GST Explained: How GST Works for Business Owners

GST (goods and services tax) is a 10% tax that applies to most goods and services sold in Australia. If your business is registered for GST, you generally charge it on your sales, claim GST credits on eligible business purchases, and report the difference through your BAS. Once your turnover reaches the registration threshold, registering usually becomes compulsory.

This article contains general information only and isn’t personal tax advice. Every business is different, so speak with a registered BAS agent or accountant about your specific situation.

Key takeaways:

• GST is a 10% broad-based tax on most goods and services sold or consumed in Australia, collected at each step of the supply chain.
• Registration is generally required once GST turnover reaches $75,000 ($150,000 for non-profits), within 21 days of reaching that threshold.
• Registered businesses charge GST on taxable sales and claim GST credits on GST-included business purchases — the BAS reports the net difference.
• Not every sale is taxed the same way — taxable, GST-free and input-taxed sales are treated differently, and only taxable and GST-free sales generate GST credits on related purchases.
• A tax invoice is generally required for any purchase over $82.50 (including GST) before a GST credit can be claimed on it.
• GST is reported and paid through the BAS, not as a separate lodgement — see our BAS explained guide for how the reporting side works.

What GST is

GST is a broad-based tax of 10% on most goods, services and other items sold or consumed in Australia. It’s collected throughout the supply chain rather than only at the final sale. Each GST-registered business charges GST on its sales and claims credits for the GST it pays on business purchases, so in practice the tax is only applied to the value added at each step.

Who has to register for GST

A business generally needs to register for GST once its GST turnover reaches $75,000 (or $150,000 for non-profit organisations), and registration needs to happen within 21 days of reaching that threshold. The ATO looks at both current GST turnover (the current month plus the previous 11 months) and projected GST turnover (the current month plus the next 11 months) — so you may need to register before your turnover actually reaches $75,000. A business below the threshold can also register voluntarily, which some choose to do specifically to start claiming GST credits on business purchases.

How GST works: charging and remitting

Once registered, a business generally charges GST on its taxable sales — adding 10% to the price — and collects that amount from the customer as part of the sale price. That collected GST isn’t the business’s income; it’s held and eventually remitted to the ATO, offset by whatever GST credits the business is entitled to claim for the same period. The BAS is where this net calculation happens, which is why GST and BAS are so closely linked. GST is the tax itself; the BAS is simply how it’s reported.

As a simple example: a $1,000 taxable sale (excluding GST) has $100 of GST added, so the customer pays $1,100 including GST. That $100 isn’t extra profit — it’s set aside and reported on the BAS, netted against whatever GST credits the business claims on its own purchases for the same period.

Claiming GST credits

Just as a registered business charges GST on what it sells, it can also claim GST credits for the GST included in the price of things it buys for the business — equipment, stock, professional services, and similar business expenses. This is what stops GST from being charged over and over again throughout the supply chain. A GST credit generally can’t be claimed without a valid tax invoice to support it, which is why invoice record-keeping matters as much as the transaction itself.

Taxable, GST-free and input-taxed sales

Not every sale is treated the same way under GST, and the distinction affects both what’s charged and what can be claimed.

The GST-free vs input-taxed distinction trips a lot of business owners up, since neither has GST charged on the sale — the difference only shows up on the purchase side, in whether GST credits can still be claimed on the related business inputs. One of the most common mistakes is assuming that any sale without GST is treated the same way. It isn’t. GST-free and input-taxed sales can have very different consequences when it comes to claiming GST credits.

Take a business that sells a mix of taxable and GST-free goods — say, a grocer selling both packaged goods (taxable) and basic food items (GST-free). It still claims GST credits on the equipment and supplies it buys for both parts of the business, because GST-free sales don’t block credit claims on related purchases. A landlord earning residential rent is in a different position: that income is input-taxed, so GST credits generally can’t be claimed on purchases related to it, even though no GST was charged on the rent either.

Tax invoices: what’s required

A tax invoice is generally required to claim a GST credit on any purchase over $82.50 (including GST). For sales of $82.50 or less, a supplier isn’t required to issue a formal tax invoice unless the customer specifically asks for one. Above that threshold, the purchaser generally needs a valid tax invoice on hand — not just any receipt — before the GST credit can be claimed, which is why keeping invoices organised matters. Missing paperwork often means businesses miss out on GST credits they’re entitled to claim.

Displaying GST-inclusive prices

Businesses advertising prices to consumers are generally expected to display the GST-inclusive total price as a single figure, rather than an exclusive price with GST added separately, under Australian Consumer Law rules the ACCC enforces. If a business does choose to show the GST-exclusive amount and the GST component separately, both figures need to sit close to, and no more prominent than, the final GST-inclusive price. This is an Australian Consumer Law requirement rather than a GST reporting rule, but it’s something many new businesses overlook.

Cash vs accrual: when GST is reported

Cash and accrual accounting determine when a sale or purchase is reported on your BAS. Under the cash method, GST is reported when money changes hands. Under the accrual method, it’s reported when an invoice is issued, even if payment comes later. Eligibility to use the cash basis generally depends on turnover and other factors, so it’s worth confirming which method applies to your business rather than assuming, since using the wrong one can shift figures into the wrong BAS period.

Common GST mistakes small businesses make

• Treating a GST-free sale and an input-taxed sale as interchangeable, when only one still allows GST credits on related purchases.
• Claiming a GST credit without a valid tax invoice for a purchase over $82.50.
• Charging GST before registration actually takes effect, or forgetting to start charging it once registered.
• Getting cash vs accrual reporting wrong, which shifts a transaction into the wrong BAS period.
• Assuming exports or overseas digital sales are automatically GST-free without checking the specific conditions apply to that transaction.

How GST connects to your BAS

GST doesn’t get reported on its own — it’s one of the components rolled into the regular BAS a registered business lodges, alongside PAYG withholding and PAYG instalments where they apply. Our BAS explained guide covers how those pieces fit together on the actual form, including lodgement frequency and due dates, which this article deliberately hasn’t gone into in detail. GST is also easy to confuse with the separate income tax figures a business reports — our guide to whether taxable income includes GST covers why the two are kept apart.

Getting help

If you’re unsure whether you’re treating GST correctly, or you’re approaching the registration threshold and not sure when to register, we can help. Our BAS services support Melbourne small businesses with GST registration, BAS preparation and ongoing compliance under fixed monthly pricing.

Official resources

• How GST works — ATO
• Registering for GST — ATO
• Claiming GST credits — ATO
• GST-free sales — ATO
• Input-taxed sales — ATO
• Tax invoices — ATO
• Price displays — ACCC