The Goods and Services Tax (GST) is one of the most important taxes for businesses in Australia. Whether you run a small café, an online store, or a large company, understanding how GST works — and when you must register for it — is essential to staying compliant and managing your finances properly. In this article, we’ll explain what GST is, how it operates, when registration becomes mandatory, and how to manage it effectively through your Business Activity Statements (BAS).
What Is GST in Australia?
Goods and Services Tax (GST) is a 10% value-added tax applied to most goods, services, and other items sold or consumed in Australia. Introduced in July 2000, GST replaced several older taxes to create a more unified and transparent system.
GST applies at every stage of the supply chain — from manufacturers and wholesalers to retailers and consumers. However, the final cost is usually borne by the end consumer, while registered businesses collect and pay GST on behalf of the Australian Taxation Office (ATO).
How Does GST Work?
The GST system is based on a credit and debit method. Here’s a simple explanation of how it works:
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You charge GST on your sales (Output Tax):
When you sell goods or services, you add 10% GST to your sale price. For example, if your product costs AUD 100, you charge AUD 110 (including GST). -
You pay GST on your purchases (Input Tax):
When you buy goods or services for your business, you usually pay GST to your suppliers. For instance, if you buy materials worth AUD 55 (including GST), AUD 5 of that is GST. -
You claim GST credits:
The GST you pay on business purchases can be claimed back as GST credits. So, if you collected AUD 1,000 in GST from your customers and paid AUD 400 in GST to your suppliers, you owe AUD 600 to the ATO. -
You report and pay GST through your BAS:
Businesses registered for GST must lodge a Business Activity Statement (BAS) either monthly, quarterly, or annually. This statement shows your GST collected and credits claimed.
This process ensures that GST is only paid on the value added at each stage of the production or sales chain.
When Do You Need to Register for GST?
Not every business in Australia must register for GST immediately. The requirement to register depends mainly on your annual turnover.
You must register for GST if:
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Your GST turnover is $75,000 or more per year (before GST), or
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You run a non-profit organisation with a turnover of $150,000 or more, or
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You provide taxi or ride-share services (like Uber), regardless of turnover, or
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You want to claim GST credits and voluntarily register even if your turnover is below the threshold.
Your GST turnover is the gross income from your business operations, excluding GST, but before deducting expenses. It’s important to regularly monitor your turnover to ensure you register on time.
Voluntary GST Registration
Even if your business hasn’t reached the $75,000 threshold, you may voluntarily register for GST. There are several advantages:
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You can claim GST credits on business purchases.
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It may make your business look more credible to larger clients.
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You can avoid disruption if your sales suddenly increase and cross the threshold.
However, once you register, you must collect and report GST regularly, so it’s important to consider the extra administrative work before registering early.
How to Register for GST
Registering for GST is free and straightforward. You can do it through:
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Australian Business Register (ABR) when you apply for your Australian Business Number (ABN), or
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ATO’s Business Portal, or
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Through your registered tax or BAS agent.
When you register, you’ll receive a GST registration date, from which you must start collecting and reporting GST.
GST-Free and Input-Taxed Sales
Not all goods and services are subject to GST. Some items are GST-free or input-taxed.
GST-Free Items:
GST-free items are not taxed, but you can still claim GST credits on related business expenses. Common examples include:
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Basic food items
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Medical and health services
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Education courses
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Certain exports
Input-Taxed Items:
For input-taxed sales, you do not charge GST, but you cannot claim GST credits on related purchases. Examples include:
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Residential rent
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Financial services
Knowing the difference helps you determine which transactions should include GST and which shouldn’t.
How to Calculate GST Correctly
To calculate GST:
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If your price is exclusive of GST:
Multiply the price by 1.10 to get the GST-inclusive amount.
Example: AUD 200 × 1.10 = AUD 220 (GST = AUD 20) -
If your price is inclusive of GST:
Divide the total by 11 to find the GST amount.
Example: AUD 220 ÷ 11 = AUD 20 GST component.
Always keep accurate invoices showing GST details for compliance and audits.
Reporting and Paying GST
After registering, you must report your GST through your Business Activity Statement (BAS). Depending on your business size, you can lodge it:
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Monthly — if your turnover is high,
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Quarterly — most common option for small businesses, or
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Annually — if you voluntarily register and have a low turnover.
You can lodge your BAS online via the ATO Business Portal, through myGov, or with your accountant. The BAS includes sections for:
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Total sales
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GST collected on sales
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GST paid on purchases
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Net GST payable or refundable
The due dates are usually within 28 days after the end of each period (e.g., the end of each quarter).
What Happens If You Don’t Register for GST?
Failing to register when required can lead to serious consequences. The ATO may:
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Backdate your GST registration,
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Require you to pay GST owed on past sales,
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Charge interest and penalties,
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Conduct audits for non-compliance.
It’s always better to register early and stay up to date with reporting to avoid unnecessary stress or fines.
Tips for Managing GST Effectively
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Use accounting software like Xero, MYOB, or QuickBooks to track GST automatically.
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Set aside your GST collected in a separate account so you have enough funds when it’s time to pay.
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Keep clear records of invoices, receipts, and BAS lodgements.
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Consult a tax agent if your business deals with complex transactions like imports or exports.
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Review your turnover regularly — especially during growth periods.
Final Thoughts
Understanding how the Goods and Services Tax (GST) works in Australia helps you manage your business more confidently. It’s not just about compliance — it’s also about gaining control over your cash flow and building a solid financial foundation.
Whether you’re a sole trader or managing a growing company, remember these key points:
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GST applies to most goods and services at 10%.
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You must register if your turnover exceeds $75,000.
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You can claim GST credits on eligible business purchases.
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Lodging your BAS on time keeps your business in good standing with the ATO.
If you’re unsure about your GST obligations or need help registering, consult a qualified tax accountant or BAS agent. They can guide you through the process and help you make the most of your GST credits.
