GST — Goods and Services Tax — is a broad-based 10% tax on most goods and services sold in Australia. Businesses registered for GST collect it from customers, then pay it to the ATO, minus any GST they paid on their own business purchases. GST was introduced on 1 July 2000 and is administered by the Australian Taxation Office under the A New Tax System (Goods and Services Tax) Act 1999.
How GST Works
GST is a value-added tax. Each business in the supply chain collects GST on its sales (output tax) and can claim back the GST it paid on business inputs (input tax credits). Only the final consumer — who cannot claim input tax credits — ultimately bears the cost of the tax.
Example:
| Stage | Sale price | GST collected | GST paid on inputs | Net GST to ATO |
|---|---|---|---|---|
| Manufacturer sells to wholesaler | $100 + $10 GST | $10 | $0 | $10 |
| Wholesaler sells to retailer | $150 + $15 GST | $15 | $10 | $5 |
| Retailer sells to consumer | $220 + $22 GST | $22 | $15 | $7 |
| Total GST paid to ATO | $22 |
The consumer pays $242 total. The ATO receives $22 in GST — exactly 10% of the final consumer price. Each business in the chain only remits its share.
The Three Types of Supply
Not everything attracts GST. Australian GST law divides supplies into three categories:
Taxable Supplies
Subject to 10% GST. This is the default for most commercial transactions — retail sales, professional services, construction, hospitality, most B2B transactions.
GST-Free Supplies
No GST is charged, but the supplier can still claim input tax credits on business purchases used to make those supplies. GST-free items include:
- Most basic food (fresh fruit, vegetables, meat, bread, dairy — but not hot food or restaurant meals)
- Exports of goods and services
- Health services (GP visits, hospital treatment, most allied health)
- Education courses (primary, secondary, and higher education)
- Child care
- Certain financial supplies (lending money)
Input-Taxed Supplies
No GST is charged, and the supplier cannot claim input tax credits on related purchases. This treatment applies to:
- Residential rent and residential property sales
- Financial services (interest on loans, bank fees, insurance in some cases)
See GST-Free vs Input-Taxed Supplies for a detailed comparison.
Who Must Register for GST
You must register for GST if your business has a GST turnover of $75,000 or more in a 12-month period (current or projected). The threshold is $150,000 for non-profit organisations. Ride-share and taxi drivers must register regardless of turnover.
Once registered, you must:
- Add 10% GST to your prices (or absorb it)
- Issue valid tax invoices for sales over $82.50
- Lodge Business Activity Statements (BAS) and remit net GST to the ATO
For full registration rules, see When Do You Need to Register for GST?
Input Tax Credits
A key feature of GST is the input tax credit system. When you are registered for GST and use a purchase for business purposes, you can claim back the GST component on your BAS. This prevents the “tax on a tax” problem.
To claim an input tax credit you need:
- A valid tax invoice (for purchases over $82.50 incl. GST)
- The purchase to be for a creditable purpose (business use)
- The supply to be a taxable supply (not GST-free or input-taxed)
If you use a purchase for both business and private purposes, you can only claim the business-use proportion.
GST and Your BAS
Registered businesses report GST on their Business Activity Statement (BAS). The net amount — GST collected minus input tax credits — is either paid to the ATO or, if credits exceed collections, refunded. See BAS Explained for the full lodgement process.
Related Articles
- When Do You Need to Register for GST?
- How to Register for GST
- GST-Free vs Input-Taxed Supplies
- BAS Explained
- GST and Business Tax hub
Frequently Asked Questions
Is GST the same as VAT? GST and VAT (Value Added Tax) operate on the same principle — a multi-stage tax collected along the supply chain with credits for business inputs. Australia calls its system GST; most other countries call it VAT. The mechanics are functionally identical.
Do I add GST on top of my price or include it? Both approaches are legal, but you must display the GST-inclusive price in most consumer-facing contexts. When invoicing other businesses, showing both the ex-GST and GST amounts on a tax invoice is standard practice.
Can I claim GST on my car? You can claim input tax credits on a car used for business purposes, but the car limit applies — for FY2025–26, the car depreciation limit is $69,674 (GST-inclusive), so the maximum GST claim on a passenger vehicle is $6,334.
What happens if I charge GST but am not registered? It is an offence to charge GST without being registered. You must remit any GST collected to the ATO even if you are not registered, and penalties may apply.
This article provides general tax information. For advice tailored to your business situation, speak with a registered tax agent or BAS agent. Find one through the Tax Practitioners Board register.