GST-Free Supplies
Goods and services that are not subject to GST, but the supplier can still claim input tax credits on related business purchases.
GST-free supplies are goods and services that are not subject to the 10% GST, but unlike input-taxed supplies, the supplier can still claim input tax credits on purchases related to making these supplies. This makes GST-free treatment more favourable for suppliers than input-taxed treatment, as they don't have irrecoverable GST costs embedded in their pricing.
Common GST-free items include: most basic food (fresh fruit, vegetables, meat, bread, dairy, eggs — but not prepared meals, confectionery, soft drinks, or snack foods), most health services (medical, dental, optical, physiotherapy), most education courses (primary, secondary, tertiary), childcare, water and sewerage services, exports, and certain religious and charitable activities.
The distinction between GST-free, input-taxed, and taxable supplies is crucial for businesses. If you only make GST-free and taxable supplies, you can claim full input tax credits. If you make a mix of taxable and input-taxed supplies, you must apportion your input tax credits. The ATO provides detailed food classification guidance to help businesses determine which food items are GST-free and which are taxable — the rules can be surprisingly complex (e.g., a plain meat pie is GST-free, but a gourmet pie heated for consumption is taxable).