How To Calculate GST In Australia?

In the world of Australian taxes, the Goods and Services Tax (GST) is a big deal. But calculating GST for your business may not be a daunting task.

It started back in 2000 and has become an important part of how the country collects money. This tax system has helped Australia grow and build things like roads and schools.

According to recent statistics, the Australian government collected over $75 billion in GST revenue in 2024-25, highlighting just how significant this tax is for the economy.

On that note, let’s dive in and demystify GST calculations once and for all. 

In this article, we’ll break down how to figure out GST in an easy way. Learning this can be helpful for individuals and businesses, making it easier to handle their finances in Australia.

 

What Is GST (or VAT) In Australia?

What makes GST in Australia particularly intriguing are its inherent advantages.

This taxation system is celebrated for its equitable approach, mirroring the principles of VAT, as it is levied at multiple stages of the production and distribution process.

For consumers, this translates into a refreshingly transparent tax structure, with the GST delineated on receipts for all to see.

However, one of the most significant merits lies in its ability to broaden the tax base.

GST is a tax that businesses have to pay on the goods they sell or the services they offer. So, if a business makes $75,000 or more (or $150,000 or more for non-profits), they’ve got to pay GST. Oh, and if they offer taxi rides, they’ve got to pay for it too.

In essence, while GST shares conceptual similarities with VAT, Australia has adeptly tailored it to meet its distinct requirements, solidifying its status as a highly advantageous tax collection method for the nation.

 

Historical Context of GST in Australia

Understanding how GST came to be in Australia gives us valuable context.

The concept of a broad-based national consumption tax has a long history in the country.

Les Bury, federal treasurer in the Gorton government from 1969 to 1971, was an early advocate, believing states needed their revenue source without reintroducing state income tax. 

The idea resurfaced in 1985 when federal treasurer Paul Keating raised it at the Tax Summit, but it was abandoned after pressure from various groups. It was revived in 1991 by the opposition Liberal-National Coalition led by John Hewson, with GST forming the centerpiece of their “Fightback!” platform for the 1993 election. 

When I first started ProfitBooks and began exploring the Australian market, I was fascinated by the story of Hewson’s infamous “Birthday Cake Interview,” where he struggled to explain how GST would apply to a birthday cake.

This communication challenge contributed to the opposition’s unexpected loss in the “unlosable” 1993 election. 

Eventually, the Howard government successfully implemented the GST in 2000, marking a significant shift in Australia’s taxation landscape. I’ve seen how this system has matured over the years, becoming an integral part of doing business in Australia. 

 

GST Rates In Australia

(source: Wikipedia)

 

Australia introduced the Goods and Services Tax (GST) in the year 2000, and it’s had its fair share of ups and downs since then. When it first came into play, the GST rate was a steady 10%, giving the government a dependable source of income for over a decade.

But in 2010, there was a twist in the tale.

The government decided to bump up the rate to 11% for a little while.

Why?

Well, it was to help out with flood relief efforts in Queensland and Victoria. Luckily, this change didn’t stick around for long, and after a year, the rate went back to its trusty 10%.

Now that you know what GST is and what are the rates, let’s see how you can calculate GST for your business. You can find online tools to calculate GST which makes the process easy, however, it’s good to know the workings behind it for any serious business.

 

How To Calculate GST For Your Business?

Calculating the Australian GST is pretty straightforward.

If you’re selling stuff or offering services in Australia, here’s what you do: just take the base price of your stuff or service, and then add 10% to it. That’s the GST, and you include it in your final sales price or on your invoice.

If you’re figuring out GST, here’s a simple formula to use: Take your base price and multiply it by 1.1. That’ll give you the total cost with GST included. It’s as easy as that!

 

Calculate GST Payable

Usually, when you’re buying or selling a property, you pay GST, which is one-eleventh of the total sale price.

Now, if you’re using something called the “margin scheme,” the amount of GST you pay is one-eleventh of the profit you make on the property. You can make these calculations a lot easier by using the GST property decision tool.

 

Here’s a good example to explain further:

Many folks think you can just subtract 10% from a price that already has the GST (Goods and Services Tax) included to get the price without GST, but that’s not quite right.

What you should do is divide the price by 11 to find the GST, and then multiply that GST by 10 to find the price without GST.

For example, let’s say you have a $100 item, and you want to figure out how much of that is GST and what the price would be without GST. Here’s how you do it:

1. Take $100 and divide it by 11. That gives you $9.09, which is the GST amount.
2. To find the price without GST, multiply $9.09 by 10. That gives you $90.91.
3. So, the price without GST is $90.91, and the GST amount is $9.09.

 

GST Credit System in Australia

First of all, what are GST credits?

GST credits in Australia are like tax refunds for businesses. When they buy things and pay GST on them, they can get that GST money back as a credit. It helps them lower their overall GST payments.

 

 

How can a business calculate GST credits?

If you’re running a business and you buy stuff that has GST included in the price, you can get some of that GST money back. It’s like a refund, and it’s called a GST credit or an input tax credit. But there are a few rules:

1. You have to be registered for GST.
2. You can claim GST credits if you’re using the stuff you bought for your business and not for things that don’t have GST.
3. The price you paid should have GST in it.
4. You need a proper receipt (called a tax invoice) from the person or company you bought the stuff from, but only if you spent more than A$82.50.

One more thing, make sure the people you buy stuff from are also registered for GST. You can check if they are on the ABN Lookup website. And remember, you’ve got FOUR YEARS to claim these GST credits.

 

GST Registration Details & Requirements

Understanding GST registration is essential for businesses operating in Australia. I often guide our clients through this process when they’re setting up their businesses. 

Who Must Register for GST in Australia

Businesses with an annual GST turnover of A$75,000 or more must register for GST. For non-profit organizations, the threshold is higher at A$150,000. Businesses below these thresholds can register voluntarily if they choose. 

The turnover threshold includes all B2C sales related to Australia and is calculated over any 12-month rolling period. I’ve seen businesses get caught out by this, assuming it’s just a financial year calculation, when it’s a rolling 12-month period.

 

Types of GST Registration

Australia offers two types of GST registration, which is something many international businesses don’t realize: 

1. Simplified GST Registration: Suitable for businesses that breach the $1,000 Low Value Imported Goods (LVIG) threshold through distance selling. An Australian Business Number (ABN) is not required, but GST credits cannot be claimed. 
2. Standard GST Registration: Required for businesses storing goods in Australia. This registration requires an ABN and allows businesses to claim GST credits for taxable importations or purchases.

 

GST Registration Process in Australia

The registration process involves two main steps: 

1. Register for an ABN: Obtain an 11-digit number identifying your business to the government and community. 
2. Register for GST: Once your ABN is active, you can register for GST through the ATO’s online services or with assistance from a tax professional. 

It’s important to note that registration for an ABN is free, making the initial step accessible to all businesses. When helping clients set up their Australian operations, I always recommend getting an ABN even if they’re below the GST threshold, as it provides credibility and makes future growth easier.

 

GST Exemptions and Special Cases

Not all goods and services are subject to GST in Australia. Understanding these exemptions is crucial for businesses and consumers. During my work with Australian business owners, I’ve found that confusion about exemptions is one of the biggest sources of GST errors.

 

GST-Free Supplies 

The following categories are “GST-free” (equivalent to “zero-rated” in other VAT jurisdictions): 

• Basic food items (with significant exceptions) 
• Exports 
• Most health, medical, and educational supplies 
• Some healthcare services and products 
• Certain educational courses 

A registered supplier of GST-free supplies can recover relevant input tax credits, even though the supply itself is not taxable. This is a significant advantage for businesses in these sectors. 

Input-Taxed Supplies

These are equivalent to “exempt” supplies in other VAT jurisdictions: 

• Residential rents 
• Second or later supply of residential premises 
• Most financial supplies 
• Some other specific supplies 

For input-taxed supplies, the supplier cannot recover relevant input tax credits, except that financial suppliers may obtain a reduced input tax credit of 75% of the GST on the acquisition of certain services.

 

Special Cases in GST

There are several special cases worth noting: 

• Health insurance is GST-free 
• Life insurance is income-taxed 
• General insurance is taxed 
• Qualifying long-term accommodation is taxed at an effective rate of 5.5% 

These nuances can make GST compliance complex for certain industries. I’ve worked with clients in the insurance sector who needed specialized help navigating these rules within their invoicing systems.

 

Digital Services & Cross-Border GST

One area where I’ve seen many businesses struggle is understanding GST obligations for digital services and cross-border transactions. This is especially relevant in today’s global digital economy. 

If you’re a foreign business selling digital products or services to Australian consumers, you need to charge GST if your annual turnover from Australian sales exceeds A$75,000. This applies to things like software subscriptions, digital content, streaming services, and consulting provided electronically. 

I remember helping a U.S.-based SaaS client implement this when they expanded into Australia.

They were surprised to learn they needed an Australian GST registration despite having no physical presence in the country.

The ATO offers a simplified GST registration process specifically for non-resident businesses in this situation, which makes things easier. 

For digital service providers, you need to:

• Track your customers’ locations (using IP addresses, billing details, etc.) 
• Calculate GST as 10% of your Australian revenue 
• Report and remit GST quarterly to the ATO 

Australia is becoming increasingly attractive for international businesses due to its growing e-commerce market, projected to grow by 8.28% from 2025 to 2029, reaching a market volume of USD 58.03 billion by 2029. In 2024 alone, household spending rose by 2.4% compared to 2023, with e-commerce spending reaching a record high of AAUD 56.07 billion 

When using ProfitBooks, you can easily set up different tax rates for different countries, ensuring your international invoices comply with local tax requirements.

 

Deferred GST Scheme for Imports

Another aspect that often confuses Australian business owners is the Deferred GST Scheme. I only learned about this myself when a client who imports wholesale products was looking to improve their cash flow. 

This scheme allows eligible businesses to defer paying GST on imports until they lodge their BAS, rather than paying it upfront at customs. The benefit? You can claim the GST credit in the same BAS period, effectively resulting in no out-of-pocket GST cost for business imports. 

To use this scheme, you need: 

• An ABN 
• GST registration 
• To lodge your BAS online monthly 

Here’s a practical example: If you import A$50,000 worth of inventory, instead of paying A$5,000 GST at the border, you: 

• Report the A$5,000 as GST payable on your BAS 
• Simultaneously claim the A$5,000 as a GST credit (if the goods are for taxable purposes) 
• Result: Zero net GST impact on your cash flow 

This has been a game-changer for many of our importing clients using ProfitBooks, as it helps preserve working capital for other business needs.

 

Reporting and Paying GST 

Businesses registered for GST must: 

1. Submit Business Activity Statements (BAS): Either monthly, quarterly, or annually, depending on business size and preferences. 
2. Keep Records: Maintain accurate records of all transactions, including tax invoices for purchases over $82.50 (including GST). 
3. Claim Input Tax Credits: Report GST collected on sales and claim credits for GST paid on eligible business purchases. 

In my experience, many small business owners find the BAS lodgment process stressful, especially in their first year. Using accounting software like ProfitBooks significantly reduces this stress by automatically calculating GST collected and paid, making BAS preparation much simpler.

 

GST Distribution to States and Territories 

A unique aspect of Australia’s GST system is how the revenue is distributed, which affects the broader economic environment businesses operate: 

The Federal Government collects GST and distributes the revenue to state governments. The Commonwealth Grants Commission (CGC) recommends “GST relativities” that determine how the GST revenue is shared among states and territories. 

These relativities aim to provide each state and territory with the capacity to provide services and infrastructure of the same standard. This is important because different states have varying abilities to raise revenue from their sources. 

Recent changes to distribution ensure that no state’s GST relativity can fall below a certain floor (0.75 in 2024-25, up from 0.70 in 2023-24). When a state’s relativity is raised to the floor, the GST relativities (and distributions) of other states are proportionally reduced based on population share. 

This system ensures that all states and territories receive a fair share of GST revenue, which funds essential services and infrastructure that businesses rely on.

 

Common GST Calculation Errors

Through my years of helping Australian businesses, I’ve noticed some recurring mistakes with GST calculations. Avoiding these can save you headaches come tax time:

 

1. Misclassifying GST-free vs. taxable supplies: This is especially common in businesses that deal with both taxable and GST-free products. For example, a health food store might incorrectly apply GST to basic food items (which are generally GST-free). 
2. Incorrectly extracting GST from inclusive prices: As I mentioned earlier, many businesses try to just subtract 10% from a GST-inclusive price, when they should be dividing by 11. 
3. Failing to claim all eligible GST credits: Small business owners often miss claiming GST credits on business expenses like utilities, professional services, and even certain entertainment expenses. 
4. Applying GST to all international transactions: GST doesn’t apply to exports, yet I’ve seen businesses incorrectly charge GST on international sales. 
5. Ignoring the timing rules for GST: The time of supply (tax point) matters for when you report GST. This should align with your accounting method (cash or accrual). 

 

ProfitBooks helps prevent these errors by automatically applying the correct GST treatment based on transaction type and providing clear reports for BAS preparation. 

Technology Solutions for GST Compliance

As a tech enthusiast running ProfitBooks, I’m always looking for ways to make tax compliance easier through technology. Modern accounting software has transformed GST management in several ways: 

1. Automated Calculations: Software automatically applies the correct GST rate to invoices and purchases, eliminating manual calculation errors. 
2. BAS Report Generation: Quality accounting systems can generate BAS reports with a few clicks, pulling all the required GST information into the correct format.
3. GST Credit Tracking: Software can track all potential GST credits throughout a reporting period, ensuring nothing is missed. 
4. Digital Record Keeping: Electronic storage of tax invoices and receipts makes it easy to substantiate GST claims if questioned by the ATO. 
5. Cloud Integration: Modern systems can integrate with payment platforms and banks, automatically reconciling transactions and their GST components. 

I designed ProfitBooks with these features in mind, specifically for small business owners who don’t have accounting backgrounds. The system handles GST automatically, generating tax-compliant invoices that clearly show the GST component and tracking all potential GST credits for your BAS.

 

Expert Insights on GST Benefits and Challenges

The GST system in Australia receives mixed reviews from tax experts and business leaders. Drawing from industry discussions, here are some balanced perspectives:

 

Positive Insights: 

• Commissioner Rob Heferen (Australian Taxation Office) has advocated for integrating GST compliance into digital business ecosystems to reduce administrative burdens. At the 2024 National GST Conference, he emphasized leveraging automation to align tax reporting with real-time transactional data, calling it “the future of frictionless compliance.” 

• Matthew Strauch (Partner, PwC National Indirect Taxes) highlights GST’s role in fostering cross-border trade efficiency, noting: “Australia’s GST framework for international transactions is robust but requires nuanced advice to navigate exemptions like financial services.”

 

Critical Perspectives: 

• John Breen et al. (Victoria University Study) found that small businesses faced compliance costs of $3,331-$30,140 during GST’s initial rollout, with costs representing over 3% of turnover for micro-enterprises. They warned: “Ongoing record-keeping demands disproportionately burden SMEs, stifling growth.” 

 

Conclusion

In a nutshell, calculating GST in Australia isn’t rocket science.

Whether you’re running a business or just curious, understanding how it works is simpler than you might think. It’s all about adding 10% to the base price of your stuff or service – that’s your GST.

Now, when it comes to property, things get a bit different. You might need to use the “margin scheme” or a handy tool for property calculations. Remember, it’s not about subtracting 10% but dividing by 11 and then multiplying by 10 to get the price without GST.

As for the future of GST in Australia, it’s looking promising. It’s likely to continue supporting Australia’s growth and development for years to come.

So, keep those calculators handy, and embrace the GST journey with optimism!

 

Staying informed about GST regulations will not only ensure financial stability but also contribute to the economic well-being of Australia.

To keep getting informative updates, you can refer to ProfitBooks blogs, where we publish daily.

If you’re looking for accounting software popular in Australia, with complex capabilities that we undertake using ProfitBooks‘ easy-to-use software, then create a FREE account now!

 

 

Also Read:

What Is VAT or GST In Australia?

CGT vs GST: How Do They Differ In Australia?

What Taxes Do Small Businesses Pay In Australia?

GST- A Guide For Small Business Owners