Goods and Services Tax (GST) is an essential part of running a business in Australia. Whether you’re starting a new company or looking to improve your tax management, understanding how GST works is key to ensuring compliance with the Australian Taxation Office (ATO).
How does GST work in Australia, and what does it mean for businesses? This guide explains what GST is, how it applies to businesses, who needs to register, how to calculate GST, and how to lodge Business Activity Statements (BAS).
- What is GST?
- Who needs to register for GST?
- When does a business need to charge GST?
- How to calculate and collect GST
- What is GST input tax credit and how does it work?
- How to lodge GST and submit BAS reports
- Common GST mistakes businesses should avoid
- How Budgetly helps businesses track GST expenses efficiently
- Final thoughts on managing GST in Australia
What is GST?
GST (Goods and Services Tax) is a 10% tax applied to most goods and services sold in Australia. It is collected by businesses on behalf of the government and remitted to the ATO through periodic reporting.
GST is included in the final sale price of goods and services, meaning consumers pay the tax, while businesses collect and remit it.
Key GST facts:
- The standard GST rate in Australia is 10%.
- Some items are GST-free, including basic food, education, and medical services.
- Businesses can claim GST credits on purchases made for business use.
Who needs to register for GST?
A business must register for GST if:
- Annual turnover exceeds $75,000 (for most businesses).
- Non-profit organisations exceed $150,000 in turnover.
- You provide taxi or ride-share services (regardless of turnover).
- You want to claim fuel tax credits.
If a business earns less than $75,000 per year, GST registration is optional, but registering may allow you to claim GST credits on business expenses.
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When does a business need to charge GST?
Businesses that are registered for GST must charge GST on:
- Sales of goods and services
- Digital products and software subscriptions
- Consulting and professional services
- Leases and rental services
However, GST does not apply to:
- GST-free items – Such as fresh food, medical services, childcare, and exports.
- Input-taxed items – Such as financial services and residential rent.
If a business is not registered for GST, it cannot charge GST on sales or claim GST credits on purchases.
How to calculate and collect GST
Businesses must add 10% GST to taxable sales and report this amount to the ATO.
1. Calculating GST on sales
To add GST to a product or service:
- Multiply the price by 1.10.
- Example: If an item costs $100, the GST-inclusive price is $110.
2. Calculating GST from a GST-inclusive price
To find the GST amount in a price that already includes GST:
- Divide the total by 11.
- Example: If the price is $110, the GST component is $10.
3. Collecting GST from customers
Businesses must issue tax invoices that clearly show:
- The total price, including GST.
- The GST amount separately (for sales over $82.50).
Collecting GST correctly ensures compliance and accurate reporting.
What is GST input tax credit and how does it work?
A GST input tax credit allows businesses to claim back the GST paid on business-related purchases.
1. When can a business claim GST credits?
A business can claim GST credits if:
- The purchase includes GST.
- The item is used for business purposes.
- A valid tax invoice is provided.
2. How to calculate GST credits
If a business buys office supplies for $110 (including $10 GST), it can claim $10 as a GST credit when submitting its BAS.
3. When GST credits cannot be claimed
GST credits cannot be claimed on:
- Private expenses (e.g., personal meals or travel).
- GST-free items (e.g., basic food, healthcare services).
- Entertainment expenses (in most cases).
Understanding GST credits helps businesses reduce tax liability and manage cash flow more effectively.
How to lodge GST and submit BAS reports
Businesses registered for GST must report and pay GST to the ATO via a Business Activity Statement (BAS).
1. How often do businesses need to submit a BAS?
- Quarterly (default for most businesses).
- Monthly (for businesses with over $20 million turnover).
- Annually (if voluntarily registered for GST).
2. How to complete a BAS
A BAS report includes:
- Total GST collected on sales.
- GST credits claimed on purchases.
- The net GST amount to be paid or refunded.
3. Payment deadlines for GST reporting
- Quarterly BAS due dates:
- 28 October (July–September)
- 28 February (October–December)
- 28 April (January–March)
- 28 July (April–June)
Paying GST on time avoids penalties and ensures compliance with ATO regulations.
Common GST mistakes businesses should avoid
Many businesses make errors when handling GST. Here are some of the most common mistakes to watch out for:
1. Forgetting to register for GST on time
Businesses that exceed the $75,000 turnover threshold must register within 21 days.
2. Incorrectly charging GST
- Charging GST on GST-free products or services can cause compliance issues.
- Failing to add GST to taxable sales may lead to unexpected tax bills.
3. Not keeping proper tax invoices
Without a valid tax invoice, businesses cannot claim GST credits, even if GST was paid.
4. Claiming GST credits on ineligible expenses
- GST cannot be claimed on personal expenses or financial services.
5. Missing BAS deadlines
Late submissions can result in ATO penalties and interest charges.
Proper GST management ensures tax compliance and financial efficiency.
How Budgetly helps businesses track GST expenses efficiently
Managing GST expenses and reporting manually can be time-consuming. Budgetly offers businesses an easy way to track, manage, and organise GST-related expenses.
1. Automated GST tracking
Automatically records GST on transactions, ensuring businesses stay on top of tax obligations.
2. Digital receipt management
Upload receipts and invoices, making GST claims simple and hassle-free.
3. Real-time expense monitoring
Businesses can track GST expenses in real time, ensuring accurate financial records.
4. Expense categorisation for BAS reporting
Sort transactions by GST-inclusive and GST-free expenses to simplify BAS lodgement.
5. Integration with accounting tools
Sync Budgetly with Xero, MYOB, or QuickBooks for easier GST reporting.
With Budgetly, businesses can stay compliant, reduce errors, and manage GST expenses effectively.
Final thoughts on managing GST in Australia
Understanding how GST works in Australia is essential for business compliance and financial management. Registering for GST, calculating tax correctly, and lodging BAS reports on time can prevent costly mistakes and improve cash flow.
For businesses looking to improve GST tracking and reporting, Budgetly provides an efficient and accurate solution.
Start managing your GST expenses effectively with Budgetly today!
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