reaches the threshold (currently $75,000), you must register for GST online and begin charging it on taxable sales.
Understanding your GST obligations helps you stay compliant, avoid penalties, and manage your cash flow effectively.
What is GST in Australia?
If your business is registered for GST, you must add 10% to the price of taxable goods and services. Prices can be displayed as:
- GST inclusive: the 10% is already included in the displayed price.
- GST exclusive: the 10% is added at the point of sale.
It’s important to clarify whether prices are inclusive or exclusive, as this directly affects what customers pay. The GST you collect is then reported and paid to the ATO at the end of each GST period, usually quarterly.
Claiming GST on Business Purchases
When you purchase supplies for your business, you’ll also be charged 10% GST. If the purchases are for business use and you have valid tax invoices, you can claim this back as an input tax credit. For example:
- GST = Value of taxable sale × 0.10
- Input tax credits reduce your net GST payable to the ATO.
Reporting GST Through BAS
Every quarter, GST-registered businesses must lodge a Business Activity Statement (BAS). This shows:
- GST collected: the tax added to your sales.
- GST paid: the credits you can claim on eligible business purchases.
The difference between the two determines how much you pay to the ATO. If your GST credits exceed the GST you collected, you may be entitled to a GST refund. Some smaller businesses may be eligible to report annually instead of quarterly.
Who Must Register For GST in Australia?
If your business’s GST turnover is $75,000 or more per year, or if it looks likely that you will reach it soon, you are required to complete GST registration as set out in the GST Act. Once you have exceeded the $75,000 annual turnover threshold, you must register within 21 days.
If your business makes less per annum, you can decide whether you want to register for GST or not. However, you should consider your obligations for GST registration as well as other taxes that may apply to your business.
You can easily register for GST online through the Australian Taxation Office (ATO). The ATO website provides detailed guidance on GST registration, the process for cancelling GST registration, and information about other taxes relevant to your business.
Most Australian charities and not-for-profit organisations are endorsed to access GST charity concessions. According to the GST Act, they must reach a turnover of $150,000 before they are required to register.
Meanwhile, taxi drivers and ride-sharing drivers are required to register for (and charge) GST, regardless of their annual turnover. They must register before they can even begin operating.
How to Register for GST
To register for GST, follow these steps:
- Get an Australian Business Number (ABN): You must first apply for an ABN through the Australian Business Register (ABR) website if you don’t already have one.
- Register Online: Once you have your ABN, you can register for GST online through the Australian Taxation Office (ATO) portal. Registering for GST is necessary for GST purposes, such as charging GST on your sales and claiming input tax credits.
- Complete the Registration Form: You’ll need to provide your business details, including your ABN and business name, and select how you will lodge your Business Activity Statements (BAS).
- Choose a Reporting Period: You’ll also need to select whether you want to lodge your BAS monthly or quarterly. Most businesses will lodge quarterly unless they have a turnover of over $20 million, in which case monthly lodging is required.
- Confirmation and Registration: After completing the form, you will receive confirmation from the ATO that your business is now registered for GST. This can take a few days.
Once registered, ensure that you keep track of your sales, purchases, and other GST obligations in accordance with the ATO requirements. Failing to register when required can result in penalties.
How to Report Your GST to the ATO
GST reporting on all your periodic business tax obligations and entitlements is done via the business activity statement. This is for ATO purposes.
As well as reporting the GST charged on your sales and the claims on your business purchases, you need to report your pay-as-you-go PAYG installments and withholding tax.
Your BAS must be lodged quarterly, by the 28th day after the end of the financial quarter (September, December, March, and June), unless you report on an annual basis.
Once your business grows to generate a turnover of more than $20 million, you will be required to complete a monthly BAS rather than quarterly. Until this time, you can also choose to lodge monthly if there are cash flow benefits to your business.
Note that monthly lodging must be done by 21 days after the end of the month.
How to Account for GST on a Tax Invoice
If you’re registered for GST, when your business makes a taxable sale of more than $82.50 with GST included, you are required to issue the customer with a tax invoice. A taxable sale is one where GST must be charged under Australian law, so it is important to identify which of your sales are taxable and which are not. If a customer requests a tax invoice and you are unable to provide it immediately, you have 28 days in which to do so.
Tax invoices are important because customers who are registered for GST need them to claim the GST back.
Tax invoices differ from regular invoices; they either display the GST amount for each item or state somewhere that the total price includes GST. For taxable sales, your business is obligated to collect GST and ensure that the invoice clearly shows the GST collected.
Sales of goods and services, including GST, require invoices to display:
- The business name
- The ABN
- The words ‘tax invoice’
- The date of the invoice
- A description of the items
- The quantity of the items
- The price of the items
If the invoice is for more than $1,000, it also needs to have the buyer’s name, ABN and address.
If your business has less than $2 million in annual turnover, you can use the cash basis to account for GST. With the cash basis, you have to account for sales and purchases when you are paid and when you pay for purchases. Many smaller businesses prefer this method because the GST reporting is better aligned with cash flow.
Businesses that have less than $2 million turnover per anum have to apply the accruals basis. In this case, you must account for sales and purchases that you invoice and receive an invoice for the purchases.
How Income Tax Deductions Work With GST
If you buy something for your business and want to claim an income tax deduction, you have to claim the net amount that doesn’t include the GST. This rule is to prevent people from using the same amount twice to get relief on taxes.
Some goods and services are exempt from GST under GST legislation and are classified as GST free. Examples include:
- Salaries and wages
- Basic food items (such as fresh, unprocessed foods)
- Certain medical aids and appliances
- Real estate
GST legislation provides detailed rules for classifying goods and services as GST free, input taxed, or taxable.
Other goods and services are input-taxed. This means that GST isn’t charged on items sold, but the GST that is paid by that part of the business cannot be claimed as an input tax claim. Examples of this are rental income and financial services.
If there isn’t any GST credit for that purchase, you can claim an income tax deduction for the gross amount that includes the GST.
How KNS Can Help With Your Goods and Services Tax (GST)
KNS Accountants can set you up with a registered tax agent from our team to assist you with your requirements and questions.
We can help you from the very beginning by registering your business with the Australian Taxation Office for GST. After you’ve registered, we can guide you through all the work involved, including GST obligations such as:
- Reporting
- Tax invoices
- Income tax deductions
Our professionals can help you remain compliant with the relevant laws, ensure you’re submitting within the reporting period, and help you optimise your credits.
Contact the KNS team today to get started on your GST obligations.
Disclaimer
Please note that every effort has been made to ensure that the information provided in this guide is accurate. You should note, however, that the information is intended as a guide only, providing an overview of general information available to contractors and small businesses. This guide is not intended to be an exhaustive source of information and should not be seen to constitute legal or tax advice. You should, where necessary, seek your own advice for any legal or tax issues raised in your business affairs.
