The Ultimate Guide to GST in Australia: From Basics to Expert-Level Insights

Whether you’re a business owner, a freelancer, or an accounting professional, understanding the Australian GST system is non-negotiable. It impacts your pricing, invoicing, cash flow, and tax compliance. In this detailed guide, we’ll walk you through everything about GST in Australia — from the very basics to advanced rules, with real examples, practical tips, and compliance strategies.

GST BASICS — What Every Business Must Know

What is GST?

Goods and Services Tax (GST) is a broad-based 10% value-added tax applied to most goods, services, and other items sold or consumed in Australia.

• Introduced in: July 1, 2000
• Administered by: Australian Taxation Office (ATO)
• Standard Rate: 10%

What Does GST Apply To in Australia?

Australian Goods and Services Tax (GST) is a broad-based 10% tax applied to most goods and services sold or consumed in Australia. Understanding what is taxable under GST and what is GST-free or input taxed helps businesses remain compliant and claim accurate GST credits.

What Is Taxable Under Australian GST?

Goods and services that fall under the standard GST category (i.e. taxed at 10%) include most commercial supplies in Australia.

1. Sale of Goods
GST applies to physical items like electronics, clothes, furniture, tools, and gadgets.
Example: A shop selling laptops must add 10% GST to each sale.

2. Services
Most professional services are GST-applicable.
Example: A marketing consultant invoices a client for $2,000 + $200 GST.

3. Digital Products
Digital downloads, SaaS subscriptions, and streaming services are GST-inclusive.
Example: A graphic design template sold online to Australian users includes 10% GST.

4. Imports
GST is charged at the border when goods enter Australia, collected by customs.
Example: A business imports machinery from China and pays 10% GST on the customs value.

5. Commercial Property Rent
GST applies to most commercial leases.
Example: A small business renting a warehouse pays monthly rent + GST to the landlord.

GST-Free Supplies

Some goods and services are exempt from GST — either completely GST-free or input taxed (GST is not charged, but input tax credits cannot be claimed).

Categories and Examples of GST-Free Supplies:

1. Basic Food Items
Unprocessed or essential foods are GST-free.
Example: Fresh vegetables, rice, plain bread, milk.

2. Health Services
Most medical, dental, and allied health services are GST-free.
Example: Doctor consultations, physiotherapy, hospital treatments.

3. Education
School and university-level education, and accredited vocational courses.
Example: TAFE courses, university tuition.

4. Exports
Goods and services sold to overseas customers are GST-free (but still reported on BAS).
Example: A wholesaler exports wine to Singapore and does not charge GST. 

GST REGISTRATION – Who, When & How

Who Must Register for GST?

You’re required to register if:

• Your GST turnover exceeds AUD $75,000 (for-profit businesses)
• You’re a non-profit with turnover over AUD $150,000
• You operate as a ride-share/taxi driver (e.g., Uber) — mandatory regardless of turnover
• You’re an importer/exporter or online seller selling into Australia

What is GST Turnover?

GST turnover includes:

• Sales of taxable and GST-free goods and services
• Not input-taxed sales or private sales

When to Register?

• Immediately upon reaching the threshold
• It’s advisable to register early to claim input tax credits and appear credible to clients

How to Register?

• Online: via business.gov.au
• MyGovID + Relationship Authorisation Manager (RAM) required
• You must have an ABN (Australian Business Number)

Need help navigating GST rules for your Australian business?

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TAX INVOICES – Requirements & Templates

A tax invoice is mandatory for sales over AUD $82.50 (including GST). It must contain:

HOW GST WORKS – Transaction Flow Explained

Example:

You sell a service for AUD $1,100 including GST:

• GST = AUD $100
• Net income = AUD $1,000

At the same time, you buy software for AUD $220:

• GST Paid = AUD $20

Your GST Payable to ATO:

• GST Collected: $100
• GST Paid: $20
• Net GST to ATO: $80

GST ON IMPORTS & EXPORTS

GST on Imports:

• GST is charged at customs unless the goods are GST-free
• Business can claim credit if used for taxable activities

GST on Exports:

• Generally GST-free
• Must provide evidence (invoice, shipping docs, etc.)
• Must be exported within 60 days (or 90 days for services)

BUSINESS ACTIVITY STATEMENTS (BAS)

What is BAS?

A Business Activity Statement is how you report and pay GST, PAYG withholding, PAYG instalments, and more.

BAS Periods:

BAS Due Dates:

• Quarterly: 28 days after quarter ends
• Monthly: 21st of following month

Reporting in BAS:

• G1: Total sales
• 1A: GST on sales
• G11: Purchases
• 1B: GST on purchases

 G1: Total Sales

What it means:
G1 is the total amount of sales (also known as gross income or turnover) your business made in the BAS period before GST is added.

Includes:

• Taxable sales (e.g., sale of goods or services where GST is charged)
• GST-free sales (e.g., basic food, medical services, exports)
• Input-taxed sales (e.g., residential rent, financial supplies)

 Note: Do NOT include any GST in this amount.

Example:
You sold $50,000 worth of products (including some GST-free items).
You enter $50,000 at G1.

1A: GST on Sales

What it means:
This is the total amount of GST you collected from customers during the BAS period.

It’s calculated only on taxable sales.

Example:
You sold taxable goods worth $44,000 + 10% GST = $48,400.
GST collected = $4,400
You enter $4,400 at 1A.

G11: Purchases

What it means:
G11 includes total purchases and expenses related to running your business where you may or may not be charged GST.

Includes:

• Stock and raw materials
• Rent and utilities
• Business equipment
• Advertising, subscriptions, etc.

 Note: This amount should also exclude GST.

Example:
You purchased $20,000 worth of items and services (excluding GST).
You enter $20,000 at G11.

1B: GST on Purchases

What it means:
This is the total amount of GST you paid on business purchases. You can claim this as a GST credit.

Only claim GST where:

• You have a valid tax invoice
• The purchase is used in your business
• You are registered for GST

Example:
You purchased computers and supplies worth $11,000 including $1,000 GST.
You enter $1,000 at 1B.

INPUT TAX CREDITS – How to Claim & What’s Not Allowed

What Are Input Tax Credits?

These are GST amounts you paid on business purchases that can be claimed back.

Conditions:

• You must be GST-registered
• Purchase must relate to taxable activities
• Must have a valid tax invoice

Not Allowed:

• Private expenses
• Entertainment (mostly)
• Motor vehicles (some limits apply)

SPECIAL GST CASES & COMPLEX SITUATIONS

1. Input-Taxed Sales

 What It Means:

Input-taxed sales are exempt from GST, meaning:

• You do not charge GST on the sale
• But you also cannot claim input tax credits on related purchases

This is different from GST-free sales, where input credits can still be claimed.

 Common Examples:

• Residential rental income (e.g., renting out a home to a tenant)
• Financial services like:
  • Bank fees
  • Interest income
  • Loan services
  • Superannuation

 Why It Matters:

Businesses often forget that input-taxed transactions break the GST credit chain, which can affect profitability and compliance.

 Example:

You rent out a residential property and spend $10,000 on repairs (with $1,000 GST).
Because rent is input-taxed:

• You cannot claim the $1,000 GST back.
• You do not charge GST to your tenant either.

 2. Mixed Supplies

 What It Means:

Mixed supplies involve a combination of taxable, GST-free, or input-taxed items in one sale. You need to:

• Separate and apportion the GST correctly
• Report each portion under the correct BAS category

 Common Scenarios:

• Selling a gift hamper with food (GST-free) and wine (taxable)
• Charging a fee that includes both consulting (taxable) and medical services (GST-free)
• Selling land where part is residential (input-taxed) and part commercial (taxable)

 Why It Matters:

Incorrect GST treatment can lead to:

• Overpaying GST (hurting your cash flow)
• Underpaying GST (causing ATO penalties)

 Example:

You sell a hamper for $110 that includes:

• Chocolates (GST-free) worth $50
• Wine (taxable) worth $50 + $5 GST

Only $5 GST is payable and should be reported at Label 1A.

3. Margin Scheme (for Real Estate Sales)

 What It Means:

The margin scheme allows GST to be paid only on the profit margin rather than the full sale price when selling real property (land or buildings).

It’s commonly used by:

• Property developers
• Real estate sellers

 Eligibility:

• Property must be eligible (e.g., not previously sold with GST)
• Both parties must agree in writing to use the margin scheme

 GST Calculation:

Instead of paying 1/11th of the full sale price, you pay 1/11th of the margin (Sale Price – Purchase Price).

 Example:

• Purchase price: $300,000
• Sale price: $400,000
• Margin = $100,000
• GST = 1/11th of $100,000 = $9,090.91

This can significantly reduce your GST liability compared to standard GST.

 4. Reverse Charge

 What It Means:

When you import services or digital products from overseas (like software subscriptions or consultants), the reverse charge rule applies.

You must:

• Self-assess GST (as if you were the supplier)
• Report this amount on your BAS
• Usually, claim the same amount back as input credit

This makes it “net neutral” for most GST-registered businesses.

 Common Scenarios:

• Purchasing Zoom, Google Workspace, or Adobe from overseas vendors
• Paying foreign consultants or freelancers
• Subscribing to foreign SaaS platforms

 Example:

You pay a US company $1,100 for software.

• You self-calculate 10% GST = $100
• Report $100 at 1A (GST on sales) and $100 at 1B (GST on purchases)

The net impact is zero—but you must report it correctly to stay compliant.

GST FOR ONLINE BUSINESSES & MARKETPLACES

With the rise of eCommerce, digital services, and international sellers reaching Australian customers, GST rules have evolved to include online businesses, marketplaces, and digital platforms.

Whether you’re a digital seller overseas, a local dropshipper, or an online marketplace operator, understanding how GST applies is essential to stay compliant and avoid penalties.

In this guide, we’ll explain:

• GST registration for foreign sellers
• GST collection by marketplaces (Amazon, eBay, etc.)
• GST on B2C digital services
• GST for dropshipping and international sales

1. GST Registration for Overseas Digital Sellers

 Who Needs to Register?

If you’re a foreign business selling digital products or services to Australian consumers (B2C) and your total sales exceed AUD $75,000 per year, you must register for GST in Australia, even if you have no physical presence in the country.

This includes:

• Streaming services (e.g., Netflix)
• Online games
• eBooks and downloadable content
• Software subscriptions (e.g., Canva, Adobe)

 This rule is part of Australia’s “Netflix Tax”, introduced in 2017.

 Example:

You’re a U.S. company selling digital training courses online.
You earn AUD $80,000 from Australian consumers.
You must register for GST and charge 10% GST on your sales to Australian individuals.

 2. Online Marketplaces May Collect GST for You

If you sell through digital platforms or marketplaces, like:

• Amazon AU
• eBay AU
• Etsy
• Shopify (with marketplace plugins)

…then these platforms may be legally required to collect and remit GST on your behalf under the Electronic Distribution Platform (EDP) rules.

 How It Works:

• You list your product on Amazon AU.
• A customer in Australia buys it.
• Amazon collects 10% GST, includes it in the price, and pays it directly to the ATO.

 You won’t need to pay that GST separately—but you must track it properly in your records.

Important:

If your own website or sales channel doesn’t go through a marketplace, you are responsible for collecting and paying the GST directly.

 3. GST on Digital Products & Services (B2C)

 What Is Taxable?

The ATO requires GST to be charged on digital goods and services sold to Australian consumers (B2C).

Examples of taxable B2C digital services:

• Streaming movies and music (e.g., Netflix, Spotify)
• Downloading eBooks or PDFs
• Purchasing software or SaaS tools
• Online training or courses

If you’re selling to Australian businesses (B2B) and they provide their ABN, the sale may be GST-free, but you must keep proper evidence.

 4. GST and Dropshipping: Where Is the Supply?

Dropshipping—selling goods you don’t physically stock—requires you to carefully determine where the supply takes place, especially if:

• The goods are sent from overseas directly to Australian customers, or
• You’re an Australian seller sourcing from abroad

 Key Rules:

• Imported goods under AUD $1,000:
  Overseas sellers and platforms must collect GST at the point of sale.
• Goods over AUD $1,000:
  GST is collected at the Australian border by customs.
• If you’re dropshipping from China to Australia, and your annual sales exceed AUD $75,000:
  You must register for GST and collect 10% on sales.

 Example:

You’re a U.S.-based dropshipper selling T-shirts to Australia.
Your supplier ships directly to customers in Sydney.
If your sales exceed AUD $75,000, you must register and charge GST on those orders.

FREQUENTLY ASKED QUESTIONS (GST FAQs)

Q1: Can I register for GST even if my turnover is below $75,000?

Yes, absolutely.
GST registration is voluntary for businesses earning under AUD $75,000 annually (or AUD $150,000 for non-profits). Voluntary registration may benefit you if:

• You want to claim GST credits on business purchases
• You want to appear more professional or credible to clients
• You plan to grow quickly and prefer to set up early

Tip: If you register voluntarily, you must charge GST and lodge BAS like any other registered business.

Q2: Can I claim GST credits if I lost the tax invoice?

No.
To claim input tax credits, the ATO requires a valid tax invoice if the purchase is over AUD $82.50 (including GST). The invoice must include:

• Supplier’s ABN
• GST amount or “includes GST” statement
• Description of goods/services
• Your business name (for purchases over AUD $1,000)

If you’ve lost an invoice:

• Ask the supplier for a copy
• Do not claim GST without a valid tax invoice

Incorrect claims can lead to ATO audits or penalties.

Q3: I missed the BAS deadline. What will happen?

If you miss your BAS lodgment deadline, the ATO may apply:

• Failure to lodge (FTL) penalties – calculated per 28 days late
• General interest charges (GIC) on unpaid GST amounts

What to do:

• Lodge your overdue BAS as soon as possible
• If you can’t pay in full, you can set up a payment plan
• Early communication with the ATO can reduce penalties or interest

Being proactive can often reduce the impact and maintain good compliance standing.

Q4: What if I accidentally overpaid GST?

If you’ve overpaid GST, there are two common ways to fix it:

1. Adjust the amount in your next BAS (if the overpayment was recent)
2. Request a refund directly from the ATO using the Activity Statement process

Important:

• Keep clear records of the error
• Ensure your accounting system reflects the correct GST position

Overpayments often happen due to duplicated invoices or errors in GST coding — regular reconciliations help prevent this.

Q5: What types of sales are GST-free?

Some goods and services are GST-free, meaning you:

• Don’t charge GST
• Can still claim input tax credits

Examples of GST-free supplies:

• Basic food items (milk, bread, fruit, vegetables)
• Education (school fees, university courses)
• Medical services
• Childcare
• Exports

Q6: Can I claim GST on business purchases made before registration?

Yes – in some cases.

If you purchased goods or services before registering for GST, you may still be eligible to claim input tax credits, provided:

• You have valid tax invoices
• The purchase was for business use
• You’re claiming within four years of the purchase

Some assets may require adjustments if you used them partly for personal purposes before registering.

Q7: How often do I need to lodge BAS?

Most businesses lodge BAS quarterly, but the frequency depends on your GST turnover:

You can choose monthly even if not required, which may help with cash flow management.

Q8: What if I provide both GST and non-GST goods/services?

If your business has mixed supplies (e.g., both taxable and GST-free), you must:

• Charge GST only on taxable goods/services
• Apportion expenses between GST-claimable and non-claimable amounts

Proper bookkeeping and coding are essential to avoid errors in your BAS.

Q9: What is a valid tax invoice?

A valid GST tax invoice must include:

• “Tax Invoice” label
• Supplier’s ABN
• Date of issue
• Description of goods/services
• GST amount (or state if GST is included)
• Your business name or ABN (if over $1,000)

Invoices under $82.50 do not need to show GST separately, but documentation is still required.

Q10: Is GST charged on international sales?

No – exports are usually GST-free.

If you export goods or services to customers outside Australia, GST is not charged (but you can still claim input tax credits on related expenses).

Keep proper documentation showing the customer is overseas and the goods/services were exported.

Q11: Can freelancers and contractors register for GST?

Yes. If you’re a sole trader, freelancer, or contractor, and you earn over $75,000 per year, you must register for GST.

Voluntary registration is also possible for those earning less but wanting to:

• Claim GST on expenses
• Appear professional to clients (especially government or corporate contracts)

Q12: What is the difference between GST-free and input-taxed?

Q13: Do I need to charge GST to international customers buying digital services?

Yes – if you’re a foreign seller providing digital services to Australian consumers, you must:

• Register for GST in Australia
• Charge 10% GST on B2C sales (if sales > AUD $75,000 annually)

This includes services like:

• Online subscriptions
• eBooks and music
• Web design, SaaS, or digital marketing services

Q14: Can the ATO cancel my GST registration?

Yes. The ATO can cancel your GST registration if:

• Your business closes down
• Your turnover falls below the threshold and you request cancellation
• You’re not complying with GST rules (e.g., non-lodgment, false claims)

You must inform the ATO within 21 days of becoming ineligible.