Alex is Sprintlaw’s co-founder and principal lawyer. Alex previously worked at a top-tier firm as a lawyer specialising in technology and media contracts, and founded a digital agency which he sold in 2015.
Contents
Goods and Services Tax (GST) touches almost every sale most Australian businesses make, but the rules can feel confusing when you’re just trying to get on with running your business.
The good news? Once you understand the basics - when to register, how to price, what to put on your invoices, and how to report - GST becomes a routine part of doing business.
In this guide, we’ll walk you through how GST works in Australia from a small business perspective, clear up common grey areas, and share practical tips so you can stay compliant with confidence.
What Is GST And When Do You Need To Register?
GST is a 10% tax on most goods and services sold in Australia. If you run a business, you collect GST on taxable sales and send it to the Australian Taxation Office (ATO) via your Business Activity Statement (BAS). You can usually claim back the GST you’ve paid on your business purchases (called input tax credits).
You must register for GST if your GST turnover is $75,000 or more in a 12‑month period ($150,000 for not‑for‑profits). Your “GST turnover” is your gross business income excluding GST, not your profit.
You can also register voluntarily below the threshold. This can make sense if your customers are mostly businesses (who can claim GST credits) or if you want to claim input tax credits on your costs.
Key steps to get set up
- Get an ABN (Australian Business Number) and decide on your business structure (sole trader, partnership, or company).
- Register for GST through the ATO once you meet (or expect to meet) the threshold, or if you choose to register earlier.
- Update your invoicing, pricing, and accounting system to handle GST correctly from day one.
If you’re formalising your operations, it may be worth considering a company structure. Our team helps with streamlined Company Set Up if you decide that’s right for your growth plans.
How GST Works In Practice: Pricing, Tax Invoices And BAS
Once you’re registered, you collect 10% GST on taxable sales and claim credits for the GST you’ve paid on your business inputs. You report the net amount on your BAS (monthly, quarterly or annually, depending on your cycle).
Pricing: “Plus GST” vs “GST Inclusive”
Your advertised prices for consumers should be GST-inclusive. If you sell B2B, you can display prices as “$X + GST”, but be clear and consistent so customers know what they will pay at checkout.
Misleading or unclear pricing can cause problems under consumer law. Make sure your price displays align with section 29 (false or misleading representations) and that GST is included or disclosed appropriately.
Tax invoice requirements
When you make a taxable sale of $82.50 or more (including GST), your customer can ask for a tax invoice. For sales of $1,000 or more, additional details are required.
A valid tax invoice generally includes:
- “Tax invoice” clearly stated
- Your business name and ABN
- The invoice date
- Description of items sold
- The price, either showing the total price with GST included, or the amount of GST for each item, or a statement that the total includes GST
- For invoices of $1,000 or more: the buyer’s identity or ABN
Some industries use Recipient Created Tax Invoices (RCTIs), where the buyer issues the tax invoice to the supplier - for example, certain agency or commission arrangements. If you use this approach, make sure you have the right agreement in place and follow the ATO rules for Recipient Created Tax Invoices.
Lodging your BAS
Your BAS reports the GST you’ve collected (output tax) and the GST credits you can claim (input tax). The net difference is what you pay or receive as a refund.
You can choose cash or accrual accounting for GST (discussed further below). Keep consistent, accurate records so your BAS figures are easy to support if queried.
GST On Different Types Of Sales: GST‑Free, Input Taxed, Exports And Imports
Not every sale attracts GST. Understanding how your products or services are classified is essential to charging (or not charging) GST correctly.
GST‑free sales
No GST is charged on GST‑free sales, but you can still claim input tax credits for related purchases. Common examples include basic food, some health services, and most exports. If you’re making mixed supplies (some items GST‑free, others taxable), you’ll need to split out the components correctly on your invoice and in your accounting.
Input taxed sales
Input taxed sales don’t have GST added, and you generally cannot claim input tax credits for purchases that relate to making these sales. The main examples are financial supplies and residential rent. If you make both taxable and input taxed supplies, you may need to apportion your credits.
Exports and cross‑border services
Exports of goods are usually GST‑free if certain requirements are met (for example, export within a specified time frame). Many services supplied to non‑residents outside Australia can also be GST‑free, depending on the circumstances. Keep documentation to substantiate the GST‑free treatment.
Imports and GST at the border
GST is usually payable on imported goods at the border. Some businesses use deferred GST to manage cash flow, reporting the GST on their BAS instead of paying it upfront. Make sure your logistics and accounting processes capture imported goods correctly. For more detail on common scenarios, see our guide to GST on importation.
Claiming Input Tax Credits: What You Can And Can’t Claim
Input tax credits let you recover the GST included in the price of goods and services you buy for your business. Getting this right improves cash flow and ensures you only pay net GST.
When you can claim
- The purchase is for your business (not private use).
- You’re registered for GST when you make the purchase.
- The purchase relates to making taxable or GST‑free supplies (not input taxed supplies).
- You have a valid tax invoice (for purchases of $82.50 or more).
Apportioning mixed‑use purchases
If something is used partly for business and partly for private purposes, you can only claim the business portion. The same goes if your purchases relate to both taxable and input‑taxed sales - you may need to apportion your credits by a reasonable method and keep your workings on file.
Common items you can’t claim
- Entertainment expenses (with limited exceptions).
- Certain motor vehicle purchases if the car limit is exceeded.
- Expenses relating to making input taxed supplies (like residential rent).
Always keep clear records and tax invoices. A clean paper trail is your best protection if the ATO asks questions later.
Common Pitfalls And Practical Tips For Small Businesses
Here are issues we frequently see - plus simple ways to avoid them.
Cash vs accrual GST reporting
On cash basis, you report GST when you’re paid and claim credits when you pay your suppliers. On accrual (non‑cash) basis, you report when you issue or receive an invoice. Cash basis often suits small businesses for cash flow, but choose the method that matches your operations and stick with it unless you formally change.
Price displays and quotes
For consumer sales, display GST‑inclusive prices. For business customers, be crystal clear whether your price is “incl. GST” or “+ GST”. Your customer‑facing documents (quotes, proposals, website checkout) should line up with your tax invoices and your obligations under section 29 of the ACL (no misleading price representations). Your website or online store can reflect this clearly using well‑drafted Website Terms and Conditions.
Invoice terms and late fees
Set clear payment timeframes on every invoice and in your customer contracts. Having consistent invoice payment terms helps with cash flow and makes BAS preparation easier. If you intend to charge late fees, make sure the right to do so is built into your contract and that your fees comply with Australian law on late payment fees.
RCTIs without an agreement
Recipient Created Tax Invoices require a compliant written agreement between the recipient and the supplier and certain wording on each invoice. If your industry uses RCTIs, ensure you have the right agreement and processes in place before you start issuing or accepting them. You can revisit the core rules in our RCTI guide.
Mixed supplies and composite supplies
If you sell bundles (e.g. a taxable product plus a GST‑free service), you may need to split the price to apply GST correctly. Sometimes a single composite supply takes the GST status of the dominant component. This is a technical area - set up your products/services correctly in your invoicing system and get advice if you’re unsure.
Marketplace and platform sales
If you sell via a marketplace, consider whether the platform is the supplier for GST purposes or whether you are. This affects who issues the tax invoice and who accounts for GST. Read your platform agreement carefully and keep your own records in sync.
Cash, card and alternative payments
However your customers pay, GST is calculated the same way. If you’re changing payment methods or moving cashless, consider your obligations around pricing transparency and payment acceptance rules. We’ve covered compliance issues when businesses consider refusing cash payments.
Rounding and system setup
Minor rounding differences can occur. Configure your accounting software to apply GST and rounding consistently across line items and totals, and keep it the same from invoice to BAS.
Legal Documents That Support GST Compliance
While GST is a tax issue, your contracts and policies do a lot of the heavy lifting when it comes to practical compliance. Clear terms reduce disputes, protect cash flow, and make your BAS easier.
- Terms of Trade: Set out pricing (including GST treatment), payment terms, late fees, delivery/acceptance, title, risk, and dispute processes for your B2B customers.
- Website Terms and Conditions: For online sales, outline how orders, pricing and taxes are handled at checkout, reducing confusion about “incl. GST” vs “+ GST”.
- Privacy Policy: If you collect customer data to issue invoices, take payments or manage accounts, you’ll need a compliant Privacy Policy explaining how you handle personal information.
- Customer Contracts or Service Agreements: Mirror your Terms of Trade for service‑based work, including scope, fees and GST, milestones, and invoicing triggers.
- Supplier Agreements: Ensure your supplier arrangements specify price basis (incl./excl. GST) and invoice requirements so your input tax credits are fully supported.
- RCTI Agreement (where relevant): If you or your customers issue Recipient Created Tax Invoices, ensure you have a compliant written agreement and invoice wording in place.
If you’re formalising your structure or adding founders, it’s also worth aligning your internal governance (for example, how you approve pricing and tax settings) within your constitution or board processes so changes don’t slip through unnoticed.
Key Takeaways
- GST is 10% on most sales in Australia - you must register once your GST turnover hits $75,000 (or register earlier voluntarily).
- Price transparently and issue compliant tax invoices; align your website, quotes and invoices so GST is treated consistently.
- Know your supply type: taxable, GST‑free, input taxed, exports and imports each have different GST outcomes and documentary requirements.
- Claim input tax credits only for eligible business purchases and apportion fairly for mixed or private use.
- Avoid common pitfalls by locking in clear invoice terms, handling RCTIs correctly, and choosing a GST reporting method that fits your cash flow.
- Strong contracts and policies - like Terms of Trade, Website Terms and a Privacy Policy - support day‑to‑day GST compliance and reduce disputes.
If you’d like a consultation on how GST works for your small business and the legal documents that make compliance easier, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no‑obligations chat.
