What Is GST and How Does It Work in Australia?
Goods and Services Tax (GST) is a broad-based tax of 10% applied to most goods, services, and other items sold or consumed in Australia. It was introduced on 1 July 2000 under the Howard Government and is administered by the Australian Taxation Office (ATO). GST is included in the price you pay at the checkout — businesses collect it on behalf of the government and remit it through their Business Activity Statement (BAS).
If your business has an annual turnover of $75,000 or more (or $150,000 for non-profit organisations), you are required to register for GST. Ride-share and taxi drivers must register regardless of turnover. Once registered, you charge GST on taxable supplies and claim input tax credits for the GST you pay on business expenses.
The GST Formula
The mathematics of GST is straightforward once you understand whether you're starting from an exclusive or inclusive price:
- Adding GST: Price inc-GST = Price ex-GST × 1.10
- Removing GST: Price ex-GST = Price inc-GST ÷ 1.10
- Finding the GST component: GST = Price inc-GST ÷ 11
The last formula — dividing by 11 rather than 10 — is the one people most often get wrong. When you see a GST-inclusive price, the GST portion is one-eleventh of that total, not one-tenth. This is because the 10% was applied to the original (smaller) ex-GST price, not to the final total.
Worked Examples
Example 1 — Tradie Quoting a Job
A plumber quotes labour and materials at $2,400 ex-GST. What should the invoice total be?
| Item | Amount |
|---|---|
| Labour & materials (ex-GST) | $2,400.00 |
| GST (10% of $2,400) | $240.00 |
| Total payable | $2,640.00 |
The plumber invoices $2,640 and collects $240 of GST to remit to the ATO.
Example 2 — Removing GST from a Receipt
A business owner buys office furniture for $1,320 (GST-inclusive). How much can they claim as an input tax credit?
| Item | Amount |
|---|---|
| GST-inclusive price paid | $1,320.00 |
| Ex-GST cost ($1,320 ÷ 1.10) | $1,200.00 |
| GST credit claimable ($1,320 ÷ 11) | $120.00 |
They can claim $120 back on their BAS, making the effective cost $1,200.
Example 3 — Checking a Quote That "Includes GST"
A supplier quotes $8,800 inclusive of GST for equipment. You need to book the ex-GST cost to your accounts.
| Item | Amount |
|---|---|
| GST-inclusive quote | $8,800.00 |
| Ex-GST value ($8,800 ÷ 1.10) | $8,000.00 |
| GST component ($8,800 ÷ 11) | $800.00 |
What Is and Isn't Subject to GST?
Not every transaction attracts GST. The ATO classifies supplies into three categories:
Taxable Supplies (GST applies at 10%)
Most goods and services sold in Australia are taxable. This includes retail purchases, professional services (accounting, legal, consulting), new residential property, commercial rent, and most tradespeople's services. If your business is registered for GST, you must charge 10% on these supplies.
GST-Free Supplies (0% GST)
Some essential goods and services carry a zero rate, meaning no GST is charged but you can still claim input tax credits for GST paid on related business costs. Key GST-free categories include:
- Basic food items (fresh fruit, vegetables, bread, milk — but not restaurant meals or takeaway)
- Most medical and health services (GP visits, hospital treatment)
- Educational courses from schools, universities, and registered training organisations
- Childcare services
- Exports of goods and services
- Some financial supplies (bank interest, insurance premiums — though stamp duty applies separately)
Input-Taxed Supplies (No GST charged, no credit claimable)
Certain supplies are input-taxed, meaning you don't charge GST but you also can't claim input tax credits on related acquisitions. The most common example is residential rental income — if you're a landlord renting a house, you don't charge GST on rent and can't claim GST on property maintenance costs. Financial supplies like lending money or issuing shares are also input-taxed.
GST and Your BAS
Registered businesses must lodge a Business Activity Statement (BAS) — monthly, quarterly, or annually depending on their turnover and ATO arrangements. The BAS reconciles:
- 1A — GST on sales: Total GST you've collected from customers
- 1B — GST on purchases: Total GST you've paid to suppliers (your input tax credits)
- Net GST: 1A minus 1B — this is what you pay to (or receive from) the ATO
Businesses with turnover under $10 million may be eligible to use the cash basis method, which means you only report GST when money actually changes hands rather than when an invoice is issued. Larger businesses must generally use the accruals basis.
Late or incorrect BAS lodgement can trigger penalties and interest charges from the ATO. If you're unsure about your obligations, speak with a registered BAS agent or tax accountant.
Frequently Asked Questions
Disclaimer: This calculator is for general informational purposes only and does not constitute tax advice. GST rules can be complex and individual circumstances vary. Always verify important figures with a registered tax agent or BAS agent, or refer directly to the ATO website.
Related Tax & Finance Tools
Use these tools alongside your GST calculations for a full picture of your tax position.
- Income Tax Calculator Australia — Calculate your annual income tax and take-home pay
- Salary After Tax Calculator — See your weekly, fortnightly and monthly net pay
- Superannuation Calculator — Estimate your super contributions and retirement balance
- Percentage Calculator — General percentage and proportion calculations