If you want to start a business, or work as a freelancer or contractor in Australia, GST definitely something you should know more about—but what is GST? Let’s take a closer look.
We know tax isn’t most people’s favourite subject, but it’s worth understanding the goods and services tax, since it’s a major part of Australia’s tax system and affects both businesses and individuals.
What is GST?
In Australia, the goods and services tax is a 10 percent tax added to most transactions. It was implemented by the Australian government in July 2000. Whether you’re enjoying your morning coffee, hiring professional services or selling your products, this tax is likely involved.
How does GST work?
Businesses who meet the criteria listed below must register for GST. Once registered, you have to add 10% tax to the prices of products and services when you invoice your clients.
You have to report GST to the Australian Taxation Office (ATO) by lodging regular business activity statements (BAS). In the BAS, you calculate the GST you have collected on sales and the GST you’ve paid your suppliers. If the paid amount exceeds the amount collected, you can claim a refund.
If the collected amount exceeds the paid amount, you have to pay the difference to the Australian Taxation Office.
Do I need to register for GST?
First of all, let’s see if you need to register. It all depends on your turnover, in other words how much money you make on sales. You have to register if
- you have a turnover of AUD 75,000 per year
- You are a non-profit organisation and your turnover is AUD 150,000 per year
- You provide taxi travel or ride-sourcing services, regardless of your turnover. This applies even if you are a driver for a company like Uber or Ola
If you earn less than this, it’s voluntary to register. If you do register voluntarily, it’ll involve more administrative work, such as lodging business activity statements (BAS) regularly and sending out tax invoices to your clients, but there are benefits too. For example, you can claim input tax credits, also called GST credits, on the GST you pay on business purchases.
Pro-tip: Manage GST with invoice software
With invoice software, you can easily add tax to your invoices. Just add your products and services to the invoice and choose the 10% tax rate. The invoice software will work out the total tax for you and clearly display it on your invoice.
Best of all—it’s completely free to use.
How do I register for GST?
1. Get an Australian business number (ABN)
When you start a business in Australia—or work as a freelancer or contractor—you have to get an Australian business number (ABN). The ABN is an 11-digit number that’s used to identify your business.
Before you register for GST, you must have an ABN. If you don’t have an ABN, you can apply for both at the same time.
2. Register online
The easiest way to register is through the Business Portal on the Australian Government’s Business Registration Service website. You can also register via your tax agent or through the Australian Taxation Office (ATO) phone services.
3. Provide relevant details
You’ll need to provide details about your business, including your ABN, business structure, and contact information.
4. Choose your reporting and payment cycle
During the registration process, you’ll be asked how often you want to lodge and pay your GST—monthly, quarterly, or annually. Choose the timeframe that best suits your business’s cash flow needs.
Once you’re done, your ABN will be registered for tax; you do not get a separate GST number.
You’ll then have to invoice your clients with a 10% tax rate. You’ll also have to lodge your business activity statement (BAS) by the due date. In the BAS, you’ll list how much GST you’ve claimed from clients and how much GST you’ve paid to your suppliers.
If you’ve claimed more than you’ve paid, you have to pay the difference to the Australian taxation office. If you’ve paid more than you’ve claimed, you’ll get a refund from the Australian taxation office.
How do I calculate GST?
Once you’re registered, you have to send tax invoices to you clients, with a 10% tax rate added to your products and services. If you sell an item for AUD 100, you should add a goods and services tax of AUD 10. The total amount your client has to pay would be AUD 110.
You can also use a GST calculator to work out GST.
Do I have to include GST on everything?
GST-free sales
Not everything is subject to GST in Australia. Several types of goods and services are not taxed, such as basic food items, certain medical services and medicines, some educational courses and materials, and exports. Read more about which items are excluded.
Input-taxed sales
There’s another category too: input-taxed sales. These should also have 0% tax. Most input-taxed sales are what’s called financial supplies, such as lending money, or selling or renting out premises. Read more about input-taxed sales.
Imports and exports
When goods are imported into Australia, they’re generally subject to GST at the point of entry, similar to domestic purchases. The Australian Customs Service collects this tax, and importers can typically claim credits for the GST paid on goods that are going to be used by the business, just as they would for goods and services purchased within Australia.
However, certain imports may be exempt, such as those that qualify as GST-free if sold within Australia. See a list of GST-free items.
Goods and services exported from Australia are classified as ‘GST-free.’ This exemption ensures that Australian businesses remain competitive in international markets, as their products do not carry the additional cost to international clients. Make sure to comply with the rules for export.
Make sure to invoice with GST
Once you’re registered for GST, you have to send tax invoices to your clients. You have to state at the top that it’s a tax invoice, and add 10% to all items, except those that are GST-free, exported items, or input-taxed sales.
Want to make invoicing easier? With free invoice software, tax is automatically calculated for you. We’ll also remind you if you’ve forgotten to add a tax rate for a product or service.
Conta is used by more than 80 000 businesses in Australia and worldwide:
Conta has streamlined my invoicing process with its user-friendly interface and reliable features. As a BI reporting and data analysis professional, it has been the perfect tool to manage and grow my new business.
– Stefan Kleinhans
Librix Innovations Pty LTD
