GST is a flat 10% broad-based tax that is paid on most goods and services sold or consumed in Australia.
GST is levied on the ‘end consumer’, however is collected businesses on behalf of the Commonwealth Government that have ‘registered for GST’ with the ATO.
You are required to register for GST if:
you run a business or other enterprise and have a GST turnover of $75,000;
you are a non-profit organisation with a GST turnover of $150,000;
you provide taxi travel and ride-sourcing, regardless of turnover no matter what your turnover is; and
you want to claim fuel tax credits (a credit for the fuel tax that’s included in the price of fuel used in machinery, plant, equipment, heavy vehicles and light vehicles travelling off public roads or on private roads).
You can also voluntarily register for GST if your GST turnover is less than $75,000. This is particularly useful if your GST credits exceed GST charged to customers or if your business supplies goods and services that are GST-Free.
When you are registered for GST, the goods and services you sell are ‘taxable’ unless they are GST-Free or input-taxed.
For taxable sales made you need to include GST in the price of goods and services supplied to your customers, issue them with a tax invoice and then pass on the 10% GST to the ATO. When you buy supplies for your business, you'll be charged 10% in GST which you can claim back as a credit from the ATO.
GST-free sales include basic foods and some education courses, childcare services, charitable activities medical, health and care products and services.
Input-taxed sales do not have GST in their price and include financial supplies (bank fees, interest) and residential premises (residential rent).
At the end of each quarter, you complete a business activity statement to report to the ATO the total GST collected on sales less any GST that paid on your purchases.
If the GST collected exceeds the GST credits on purchases, you pay the net GST amount to the ATO.
If the GST credits on purchases exceeds the GST collected, the ATO pays you the net GST amount.
GST and income tax deductions
Where you claim a tax deduction for business expenses, you only claim for the net amount ie without the GST. If the expense is an 'input taxed' item, you can claim an income tax deduction for the gross amount eg rent on residential premises,
GST and income
When including income in your tax return, you only include the net amount ie without the GST.
You cannot claim a goods and services tax (GST) credit:
if you are not registered for GST
if purchases do not have GST in the price, including
are from a supplier that is not registered or required to be registered for GST
for wages and superannuation you pay to staff
if you do not have a valid tax invoice for purchases over $82.50 (including GST) when you lodge your activity statement.
You also cannot claim GST credits for some purchases (even if GST is included in the price) such as:
to the extent that a purchase is for a private or domestic purpose;
to the extent that a purchase is for making an input-taxed supply (such as those associated with providing residential accommodation);
for some purchases that you cannot claim as an income tax deduction (such as entertainment expenses); and
for the part of the purchase price of a car that is over the car limit amount for the relevant financial year.
Tips on calculating GST
When you are registered for GST you need to put your prices up by 10%. There’s a very simple formula for doing that:
If a tax invoice does not specify the amount of GST included in the price of your purchase and only states that the price includes GST, you can work out the GST amount yourself by dividing the price by 11.