What is GST in Australia? What small businesses need to know

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  1. Introduction
  2. What is GST in Australia?
  3. Who needs to register for GST in Australia?
    1. The $75,000 turnover threshold
    2. Industry-specific rules
    3. Voluntary registration
  4. How does GST work in Australia?
    1. GST rates
    2. How to charge GST correctly
  5. How do businesses report and pay GST?
    1. How often do you need to lodge a BAS?
    2. How to lodge a BAS
    3. Using Stripe to simplify GST reporting
  6. GST errors businesses should avoid
    1. Getting the GST maths wrong
    2. Forgetting to claim GST credits on expenses
    3. Keeping insufficient records
    4. Misclassifying sales
    5. Not charging GST on online sales to Australian customers

Running a business in Australia means dealing with the goods and services tax (GST). GST affects your cash flow, pricing strategy, and how much tax you owe. Getting it wrong can mean paying too much, undercharging customers, or facing penalties from the Australian Taxation Office (ATO). Below, we’ll cover what small businesses need to know about GST: when to register, how to report it, and common mistakes to avoid.

What’s in this article?

  • What is GST in Australia?
  • Who needs to register for GST in Australia?
  • How does GST work in Australia?
  • How do businesses report and pay GST?
  • GST errors businesses should avoid

What is GST in Australia?

GST is a 10% tax on most goods and services sold in Australia. Businesses collect the extra 10%, and send it to the government. Buyers cover the cost, while sellers handle collection and reporting.

Introduced in 2000, GST in Australia provides a steady revenue stream for public services such as healthcare, education, and infrastructure. The federal government collects it, then distributes it to states and territories. Because GST applies at the point of sale (POS), it ensures that tax is collected broadly as money moves through the economy.

If your business is registered for GST, you’re responsible for:

  • Adding 10% GST to eligible sales and clearly stating it on invoices

  • Collecting GST from customers and remitting it to the ATO

  • Tracking GST paid on any business expenses you want to claim back

Because GST affects pricing, some businesses advertise prices as “GST-inclusive” for transparency.

Who needs to register for GST in Australia?

GST registration isn’t required for every business. Understanding when and why you need to register your business can help you avoid costly mistakes. Businesses that fail to register for GST when they should can face the following consequences:

  • Retroactive GST payment: The ATO can require businesses to pay GST on past sales, even if they did not collect it from customers.

  • Penalties and interest: Businesses found to be non-compliant can be fined and charged interest on unpaid GST.

  • Business credibility risks: Other businesses might be reluctant to trade with non-registered suppliers, as they cannot claim GST credits on purchases.

If your business should have been registered but wasn’t, addressing the issue promptly can reduce penalties. The ATO is more likely to be lenient with businesses that voluntarily correct errors rather than waiting for an audit.

Here are the conditions under which businesses must collect GST in Australia.

The $75,000 turnover threshold

If your annual GST turnover – your total business income, excluding GST – is 75,000 Australian dollars (AUD) or more, you must register for GST. Non-profits have a higher threshold of $150,000 AUD. Registration is required within 21 days of passing the threshold. New businesses that expect to exceed $75,000 AUD in their first year must register in advance.

GST turnover is based on revenue, not profit. Any business that crosses the threshold must register. This applies to:

  • Small businesses

  • Businesses with high expenses and low margins

  • Businesses that sell GST-free goods

Industry-specific rules

Some businesses must register for GST from their first dollar of revenue, regardless of their income. Businesses that want to claim fuel tax credits (such as those in haulage, farming, or mining) must be GST-registered to qualify. Ride sharing and taxi drivers (including Uber and similar services) must charge GST on fares, even if they have low annual earnings.

Voluntary registration

Businesses earning less than $75,000 AUD are not required to register, but they might choose to do so. Some common reasons to register voluntarily include:

  • Claiming GST credits: If a business purchases goods or services with GST, registering allows the business to reclaim those amounts.

  • Improving business credibility: Some B2B customers prefer dealing with GST-registered businesses because they can claim input tax credits.

  • Avoiding a registration rush: Businesses that anticipate growth beyond the threshold might prefer to register early to avoid administrative delays.

Voluntary registration comes with an obligation. Once registered, businesses must lodge a business activity statement (BAS) in order to report GST collected and paid.

How does GST work in Australia?

Once you’re registered for GST, your business becomes an intermediary between your customers and the government. You collect a 10% tax on most sales, and hold on to it to pass along to the government.

You’re also paying GST on your own expenses. If you collect more GST from customers than you pay on expenses, you owe the difference to the ATO. If you pay more GST on expenses than you collect from customers, the ATO owes you a refund.

For example, let’s say that over a three-month period, you collect $5,000 AUD in GST from customers and pay $3,000 AUD in GST on business expenses. When you file your GST report, you pay the ATO $2,000 AUD (the difference between what you collected and what you paid).

To claim back GST, your expenses must meet the following requirements:

  • The purchase must be for business use (if something is partly for personal use, you can only claim the business portion).

  • You must have a valid tax invoice from the supplier.

Most standard business expenses – such as office rent, supplies, equipment, and software subscriptions – qualify for GST credits, as long as GST was actually charged. But if your supplier wasn’t registered for GST, or the item was GST-free, there’s no tax to reclaim.

If you don’t register, you miss out on these credits. That’s why some small businesses register voluntarily. If they have high setup costs, they can claim back GST on those purchases even before making substantial sales.

GST rates

The default GST rate is 10%. Some sales get taxed at this rate, others are zero-taxed but still allow GST credits, and some don’t include GST at all. The category of the sale impacts what businesses can claim on their taxes:

  • Standard GST sales (10%): Most sales have the standard GST rate applied. If your product or service doesn’t fall into a special category, GST applies.

  • GST-free sales (0%): Some essentials – such as basic food, medical services, education courses, and exports – don’t have GST added to the price. You still report these sales, but you don’t charge tax on them. You can claim GST credits on business expenses related to these sales.

  • Input-taxed sales: Certain payments are exempt from GST altogether. This category includes residential rent and certain financial services. You can’t claim back the GST you pay on business costs related to these payments.

Businesses that sell GST-free goods (such as a grocery store selling fresh produce) can claim credits on their expenses. But businesses dealing in input-taxed sales (such as a landlord renting out flats) can’t claim credit on expenses such as maintenance. Here’s how it affects different industries:

  • Retail and hospitality: Restaurants charge GST on meals, but grocery stores might sell a mix of GST-free and taxable products.

  • Ecommerce: If you sell to Australian clients, you charge GST. But if your customers are overseas, those sales can count as GST-free exports.

  • Finance and real estate: Loan interest and residential rent don’t include GST, and businesses in these spaces can’t claim GST credits on related costs.

How to charge GST correctly

If your business is GST-registered, you need to build that 10% tax into your prices. Some businesses list prices as GST-inclusive (where the tax is already factored in), while others – especially those working with other businesses – list a separate GST amount on invoices.

If you issue invoices to other businesses, you must include the following information on invoices for sales of $82.50 AUD or more (including GST), but under $1,000 AUD:

  • Your Australian Business Number (ABN) and business name

  • The date and a description of what was sold

  • Which line items are taxable sales

  • The GST amount or a note saying the price includes GST

Sales of $1,000 AUD or more must also include the buyer’s details.

GST calculation can be automated for businesses using online payments. If you’re billing customers through Stripe, Stripe Tax can determine the right GST rate based on what you’re selling and where your customer is located.

How do businesses report and pay GST?

Once your business is registered for GST, you’re responsible for collecting, reporting, and paying this tax. This happens through the business activity statement, which is how businesses tell the ATO how much GST they’ve collected, how much they’ve paid, and whether they owe money or are due a refund.

How often do you need to lodge a BAS?

Your reporting frequency depends on your business size and revenue. The ATO assigns businesses a reporting schedule based on GST turnover.

If your GST turnover is under $20 million AUD, you usually report every three months. Most small businesses fall into this category. If you lodge your BAS online, you might be eligible to get two extra weeks to submit. Standard deadlines are:

  • 28 October for Q1 (July–September)

  • 28 February for Q2 (October–December)

  • 28 April for Q3 (January–March)

  • 28 July for Q4 (April–June)

If your turnover is $20 million AUD or more, you must report monthly and lodge online. Some smaller businesses choose monthly reporting to manage cash flow or receive GST refunds faster. Monthly BAS is due on the 21st of the following month (e.g. July BAS is due by 21 August).

If your business voluntarily registered, you might be eligible to report GST once a year. Businesses on this cycle often pay quarterly GST instalments and then reconcile everything in an annual GST return. This is due by 31 October.

Missing a BAS deadline can result in:

  • Failure to lodge (FTL) penalties: These are calculated based on business size and how long a BAS has been overdue.

  • General interest charge (GIC): The ATO charges interest on overdue GST amounts.

  • Stricter compliance enforcement: Repeated late lodgements can lead to audits.

The ATO might waive penalties for first-time mistakes or offer payment plans if you’re struggling to pay what you owe.

How to lodge a BAS

  • Gather your records: Make sure your books are up to date. Accounting software such as Xero or QuickBooks usually has a BAS report feature.

  • Complete the BAS form: Fill in information about your total sales, GST collected, and GST paid, as well as any adjustments you’re making for past errors.

  • Lodge your BAS: You can lodge through the ATO’s online services for business, myGov (if you’re a sole trader), your accounting software (many often integrate with the ATO), or a registered BAS or tax agent.

  • Pay any GST owed: If your BAS shows you owe GST, payment is due by the lodgement deadline. You can pay using a credit or debit card, BPAY, or other methods. The ATO usually has payment plans, if needed.

Using Stripe to simplify GST reporting

Although Stripe doesn’t lodge your BAS, it can help businesses manage GST with detailed sales reports to track taxable and GST-free revenue and transaction breakdowns that show how much GST was collected. Many businesses integrate Stripe with accounting software, which can pull transaction data directly into BAS reports.

GST errors businesses should avoid

GST can be straightforward: you collect 10% on most sales, claim back GST on what you buy for the business, and pay the ATO the difference. But in practice, mistakes happen, and they can cost you money or put you on the ATO’s radar. Here are some potential errors to monitor for when dealing with GST.

Getting the GST maths wrong

Some businesses miscalculate GST when pricing their products or filling in their BAS:

  • If your price includes GST, the GST portion isn’t 10% of the total – it’s 1/11th. For example, if you charge $110 AUD (GST included), the GST isn’t $11 – it’s $10.

  • Another common mistake is adding 10% to a GST-inclusive price, which inflates the final amount. If your price is already $110 AUD including GST, adding another 10% would be incorrect.

Use an online GST calculator or accounting software to avoid manual errors. If you’re selling online or using a POS system, make sure it’s set up correctly. Stripe and other platforms allow you to specify tax settings for Australian GST, so check them carefully.

Forgetting to claim GST credits on expenses

Some businesses might focus so much on collecting and paying GST that they could forget to claim back the GST they’ve paid on business expenses. In particular, businesses might easily forget to claim GST on:

  • Software subscriptions

  • Bank fees

  • Office supplies and equipment

  • Travel expenses

  • Stock and inventory purchases

Get a tax invoice for any expense over $82.50 AUD. Without it, you can’t claim GST credits. If you use an accounting tool, check your transaction reports regularly, so you don’t miss eligible expenses. Even if you’re tracking everything in a spreadsheet, making a habit of recording GST on expenses as you go will save you time and money.

Keeping insufficient records

Good recordkeeping prevents overpayment of GST and protects against audits. Businesses might lose receipts for claimable expenses, fail to reconcile bank statements with sales records, or forget to download reports from payment providers such as Stripe.

The ATO requires you to keep records for five years, so set up a simple system:

  • Digitally save invoices and receipts using Dropbox, Google Drive, or accounting software.

  • Download transaction reports from Stripe every month.

  • Reconcile sales and expenses quarterly.

Even if you use a bookkeeper or accountant, it’s your responsibility to keep track of your records.

Misclassifying sales

Not all sales are treated the same for GST. Businesses can accidentally charge GST when they shouldn’t or fail to charge it when they should. For example, an ecommerce shop owner might charge GST on clothing that should be GST-free because it was exported, or a consultant might mistakenly assume their service is exempt.

If you’re not sure whether something is GST-free, check the ATO’s website or ask an accountant. If you sell both taxable and GST-free products (e.g. a grocery store selling fresh produce and household items), make sure your invoices clearly separate them to avoid reporting errors.

Not charging GST on online sales to Australian customers

Selling online doesn’t exempt you from GST. If you’re based in Australia and selling to Australian customers, GST still applies – whether it’s a physical or digital product. If you sell e-books, software, or digital services to Australians, GST applies. If you sell physical products through an e-commerce platform such as Shopify, you must charge GST the same way you would in a physical store.

If you sell to international customers, those sales are usually GST-free, but you need proof (such as a billing address or IP location) to show the customer is overseas. Check your e-commerce and payments platform settings to ensure GST is being applied correctly. Stripe Tax can track customer locations to help automate this part of the process.

GST mistakes can happen when businesses aren’t paying attention to the details or don’t have the right systems in place. Platforms such as Stripe, Xero, and QuickBooks can help track GST automatically. Businesses should work to keep up with evolving ATO rules and seek professional advice when needed.

The content in this article is for general information and education purposes only and should not be construed as legal or tax advice. Stripe does not warrant or guarantee the accuracy, completeness, adequacy, or currency of the information in the article. You should seek the advice of a competent lawyer or accountant licensed to practise in your jurisdiction for advice on your particular situation.

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