GST in Australia is a 10% tax on most goods and services. If your business is registered, you collect GST from customers, claim eligible GST credits on business purchases, and report the difference to the ATO through your Business Activity Statement. That cycle sounds simple enough, but the confusion usually starts at registration, not the rate itself.
This guide covers who needs to register, how GST turnover actually works, what goes on a tax invoice, how input tax credits function, and the BAS mistakes that cost small businesses time and money. Everything here reflects current ATO guidance as of 2026.
GST at a glance
| Question | answer |
|---|---|
| GST rate | 10% |
| Standard registration threshold | $75,000 GST turnover |
| Non-profit threshold | $150,000 |
| Common reporting cycle | Quarterly |
| Mandatory monthly reporting | $20 million+ GST turnover |
| Main reporting document | BAS |
| GST credit | GST paid on eligible business purchases |
| GST-free | Certain supplies sold without GST (e.g. basic food, some health services) |
How does GST actually work for a small business?
Yes, the maths is straightforward, but the workflow around it trips people up. When you sell a taxable product or service, you add 10% GST. When you buy something for the business, you can usually claim back the GST you paid as an input tax credit. Each BAS period, you report GST collected minus GST credits. If you collected more, you pay the difference to the ATO. If credits exceed collections, you get a refund.
A quick example
A Brisbane consultant invoices $2,200 including GST for a project. The GST component is $200 (that’s $2,200 ÷ 11). During the same quarter, she buys a $550 software subscription (GST component: $50). Her net GST position: $200 collected minus $50 in credits = $150 payable to the ATO.
The 1/11 formula catches people out. When you’re working backwards from a GST-inclusive price, you divide by 11, not multiply by 10%. Getting that wrong on every invoice for a quarter creates a mess at BAS time.
Who needs to register for GST?
You generally must register when your GST turnover reaches $75,000 or more. For non-profit organisations, the threshold is $150,000. Taxi, limousine, and ride-sourcing drivers must register regardless of turnover, a rule the ATO confirms on its registration page and one that still surprises people entering the gig economy.
The critical detail most guides skip: registration isn’t triggered only when you cross the threshold. You also need to register if you reasonably expect to reach it within the next 12 months. That’s the projected GST turnover test, and it runs alongside the current GST turnover test (which looks backward over the previous 12 months).
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Once you hit or expect to hit the threshold, you have 21 days to register. Not 30. Not “end of the quarter.” Twenty-one days.
The $60k early-warning trick
Forum threads on accounting communities consistently recommend setting an internal trigger around $60,000 to $65,000 in turnover. That gives you breathing room to get your ABN linked, your invoicing updated, and your accounting software configured before the legal deadline arrives. Scrambling to register after you’ve already crossed $75,000 and missed the 21-day window is how penalties start.
Voluntary registration
If your turnover is below $75,000, you can still register voluntarily. Some businesses do this to claim input tax credits on equipment or startup costs. The trade-off: once registered, you must charge GST on taxable supplies and lodge BAS, even if your turnover stays low. The ATO’s current guidance allows voluntarily registered businesses under $75,000 to report annually rather than quarterly.
GST turnover is not your profit
This is where confusion does real damage. GST turnover includes the total value of sales that are connected with Australia (excluding GST itself), not your profit after expenses. A business pulling in $80,000 of revenue with only $30,000 in profit has still crossed the threshold.
The ATO distinguishes between current GST turnover (rolling 12 months back) and projected GST turnover (12 months forward). Both tests matter. You can be under $75,000 looking backward but over it looking forward, and that forward projection alone triggers the registration requirement.
What counts toward GST turnover generally includes sales of goods and services connected with Australia, even some that are GST-free. What doesn’t count includes input-taxed sales (like residential rent) and sales not connected with Australia. The distinction matters for businesses selling digital products or services to Australian customers from overseas, since the ATO’s non-resident GST rules can require registration based on sales connected with Australia.
Taxable, GST-free, and input-taxed: what’s the difference?
| Type | GST charged? | Can you generally claim related GST credits? |
|---|---|---|
| Taxable supplies | Yes (10%) | Yes, where eligible |
| GST-free supplies | No | Generally yes |
| Input-taxed supplies | No | Generally no |
GST-free supplies include most basic food, certain medical services, some education courses, and exports. You don’t charge GST on them, but you can still claim credits for the GST you paid on related business purchases.
Input-taxed supplies (residential rent, most financial supplies) are the opposite problem. No GST charged, and no credits claimable on related purchases. Miscoding an input-taxed sale as GST-free is one of the most common BAS errors the ATO flags during reviews.
How input tax credits work
An input tax credit is the GST you’ve paid on a business purchase that you can claim back. The rules are more specific than “bought it for work.”
To claim, the purchase must relate to your business (not private use), you need a valid tax invoice for anything over $82.50 including GST (as confirmed in current ATO guidance), and the purchase must relate to making taxable or GST-free supplies. Mixed-use purchases, like a laptop used 60% for business, can only be claimed at the business-use percentage.
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You have four years from the due date of the relevant BAS to claim a credit you missed. That’s generous, but fixing old claims means amending past BAS lodgments, which creates its own paperwork.
What goes on a tax invoice?
This is a gap in most GST guides, yet it’s one of the most searched practical questions. A standard tax invoice for sales of $1,000 or more (including GST) must show:
For sales under $1,000, the requirements are lighter, but missing any element on a larger invoice means your customer can’t claim their input tax credit. That creates friction with business clients fast.
BAS and GST: how they connect
Your Business Activity Statement is the form you use to report GST (and other obligations like PAYG) to the ATO. The key GST labels on a BAS are 1A (GST on sales) and 1B (GST on purchases/input tax credits). The difference between those two figures drives your GST payable or refund amount.
Most businesses under $20 million in annual turnover report quarterly. Businesses at $20 million or more must report monthly. The ATO can also direct a business to monthly reporting if there’s a history of compliance issues, late lodgments, or incorrect BAS filings.
Quarterly BAS is generally due 28 days after the end of each quarter. December quarter gets an extra month (due 28 February). Missing a deadline doesn’t just attract a penalty; it puts you on the ATO’s radar for the monthly reporting direction mentioned above.
The ghost error nobody warns you about
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Here’s a friction point that shows up in accounting forums regularly: businesses using cash accounting report GST when payment is received, while those on accrual accounting report when the invoice is issued. Switching between methods mid-year, or not realising which method your software is set to, creates a mismatch between your BAS figures and your bank account. The fix is unglamorous. Check your GST accounting method in your software settings before your first BAS lodgment, and don’t change it without understanding the transitional adjustments required.
Common GST mistakes small businesses make
Treating GST collected as available cash. That money belongs to the ATO. Spending it creates a shortfall at BAS time.
Charging GST when you’re not registered. You can’t collect GST without a valid GST registration. Doing so creates a compliance problem and confuses your customers’ credit claims.
Forgetting GST adjustments. If you issued a credit note or a sale fell through, the GST position changes. These adjustments need to appear on the relevant BAS.
Claiming credits without records. The ATO can disallow credits during a review if you can’t produce the tax invoice. A shoebox of receipts is technically records, but searchable digital records in accounting software save hours when a review lands.
Mixing private and business expenses. Claiming 100% GST credits on a vehicle you also use personally is exactly the kind of thing that triggers an ATO adjustment.
When this guide doesn’t apply
If your business deals primarily in input-taxed supplies (financial services, residential property), the GST credit rules work against you in ways this guide doesn’t fully cover. Similarly, businesses with complex international supply chains or significant cross-border digital sales need specialist advice on the non-resident GST rules and reverse-charge mechanisms. In those cases, a BAS agent or tax adviser with specific international GST experience is worth the fee. Don’t try to navigate those rules from a general guide.
How accounting software simplifies GST
Manually tracking GST on every sale and purchase, then reconciling it all for BAS, works until it doesn’t. Usually it stops working around the second quarter, when the volume of transactions makes spreadsheets unreliable.
Accounting software automates GST coding on transactions, generates compliant tax invoices, tracks input tax credits against purchases, and produces BAS-ready reports. Bank reconciliation catches transactions you might otherwise miss. The audit trail means you’re not reconstructing records from memory when the ATO asks a question.
Spend less time on GST admin
ProfitBooks brings GST-ready invoicing, expense tracking, and financial reporting into one place, so BAS preparation isn’t a quarterly scramble.
Need to quickly work out the GST on a price? The ProfitBooks GST calculator for Australia handles both adding and removing GST.
GST by business type
Sole traders and freelancers often delay registration because they track annual income rather than rolling GST turnover. Set up monthly turnover tracking from day one.
Retailers dealing in mixed supplies (taxable groceries alongside GST-free basic food) need item-level GST coding. Getting this wrong at the point of sale compounds across hundreds of transactions.
E-commerce businesses selling to Australian customers from overseas should check the ATO’s rules on sales connected with Australia. The registration obligation can apply even without a physical presence here.
Tradespeople frequently miss credits on tools and materials because receipts get lost on job sites. Photographing receipts into your accounting software the same day solves that.
Frequently asked questions
Do sole traders need to register for GST?
Only if GST turnover hits $75,000 or more (or is expected to). Below that, registration is voluntary.
How do I calculate GST from a GST-inclusive price?
Divide the total by 11. A $330 GST-inclusive price contains $30 of GST.
What’s the difference between GST and BAS?
GST is the tax. BAS is the form you use to report and pay it. BAS also covers other obligations like PAYG withholding.
Can I claim GST credits on a car used partly for personal use?
Only the business-use percentage. If 70% business, you claim 70% of the GST paid.
What happens if I register late?
You may owe GST from the date you were required to register, plus potential penalties and interest. The ATO’s 21-day rule applies from the day you reach or expect to reach the threshold.
How often do I need to lodge BAS?
Quarterly for most businesses under $20 million turnover. Monthly if turnover is $20 million or above, or if the ATO directs you to monthly reporting.
Is there GST on rent?
Commercial rent is generally taxable. Residential rent is input-taxed (no GST charged, no credits claimable on related costs).
What if I forget to include GST on an invoice?
If you’re registered, the ATO treats the price as GST-inclusive. On a $1,000 invoice where you forgot GST, the ATO considers $909.09 as your sale and $90.91 as GST you owe. That eats into your margin.
Do I charge GST on exports?
Exports of goods are generally GST-free. You still need to keep records proving the export.
Can I backdate a GST registration?
The ATO can backdate registration to the date you were required to register. This isn’t optional; it creates retrospective GST obligations on sales made during that period.
What to do next
If you’re approaching $60,000 in turnover, start preparing now. Get your ABN sorted, choose your GST accounting method (cash or accrual), set up compliant tax invoices, and pick software that codes GST automatically. The businesses that struggle with GST aren’t the ones who find the rate confusing. They’re the ones who set up their systems three months too late.
Get GST right from day one
ProfitBooks codes GST automatically, generates compliant tax invoices, and produces BAS-ready reports — so your first BAS isn’t a scramble. Set up your systems before you cross the threshold, not after.
