Goods and Services Tax (GST)
A 10% broad-based consumption tax applied to most goods, services, and other items sold or consumed in Australia.
The Goods and Services Tax (GST) is a 10% tax on the supply of most goods, services, and other items consumed in Australia. It was introduced on 1 July 2000 and is administered by the ATO. Businesses with an annual turnover of $75,000 or more ($150,000 for non-profits) must register for GST, charge it on their sales (output tax), and can claim back GST paid on business purchases (input tax credits).
GST is a value-added tax, meaning each business in the supply chain only remits the net GST (GST collected on sales minus GST paid on purchases). The end consumer ultimately bears the full 10% cost. Businesses report and pay net GST through their Business Activity Statement (BAS), lodged monthly or quarterly depending on turnover.
Not all goods and services are subject to GST. GST-free items include most basic food (fresh fruit, vegetables, meat, bread, milk), health services, education courses, childcare, water and sewerage, and exports. Input-taxed supplies — such as residential rent, financial supplies (interest, fees), and second-hand residential property — are not subject to GST, but the seller cannot claim input tax credits on related purchases.
How it works
GST works as a value-added tax rather than a simple sales tax: every GST-registered business in a supply chain charges 10% on its sales and can claim back the 10% it paid on its own business purchases, so only the net difference — GST collected minus GST paid — actually gets remitted to the ATO at each link in the chain. The end consumer, who can't claim anything back, ultimately bears the full 10% cost embedded in the final price. Registration isn't automatic for every business — it's compulsory once annual turnover reaches $75,000 (or $150,000 for non-profit organisations), though businesses below that threshold can register voluntarily if it suits them.
In everyday transactions, GST shows up as the 10% added to (or already embedded in) the price of most goods and services — evident on any tax invoice, which itemises the GST component separately once the amount reaches $1,000. For a GST-registered business, the practical work of GST happens behind the scenes: tracking GST collected on sales and GST paid on purchases throughout each reporting period, then reporting and remitting the net figure through the Business Activity Statement, typically quarterly.
Not everything attracts GST, and the exceptions matter for anyone running a business: GST-free items, like most fresh food, health services, and education, mean no GST is charged but the seller can still claim back GST on related purchases, while input-taxed items, like residential rent and many financial supplies, mean no GST is charged and the seller cannot claim GST back on related purchases either. Confusing these two categories is a common bookkeeping error, because they look similar from the buyer's side — no GST on the price either way — but have very different consequences for the seller's ability to recover GST costs.
Example: GST through a simple supply chain
A wholesaler sells goods to a retailer for $1,100 (including $100 GST) and claims back the $50 GST it paid on its own inputs, remitting the net $50 to the ATO.
The retailer then sells the same goods to a consumer for $2,200 (including $200 GST), claims back the $100 GST paid to the wholesaler, and remits the net $100. Across the chain, the ATO collects $150 in total — exactly 10% of the final $1,500 GST-exclusive retail value — all ultimately borne by the end consumer.
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GST-Inclusive Price
A price that already includes the 10% GST component. The GST amount is 1/11th of the inclusive price.
GST-Exclusive Price
The base price of a good or service before 10% GST is added.
Input Tax Credit
A credit for GST included in the price of goods and services purchased for business use, offsetting GST collected on sales.
Business Activity Statement (BAS)
A form lodged with the ATO to report and pay GST, PAYG withholding, PAYG instalments, and other business tax obligations.
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.