The Goods and Services Tax in Australia is a 10% tax added to the price of most goods and services sold or consumed in the country. It took effect on 1 July 2000 and works as a value-added tax: businesses collect it at each stage of production and distribution, but the cost ultimately lands on the final consumer.1Australian Taxation Office. Overview of GST You pay it on everything from a cup of coffee to a new car, usually without noticing because it’s already baked into the shelf price.
How the 10% Actually Works
For every $100 of a taxable good or service, the seller adds $10 in GST, bringing the total to $110. Businesses registered for GST collect that 10% on their sales and send it to the Australian Taxation Office (ATO). What stops the tax from compounding at every step of a supply chain is the input tax credit: businesses claim back the GST they paid on their own purchases, so only the value they added gets taxed.
A short example makes this concrete. A manufacturer buys raw materials for $110 (including $10 GST) and sells the finished product to a retailer for $220 (including $20 GST). The manufacturer remits $10 to the ATO: $20 collected minus the $10 already paid. The retailer sells the product to a customer for $330 (including $30 GST), remits $10, and so on. At every stage, only the new value is taxed. The final consumer pays the full $30 embedded in the price and cannot claim it back.
What’s Taxed, What’s GST-Free, and What’s Input-Taxed
GST covers a broad range of transactions: retail purchases, professional services like legal or accounting advice, imported goods, and most commercial activities. New residential properties and commercial property sales or leases are also taxable when the seller is registered for GST.2Australian Taxation Office. GST and Residential Property
Some things carry no GST at all. These are called GST-free supplies, and businesses selling them don’t add 10% to the price but can still claim input tax credits on their related purchases.3Australian Taxation Office. GST-free Sales The main GST-free categories are:
- Most basic food: fresh fruit and vegetables, bread, meat, dairy, and similar staples. Prepared meals, confectionery, and restaurant food are not GST-free.
- Medical services provided by doctors, plus a defined list of allied health services (dental, chiropractic, physiotherapy, psychology, optometry, and others) when performed by a recognised professional and considered necessary treatment.4Australian Taxation Office. Other Health Services
- Some courses, course materials, and related excursions.
- Goods and services exported from Australia.
- Some childcare services, water and sewerage, certain medicines and medical aids, menstrual products, precious metals, farmland, sales of businesses as going concerns, and international transport.
The health exemption trips people up because it covers only services on a specific list. Remedial massage, for instance, attracts GST even when provided by a qualified therapist.
Input-taxed supplies look similar on the surface because neither includes GST in the price. The critical difference: businesses making input-taxed supplies cannot claim input tax credits for the GST they pay on related purchases.5Australian Taxation Office. Input-taxed Sales That hidden GST becomes a real cost absorbed by the business. The two most common categories are financial services (lending money, providing credit for a fee) and residential property (renting out or selling an existing home). If you’re a landlord, the rent you charge doesn’t include GST, but you also can’t claim back the GST on repairs, maintenance, or management fees.
GST on Imports and Digital Products
Since 1 July 2017, overseas businesses selling digital products and services to Australian consumers have been required to register for GST and charge the 10% tax, just like a local business.6Australian Taxation Office. GST on Imported Services and Digital Products This covers streaming subscriptions, e-books, apps, online games, software, distance learning courses, and services like online dating or overseas legal and accounting advice.
For physical goods, the rules depend on value. Goods imported in a consignment with a customs value of $1,000 or less generally don’t attract GST or customs duty at the border, though alcohol and tobacco are exceptions. Consignments over $1,000 have GST, customs duty, and other charges payable by the importer at the time of import.7Australian Taxation Office. GST and Australian Businesses – Imported Services, Digital Products
When a Business Must Register
You must register for GST if your business has a GST turnover (gross income minus GST) of $75,000 or more per year.8Australian Taxation Office. Registering for GST Non-profits get a higher threshold of $150,000. Two other situations trigger mandatory registration regardless of turnover: starting a new business where you expect to hit the threshold in the first year, and providing taxi or limousine travel, including ride-sourcing services like Uber or DiDi.9business.gov.au. Register for Goods and Services Tax
Below $75,000, registration is optional. Once you register, though, you generally must stay registered for at least 12 months. Businesses sometimes register voluntarily to claim input tax credits on heavy setup costs, or because their clients prefer GST-registered suppliers. When your client is GST-registered, the GST on your invoice isn’t a real cost to them, because they claim it back.
If your turnover later drops below the threshold, you can choose to cancel registration. If you stop trading entirely, you must cancel within 21 days.10Australian Taxation Office. Check Your GST Registration as the Year Wraps Up
Reporting, Invoices, and Deadlines
Once registered, your main ongoing obligation is lodging a Business Activity Statement (BAS). The BAS reports the GST you collected on sales, the input tax credits you’re claiming on purchases, and the net amount you owe or are owed.
How often you lodge depends on turnover. Businesses with a GST turnover of $20 million or more must report monthly. Below that threshold, you can choose monthly, quarterly, or annually, and quarterly is the most common choice for small and medium businesses.11Australian Taxation Office. Monthly GST Reporting The ATO can also direct a business to report monthly if it has a history of compliance problems.
Alongside your BAS, you need to issue proper tax invoices for taxable sales. If a customer requests a tax invoice, you must provide one within 28 days, unless the sale is $82.50 or less including GST. For sales under $1,000, the invoice must show seven details: that it’s intended as a tax invoice, the seller’s identity, the seller’s ABN, the date, a description of the items and price, the GST amount, and which items are taxable.12Australian Taxation Office. Tax Invoices
Penalties for Lodging Late
Missing your BAS deadline triggers a Failure to Lodge penalty. The base penalty is one penalty unit for every 28-day period (or part thereof) the document is overdue, capped at five penalty units.13Australian Taxation Office. Failure to Lodge on Time Penalty As of November 2024, one Commonwealth penalty unit is worth $330, so the maximum base penalty for a small business is $1,650.14Australian Taxation Office. Penalty Units
Larger businesses face steeper multipliers. The base penalty doubles for medium entities (assessable income or GST turnover between $1 million and $20 million), bringing the maximum to $3,300. For large entities ($20 million or more in turnover), the base penalty is multiplied by five, pushing the maximum to $8,250. Beyond penalties, the ATO may also adjust or deny input tax credit claims if your records don’t adequately support them.
Where GST Revenue Goes
Unlike most federal taxes, GST revenue doesn’t stay with the Commonwealth. The entire pool is distributed to Australia’s state and territory governments each year. The Commonwealth Grants Commission, an independent body, recommends how to divide it based on each state’s economic, social, and geographic circumstances.15Commonwealth Grants Commission. Guide to the 2026-27 GST Distribution The goal is to let all states provide broadly the same standard of government services regardless of their individual capacity to raise revenue.
Each state receives a share based on its assessed needs relative to its population. A state with a GST relativity of 0.85, for example, receives 85% of what it would get under a simple equal-per-person split. Under legislation passed in 2018, no state’s relativity can fall below 0.75, and from the 2026-27 update onward, no state receives less than the lower relativity of New South Wales or Victoria. Because the total pool is fixed, any increase to one state’s share reduces what others receive, which is why the distribution formula is renegotiated periodically and remains one of the more contested questions in Australian fiscal policy.