GST - the basics

Goods and services tax is a broad-based tax at a flat rate of 10% that is slapped on almost everything that Australians buy, use or consume. Sounds pretty straightforward doesn’t it. Well, yes and no.

It’s true that the flat rate 10% goods and services tax (GST) will be included in the price of most items – but it is the exceptions to this rule, the allowances made and concessions written into the GST rules, that make it much less straightforward than it could be.

You can get more details from our Small Business section here, although there’s a bit to get through, but here’s a snapshot of how GST works:

• Businesses add 10% to goods and services they supply to customers, and then pass this 10% on to the Tax Office.
• If the customer is also a business, it can generally claim a credit for the GST it has paid. This credit is taken away from any GST the business itself has charged out in working out whether the business owes net GST to the Tax Office or vice versa.
• So businesses charge GST but don’t keep it, and they pay GST but get a credit for it (so basically are working as collection agents for the Tax Office).
• The end consumer wears the ultimate burden as they pay the 10% and get no credit.
• The business must be registered to both charge GST and to get credits for it.
• Business activity statements (BASs) account for GST charged and credits claimed, and a separate GST return is made for each tax period, which is monthly or quarterly (or annually for some taxpayers).
• If the GST for a tax period is more than the credits, the business pays the balance to the Tax Office. If credits are more than GST, they get a refund.

The GST rate is set at 10%, so for example if a business charges $90 for whatever it supplies, the customer will be invoiced for $99. That extra $9 is the government's take.

Invoices need to display specific information. For sales of $1,000 or more, invoices need to display the words 'tax invoice' prominently, the seller's name and ABN, date, buyer name and ABN or address, the items sold and how many, and the GST amount or that the total includes GST.

Invoices for less than $1,000 need to have all the above but not the buyer's details. See all the details about tax invoices here.

Some things are GST-free, mainly food, health services, education, exports and certain charity items. The GST-free food list includes most food, although some are taxable (see here for the list of foods that are, and also this detailed searchable database of food items). Then there are precious metals, cars for the disabled, health and medical supplies, international travel, second-hand goods, farmland – the list goes on and is both exhaustive and exhausting.

Others items are 'input taxed', which means the supplier can’t charge GST or claim a credit. These are mainly residential rental and financial services. There are also special rules regarding second-hand goods, gambling, land development, imports, insurance and cars.

Items that are bought from overseas that are valued at $1,000 or less escape GST, and this includes anything bought online.

Last reviewed 26/07/2012