GST Calculator

Goods and Services Tax, known as GST, is a broad tax of ten per cent that applies to most sales of goods and services in Australia. It was introduced in July 2000 and is collected by businesses on behalf of the Australian Taxation Office at every step of the supply chain. If you run a business, understanding when GST applies to what you sell, and when you can claim it back on what you buy, is one of the most basic pieces of financial housekeeping you need to get right.

When does GST apply

GST generally applies to a taxable supply, which in plain terms means a sale connected with Australia that is made for payment as part of running a business. Most retail goods, professional services, and trades work fall into this category. A smaller set of supplies are treated differently. GST free supplies, such as most basic food, many medical and health services, and most education courses, have no GST added but a business can still claim back the GST it paid on related purchases. Input taxed supplies, the main examples being residential rent and many financial services, also carry no GST, but in this case the business cannot claim input tax credits either. Certain transactions sit outside the GST system altogether, wages being the clearest example, since an employee is not running a business when they are paid a salary.

Do you need to register

A business must register for GST once its annual turnover reaches or is expected to reach $75,000. The threshold is higher for not for profit organisations, currently $150,000. Registration is optional below these thresholds, though many smaller operators register anyway if most of their customers are other GST registered businesses, since it allows them to claim input tax credits on their own purchases. Once registered, a business must add GST to its taxable sales, issue proper tax invoices, and lodge a Business Activity Statement, usually quarterly, reporting the GST collected and the GST paid on business expenses.

Adding and extracting GST

Working out GST on a price is straightforward once you know which direction you are calculating. If you have a price that excludes GST, you add ten per cent of that amount to reach the GST inclusive total. If you already have a GST inclusive figure and need to know how much of it is tax, you divide the total by eleven rather than simply taking ten per cent off the top, since the GST component is one eleventh of the final price, not ten per cent of it. Getting this the wrong way around is a common and costly error, particularly when quoting jobs or reconciling invoices.

Common traps

Businesses that are not registered for GST cannot charge it on their invoices, even if they assume they should once they start dealing with larger commercial clients. On the other side, a business that is registered but mistakenly treats a GST free or input taxed sale as a normal taxable supply will overcharge its customer and may need to issue a correction. Where a transaction is complex, mixed supplies involving both taxable and GST free elements, imported goods and services, or property transactions with margin scheme considerations are all areas where the general rules above do not tell the whole story, and specific advice is the safer course.

Frequently Asked Questions

Do I have to register for GST as a sole trader?

Only once your turnover reaches or is expected to reach $75,000 in a twelve month period. Below that threshold registration is optional, though some sole traders choose to register voluntarily if their clients are GST registered businesses.

Is GST calculated on the full sale price or added separately?

For a taxable supply, GST is one tenth of the price before tax, which becomes one eleventh of the final price once GST is added. Both figures describe the same amount, just calculated from different starting points.

What happens if I charge GST but I am not registered?

You should not charge GST unless you are registered. If this happens in error, the amount generally still needs to be remitted, and the invoice should be corrected. Speak with your accountant or contact CMH Lawyers if this has occurred and you are unsure of your obligations.

Are all professional legal fees subject to GST?

Most legal services provided in Australia are a taxable supply and carry GST, though certain matters connected with overseas parties or specific exempt categories may be treated differently. Your invoice from CMH Lawyers will always show the GST component separately.