GST touches almost every sale your business makes, yet plenty of owners still aren’t quite sure how it works. Here’s the plain version.
GST in Australia is a flat 10% tax on most goods and services. Run a business, and you’re the one who collects it for the government. You add it to your prices, hold onto it, then hand it over to the Australian Taxation Office (ATO) when you lodge your BAS. Get it right and it’s just admin. Get it wrong and it costs you, in penalties or in money you should have claimed back.
This guide walks you through the lot. What GST stands for, how much it is, who has to register, and how to work it out without reaching for a calculator every time.
What does GST stand for, and what is it?
GST stands for Goods and Services Tax. It’s a 10% tax added to the price of most things sold in Australia. Businesses collect it on behalf of the ATO, then pass it on when they report their sales.
The idea is simple. The tax sits on top of the sale, the customer pays it, and the business is just the middleman holding the money until it’s due. You’re not meant to keep a cent of it.
How much is GST in Australia?
GST is 10% in Australia, and it has stayed at that flat rate since the ATO introduced it on 1 July 2000. The rate is the same whether you’re buying a coffee, a laptop, or an hour of an accountant’s time, as long as the sale is taxable.
A $200 service becomes $220 once you add GST. That extra $20 isn’t yours. It belongs to the ATO, and you send it on at BAS time.
How does GST actually work for a business?
GST works in two directions. You charge it on what you sell, and you pay it on what you buy. The gap between those two numbers is what you owe (or what gets refunded).
Say you collect $5,000 in GST from customers over a quarter, and you paid $1,500 in GST on stock, software and other business expenses. You send the ATO the difference, $3,500. The $1,500 you paid is called an input tax credit, and claiming it is how you avoid being taxed twice on the same dollar.
Three things have to happen for this to run smoothly:
- You charge 10% GST on every taxable sale.
- You keep tax invoices for the GST you pay on expenses.
- You report both sides on your BAS and settle up.
Miss the invoices and you can’t claim the credits. That’s the most common way small businesses leave money on the table.
Who needs to register for GST?
You must register for GST once your business turnover hits $75,000 a year or more. That’s the ATO threshold, and it’s based on your income, not your profit. Not-for-profits get a higher bar of $150,000.
A few situations override the threshold completely:
- Taxi, limousine and rideshare drivers (think Uber or DiDi) must register from day one, no matter how little they earn.
- You have to register within 21 days of crossing $75,000, or once you expect to cross it in the next 12 months.
Under the threshold and not in one of those special groups? Registering is optional. Some small operators do it anyway so they can claim credits on their setup costs. Others hold off to keep their prices simple. The right call depends on your margins and who your customers are, which is worth a quick chat with your accountant before you decide.
Not sure whether you’ve crossed the line? That’s a five-minute conversation. SMG Accounting is a CPA practice in Western Sydney, and we sort out GST registration and BAS for sole traders and companies across Rooty Hill, Mount Druitt, Blacktown and Penrith. Book a chat before you guess.
How do you register for GST?
Registering for GST is quick once you have an ABN. You can do it three ways:
- Online through the ATO’s Business Portal or myGovID linked service.
- By phone on 13 28 66.
- Through a registered tax or BAS agent, who can lodge it for you.
You’ll need your ABN first, since GST is tied to it. No ABN yet? You can apply for both at the same time through business.gov.au. Once you’re registered, you start charging GST straight away and issuing tax invoices that show the GST amount.
How do you calculate GST?
Working out GST comes down to two quick sums, depending on which way you’re going.
To add GST to a price: multiply by 1.1. A $400 job becomes $440.
To find the GST inside a GST-inclusive price: divide by 11. That same $440 holds $40 of GST.
The “divide by 11” trick catches people out. The GST isn’t 10% of the final price, because the 10% was added before the total existed. On a $110 sale, the GST is $10, which is a tenth of the original $100, not of the $110. Divide the total by 11 and you’ll always land on the right figure.
Which sales have GST, and which don’t?
Not every sale carries GST. The ATO sorts sales into three buckets, and knowing which is which keeps your BAS clean.
| Category | GST charged? | Can you claim credits? | Examples |
|---|---|---|---|
| Taxable | Yes, 10% | Yes | Most goods and services, commercial rent, professional fees |
| GST-free | No | Yes | Basic food, most health and medical care, education, exports |
| Input-taxed | No | No | Residential rent, most financial services |
The difference between GST-free and input-taxed matters more than it looks. Sell GST-free items and you still claim back the GST on your costs. Sell input-taxed ones (like renting out a residential property) and you can’t. Mix the two up and your BAS won’t balance.
Selling property as part of your business is its own beast. You may be able to work out the GST under the margin scheme, which taxes the profit margin rather than the full sale price, and that often means a smaller GST bill.
One more that trips people up: yes, there is GST on electricity and most other utilities, so keep those invoices for your credits.
When do you report and pay GST?
You report GST on your Business Activity Statement, or BAS. Most small businesses lodge quarterly, though some do it monthly or annually depending on turnover and how the ATO sets them up.
Your BAS shows the GST you collected, the GST you paid, and the net amount owing. Lodge late and the ATO can apply a failure-to-lodge penalty, so the dates are worth marking in your calendar. We’ve covered the full process in our BAS guide.
What GST mistakes catch small businesses out?
We see the same few slip-ups every quarter, and they’re all avoidable.
The biggest one is claiming GST credits without a valid tax invoice. No invoice, no claim, simple as that. The second is forgetting that the $75,000 threshold is a rolling 12-month figure, not a financial-year one. Plenty of owners cross it mid-year, keep trading without registering, then face backdated GST on sales they never charged it on.
Charging GST while unregistered is another. You can’t legally add 10% until the ATO has you on the books. And mixing personal and business expenses muddies your credits and slows down every BAS.
None of these are hard to avoid with decent record-keeping and a set of eyes on your numbers each quarter. That’s the part a good accountant earns their keep on.
Frequently asked questions
How much is GST in Australia?
GST in Australia is a flat 10% on most goods and services. The rate has not changed since the ATO introduced it on 1 July 2000. It applies the same way to products and services, as long as the sale counts as taxable rather than GST-free or input-taxed.
Do I have to register for GST?
You must register once your business turnover reaches $75,000 a year, or $150,000 for not-for-profits. Taxi, limousine and rideshare drivers must register regardless of income. Below the threshold, registration is optional, though some businesses choose it to claim credits on their costs.
How do I work out GST from a total?
Divide the GST-inclusive total by 11. On a $110 sale, that gives $10 of GST. The GST is a tenth of the original price, not of the final total, which is why dividing by 11 (rather than taking 10%) gives the correct figure every time.
Is there GST on electricity?
Yes. Electricity and most utilities are taxable supplies, so your bills include 10% GST. If your business is registered, keep those invoices and claim the GST back as an input tax credit on your BAS.
What is the difference between GST-free and input-taxed sales?
Both mean you don’t charge GST to the customer. The difference is credits. With GST-free sales, like basic food or exports, you can still claim back the GST on your business costs. With input-taxed sales, like residential rent, you cannot.
To Conclude
GST is one of those things that runs in the background until it doesn’t. A missed registration date or a quarter of dodgy invoices can turn a routine BAS into a real headache.
SMG Accounting Services is a CPA practice serving small businesses across Western Sydney. We handle GST registration, BAS lodgement and the day-to-day bookkeeping that keeps it all tidy, so you can get back to running the business. Book a free chat and we’ll make sure your GST is set up right from the start.