The Goods and Services Tax (GST) seems straightforward: it’s just 10% added to the cost of goods and services, right? But that simple percentage spawns more client questions than any other aspect of Australian tax law.
Every month, thousands of Australians turn to Google with questions like, “Do I need to register for GST?”, “What records do you need to keep for GST?” and “Does milk have GST?” If they’re not asking Google, they’re asking their friendly local tax accountant, which is what inspired us to create this guide.
As Aussie accountants who’ve spent countless hours demystifying GST for businesses, we’ve heard every question imaginable – from the basics to the bizarrely specific. Some questions are straightforward (“How do you calculate GST from a total amount?”). Others are more complicated (“If I restore vintage furniture in my garage and sometimes flip office clearance lots on Facebook Marketplace, does GST apply?”).
While we recommend saving the more complex questions for an appointment with your accountant, we’ve compiled the most common GST questions we receive, along with clear, easy-to-read answers. Consider this your practical guide to understanding GST without needing to rely on AI and its occasionally made-up but legitimate-sounding answers.
With ITP, you’ll learn from human accountants who’ve been in the game for 50 years and counting. We’ve covered everything you need to know about GST registration requirements, calculation methods, overseas purchases, error corrections, and those special cases that make accountants reach for their fifth coffee of the day.
Note: We’ll update this resource regularly to ensure it’s accounting for tax law changes and new questions from our clients.
Do I need to register for GST?
You must register for GST when your annual turnover reaches or exceeds $75,000 for businesses or $150,000 for non-profit organisations. This threshold applies to your total revenue from all business activities combined.
Of course, this leads to some interesting mathematical gymnastics for those hovering around the threshold. We’ve seen plenty of businesses frantically calculating their monthly averages on the back of old invoices. We strongly recommend using actual accounting software instead.
Should I register for GST before reaching the threshold?
Voluntary GST registration makes sense for some businesses but can create an unnecessary admin burden for others. The decision depends on your business circumstances and long-term strategy.
Registering early does have some advantages:
- You can claim GST credits on business purchases immediately
- Large clients often prefer suppliers with GST registration
- It can make your business appear more established
- You won’t need to adjust your pricing structure later when you do hit the threshold
- Growing businesses can avoid scrambling to register when they suddenly reach the threshold
However, voluntary registration also has potential drawbacks:
- You’ll need to lodge regular Business Activity Statements (BAS) even during quiet periods
- Your prices will need to include GST, potentially making you more expensive than non-registered competitors
- The administrative overhead of GST compliance might outweigh the benefits if your turnover is well below the threshold
- You’ll need to maintain more detailed accounting records
- The cash flow impact of holding and remitting GST funds requires careful management
In general, it’s worth considering early registration if you’re close to the threshold, have significant business expenses with GST, or primarily serve business clients who can claim GST credits.
For example, a café renovating its kitchen might benefit from claiming GST credits on equipment purchases. Meanwhile, a freelance writer working from home with minimal expenses might find early registration more trouble than it’s worth.
If you’re at all unsure, contact ITP and one of our accountants will be happy to help.
How do you calculate GST from a total amount?
To calculate GST from a total amount that includes GST, divide the total by 11. For example, in a $110 sale, the GST component is: $110 / 11 = $10.
The division-by-11 rule might seem like odd mathematics, but there’s elegant logic behind it. When you add 10% to a base amount, that 10% becomes 1/11th of the new total.
Do I need to pay GST on overseas purchases?
Yes, GST applies to imported goods valued over $1,000 and most digital products or services purchased from overseas vendors.
GST also applies to goods under $1,000 purchased from overseas if they are purchased from a merchant who is registered for GST with the ATO. Many large overseas online retailers are now required to register and collect GST on these lower-value goods. So, while the Australian Border Force (ABF) doesn’t collect it at the border for these smaller purchases, you’ll likely pay it at the point of sale.
If you’re exporting goods overseas, your sales are generally GST-free because the GST is focused on domestic consumption. However, there are some exceptions. For instance, some supplies related to intellectual property rights might not be GST-free even if they’re used overseas. If you think you might fall into a grey area, your best bet is always to speak to an accountant.
How can you correct GST errors?
To correct GST errors, you can simply adjust your next Business Activity Statement (BAS) if the error is within certain limits. For larger errors, you’ll need to revise previous statements and possibly contact the tax office directly.
The size of the error determines your correction method:
- Small errors (under $1,000): Adjust your next BAS
- Medium errors ($1,001 – $10,000): Self-review and document your correction
- Large errors (over $10,000): Contact the tax office before making any adjustments
We recommend maintaining detailed records of any corrections. Tax auditors are far easier to satisfy if you have a solid paper trail.
Are GST rebates taxable?
GST rebates themselves aren’t taxable, but they may reduce the tax deductibility of the related expense. The rebate effectively reduces your original purchase price for tax purposes.
This all sounds very vague in theory, so let’s look at an example:
Let’s say you’re a small business owner, and you purchase a new laptop for $1,100 (including $100 GST). You’re eligible for a $100 GST rebate on this purchase.
What happens with the rebate?
You claim the $100 GST back from the Australian Taxation Office (ATO). This isn’t considered income, so it’s not taxable.
When you calculate your business expenses for tax purposes, you can’t deduct the full $1,100 you initially paid for the laptop. Instead, you need to subtract the rebate amount.
So, you’re looking at:
$1,100 (original purchase price) – $100 (GST rebate) = $1,000
This means you can only deduct $1,000 as an expense, which reduces your taxable income.
Why does it work this way?
The ATO wants to avoid you getting a double benefit. If you could claim the full $1,100 as an expense and keep the $100 rebate, you’d effectively be getting a $1,200 deduction for a $1,100 purchase. The system is designed to be fair and accurate.
What are GST credits, and how do you claim them?
GST credits (input tax credits) are the GST amounts you’ve paid on business purchases that you can claim back. You claim these credits through your regular BAS lodgment.
To claim GST credits, you need:
- Valid tax invoices for purchases over $82.50 (including GST)
- To use the purchases for business purposes
- To be registered for GST
- To claim within four years
The credit system transforms GST from a cascading tax into a value-added tax (i.e. Instead of taxing the total price at each stage, it only taxes the value added at each stage). If you’d like to learn more, you can read our comprehensive guide covering GST credits and how to claim them.
Why was GST introduced?
GST was introduced to replace a hodgepodge collection of inefficient state taxes, replacing them with a broader, more consistent tax base. It’s part of a larger tax reform that aimed to simplify Australia’s taxation system.
The aim of this reform was to streamline tax collection, reduce tax avoidance opportunities, and create a more efficient system for both businesses and government. The change also allowed for reductions in personal income tax rates and introduced several new business tax measures.
Will there ever be a GST increase?
At present, there are no confirmed plans to increase the GST. Consulting and advisory firms like PWC have projected what might happen if Australia increased GST to 12.5%. However, any changes to the GST rate would require agreement from all states and territories, plus federal legislation.
The process would require extensive economic modelling, public consultation periods, and enough parliamentary debates to make watching paint dry seem thrilling by comparison. So for now, the 10% rate remains.
How do you report GST for multiple business entities?
Each registered entity must lodge its own BAS, but you can streamline this through:
- Branch registration for single entities with multiple branches
- GST groups for related companies
- Using consolidated accounting software
Think of it as keeping separate wallets for different purposes, except these wallets need to file detailed government reports quarterly.
What happens if you collect GST without being registered?
If you collect GST without being registered, you must remit these amounts to the tax office, but do be aware that you may face penalties. It’s essentially collecting money you’re not authorised to collect, and then holding onto it when it isn’t yours.
The tax office takes a particularly dim view of this practice. So you might also be charged interest on the GST amounts you held. The ATO could even backdate your GST registration if they find you should have been registered earlier.
They take it this seriously because:
- Collecting GST without being registered is a form of misrepresentation to your customers
- It interferes with proper tax collection and reporting
- It can give businesses an unfair advantage over properly registered competitors
How do GST rules apply to property transactions?
Property transactions have specific GST rules depending on the property type and usage:
- New residential properties: GST applies
- Established residential properties: Generally GST-free
- Commercial properties: GST applies unless sold as a going concern
- Land: Varies based on intended use and development status
The complications come in the details of each category. For new residential properties, developers must remit GST at settlement, while purchasers of existing homes can breathe easy knowing their transaction is GST-free.
Commercial properties require careful attention to the “going concern” provisions—which means proving the business is actually operational and will continue to operate after the sale. The buyer and seller must both be registered for GST, agree in writing that it’s a going concern, and include all the necessary things to continue operating the business.
Land transactions are particularly tricky because their GST status can change based on subdivision plans, development approvals, or even farming intentions. Add in the margin scheme calculations, and you’ve got a system intricate enough that most property developers can recite their accountant’s phone number faster than their own.
What records do you need to keep for GST?
Keep all tax invoices, receipts, and business records for five years. This includes:
- Sales and purchase invoices
- Bank statements
- Contracts
- Property records
- Digital records of online transactions
Store these records like your business depends on it because that very well might be true.
Also, keep in mind that different rules apply in special circumstances:
- Long-term contracts crossing multiple tax periods: Keep copies of original contracts, plus records of progress payments, adjustments, and variations. These need to show how GST was handled across each tax period.
- Capital asset purchases and sales: Maintain purchase and sale documentation, depreciation schedules, and private use calculations for the entire ownership period plus five years after disposal.
- Adjustments for private use: Document your method for calculating private use percentages, including logbooks, diaries, or any other records showing how you determined the split between business and private use.
- Bad debts written off: Keep all original invoices, correspondence about attempted collections, and documentation showing when and why the debt was written off.
- Margin scheme calculations: For property transactions using the margin scheme, maintain records showing how you calculated the margin, including original purchase documentation (no matter how old), and proof of eligibility to use the scheme.
The GST system rewards those who maintain meticulous records. But it doesn’t tend to favour those who think they can reconstruct five years of transactions from memory and a chaotic shoebox of faded receipts.
Pro tax tip: GST compliance is all about maintaining a clear paper trail. Like a good detective novel, the ending should make perfect sense when you review all the evidence.
Got GST questions? We’ve got the answers
While the GST might seem like it was just designed to keep accountants employed, its core purpose remains simple: a 10% tax on goods and services that funds essential public services.
This guide covers the basics, but GST can get quirky when you start mixing in overseas suppliers, multiple business structures, or that vintage furniture restoration side-hustle you run through Facebook Marketplace. Each business brings its own special blend of GST questions.
ITP’s accountants have spent more than fifty years helping businesses understand their tax obligations and work out whether coffee machines, overseas trips, and client lunches really count as business expenses. We’ve heard thousands of GST questions, from the simple to the surprisingly philosophical, and we’re always up for more.
Give us a call, drop in to your nearest office, or book an appointment online. Our accountants love talking tax.