Goods and services tax (GST) for small businesses is straightforward in theory, but in practice, it shapes nearly every part of how your business runs. The tax affects how you set prices, how you invoice, what you can claim back, and how you manage cash flow from month to month. If you miss a rule or skip a detail, you might have to pay tax out of pocket or face penalties.

Below, we’ll explain how to address GST as a small business in Australia—what applies to you, what you need to do, and how to get it right.

What’s in this article?

• When does a small business need to register for GST?
  
• How do you register for GST in Australia?
  
• What goods and services are subject to GST?
  
• How do you collect GST from customers?
  
• What are input tax credits, and how do they reduce GST liability?
  
• How and when do you lodge a business activity statement?
  
• What are the penalties for noncompliance with GST rules?
  

When does a small business need to register for GST?

Goods and services tax in Australia is a 10% tax applied to most goods and services. If your business is registered for GST, you’re responsible for charging GST on most sales and remitting the tax to the Australian Taxation Office (ATO). GST registration isn’t automatic—it becomes mandatory when your business exceeds specific thresholds or operates in certain sectors.

Turnover threshold

You must register for GST once your turnover is $75,000 Australian dollars (AUD) or more over a rolling 12-month period. If you’re starting a business and expect to exceed the threshold within your first year, you should register from the beginning. If you don’t register, you should still monitor your revenue monthly.

Once you exceed—or know you will exceed—the threshold, you must register within 21 days.

Business-specific requirements

Some business types are required to register for GST from Day 1 no matter how much they earn. If you drive a taxi or offer rideshare services, you must register for GST immediately—even if it’s a side gig with minimal income. If you want to claim fuel tax credits for your business (e.g., for heavy vehicles or equipment), GST registration is a prerequisite.

Optional registration

If your revenue is under $75,000 AUD and you don’t offer driving services, GST registration is optional.

If you don’t register:

• You don’t charge GST on your sales.

• You can’t claim GST credits on your business expenses.

• You might appear less established to other businesses, particularly in B2B transactions.

Some businesses register voluntarily to access input tax credits or present a more professional image.

How do you register for GST in Australia?

GST registration is a clear-cut process. You can do it online, over the phone, or through an agent, and it’s often completed at the same time as other business setup tasks. Here are the steps to registering:

Ensure you have an Australian Business Number (ABN)

Before you can register for GST, you’ll need an ABN. If you don’t have one, you can apply online through the Australian Business Register. The ABN application form includes an option to register for GST at the same time.

If you have an ABN, you can register for GST separately at any time.

Choose how to register

There are four official ways to register for GST:

• Online: You can register via the ATO’s online services for business.

• By phone: Call the ATO at 13 28 66. An ATO officer will complete the registration with you over the phone.

• Through a registered tax agent or business activity statement (BAS) agent: If you use an accountant or BAS agent, they can register you for GST on your behalf.

• By paper form: You can fill out and post the registration form (NAT 2954) to the ATO. You can order the form here.

After registration is approved, the ATO will issue a written confirmation with the date your registration is effective. That’s the date from which you’re expected to start charging GST on your taxable sales.

What goods and services are subject to GST?

Australia’s GST applies to most goods and services sold domestically, but not everything is taxed the same way. As a business owner, knowing which category your sales fall into—taxable, GST-free, or input taxed—is necessary for pricing products correctly, charging customers the right amount, and claiming GST credits where you’re entitled to them.

Here are the categories:

Standard rate

Most goods and services fall into this group. If your business sells taxable items, you need to charge 10% GST on each sale. Common examples include:

• Retail items such as clothing, electronics, and cosmetics

• Hospitality sales such as restaurant meals, coffee, and takeout

• Professional services such as consulting, legal work, graphic design, and marketing

For example, if you run a café, GST applies to your coffees, sandwiches, branded merchandise, and more. If you’re a web designer who invoices clients in Sydney, you’ll charge GST on your services. Unless the law says otherwise, assume GST applies.

GST-free sales

You don’t add GST to these sales, but you can still claim GST credits on business purchases that relate to making these sales.

GST-free sales are limited to specific categories, including:

• Most basic food

• Medical and health services

• Medicines

• Education courses and course materials

• Childcare services

• Exports

Input-taxed sales

You don’t charge GST on input-taxed sales, and you can’t claim GST credits on business expenses related to these sales. These activities are outside the GST system.

The two most common examples are:

• Financial services such as lending money and granting credit to a customer

• Residential rent

If your business earns income from either, you won’t charge GST, and you can’t claim GST back on the costs you incur in earning that income.

How do you collect GST from customers?

GST is a flat 10% applied to most taxable sales. But how you apply it—and how you communicate it—depends on how your prices are structured and how your customers buy from you.

Pricing with GST

Calculating GST is simple: you add 10% of the product’s or service’s price. Australian businesses must show the total price, including GST, when they display or advertise prices to customers.

If you’re selling a GST-free item or service, show that clearly by marking GST as $0 AUD or confirming the sale doesn’t include tax.

Tax invoices

If a sale is over $82.50 AUD (including GST) and your customer asks for a tax invoice, you must provide one that meets the ATO’s standards within 28 days. The invoice should include your ABN, the GST amount charged, and a clear description of what was sold. This is especially important for your B2B customers, who’ll need it to claim their input credits.

Tracking collected GST

Every time a customer pays you, a portion of that money is tax you’ll send to the ATO. You must track that GST separately in your records so you don’t confuse it with business revenue. Accounting software can simplify the process by tracking the GST collected automatically.

Ecommerce and automation

If you’re running an online business, you don’t have to do these calculations manually. Tools such as Stripe Tax can automatically apply 10% GST based on customer location and product type and provide you with comprehensive reports on the amount you collect.

What are input tax credits, and how do they reduce GST liability?

Input tax credits—also called GST credits—are a core feature of Australia’s GST system. If your business is registered for GST, you can recover the GST you pay on eligible business purchases. That reclaimed amount is then offset against the amount you collect from customers. This keeps the tax burden where it’s supposed to be: on the final customer.

Here’s how the system works:

• You collect 10% GST on most goods and services. This is your “output tax.”

• You also pay 10% GST on many business purchases such as inventory, equipment, and software. That’s your “input tax.”

• When it’s time to lodge your BAS, you subtract the input tax from your output tax. The difference is what you owe the ATO.

• If your input GST is higher than your output GST (e.g., during a quiet sales quarter or after a large capital purchase), you’ll be eligible for a refund.

What qualifies as an input tax credit?

To claim input tax credits, all of the following must be true:

• Your business uses the purchase to make taxable or GST-free sales.

• The item or service you bought had GST in the price.

• You have valid tax invoices for purchases over $82.50 AUD (including GST).

If any of those conditions aren’t met, you can’t claim GST credits. Otherwise, when you lodge your BAS with the ATO and report how much GST you’ve collected, you can claim the credits.

You can’t claim input credits on:

• Expenses tied to input-taxed sales

• Private purchases or personal use components

• Certain items subject to ATO restrictions, such as luxury cars

The ATO has additional rules for special cases, including apportionment for mixed-use purchases and limits on specific categories.

How and when do you lodge a business activity statement?

Once you’re registered for GST, you’ll need to regularly report how much GST you’ve collected from sales and how much you’ve paid on business expenses. To do this, you lodge a BAS with the ATO.

How often do you need to lodge a BAS?

Most small businesses lodge a BAS quarterly, though some file monthly.

If you file quarterly, your due dates will be:

• October 28 for the first quarter (July–September)

• February 28 for the second quarter (October–December)

• April 28 for the third quarter (January–March)

• July 28 for the fourth quarter (April–June)

If you file monthly, your BAS is due on the 21st of the following month. For example, the March BAS is due April 21. Monthly reporting is required if your turnover exceeds $20 million AUD.

How do you lodge a BAS?

You can lodge your BAS:

• Through the ATO’s online services for business

• Through a registered tax or BAS agent

• By mail

• By phone if you have no sales and no GST to report

Use accounting software to simplify preparation. Most systems track GST paid and collected, and many will autofill your BAS form or gather all the information you need. With Stripe, you can export transaction-level GST summaries from the Stripe Dashboard.

What are the penalties for noncompliance with GST rules?

The ATO expects businesses to meet their GST obligations and will enforce GST rules. If your business doesn’t comply—intentionally or not—you can face financial penalties, interest charges, and reputational damage. Here are the most common errors and what they can cost:

Failing to register when required

If you miss your registration window, the ATO can:

• Backdate your registration and require you to pay all the GST you should have been collecting from customers

• Apply penalties for failing to register on time

• Add interest to compensate for the delay

If you didn’t charge GST to customers during that period, the shortfall comes out of your revenue. The longer you delay, the higher your risk of further penalties.

Not charging or underreporting GST

If you’re registered but don’t charge GST on taxable sales, you still owe it. If you understate GST in your BAS, the ATO considers that a false statement. You might have to pay:

• Shortfall penalties, starting at 25% of the unpaid GST for careless mistakes and rising to 75% for deliberate disregard of the law

• General interest charges (GIC), accrued daily on unpaid tax

Charging GST when you’re not registered

It’s illegal to charge GST if you’re not registered. Don’t include it in your pricing, invoicing, or receipts.

If you charge GST while unregistered and don’t remit it to the ATO, then:

• The ATO might order you to refund it to your customers.

• You might face fines, audits, or both.

Lodging your BAS late

Late lodgment can trigger a failure to lodge penalty, even if your BAS shows zero GST due. This penalty accrues for small businesses, with 1 penalty unit per 28-day period (capped at 5 units). A single penalty unit amounts to $330 AUD.

The ATO might waive small or first-time penalties for businesses with good compliance histories, but don’t assume leniency. It’s safer to file on time or request an extension, if needed.

Paying your BAS late

If you lodge your BAS but don’t pay the GST owed by the due date, the ATO applies:

• GIC, compounding daily
  

The GIC rate is set quarterly. Interest alone can add up quickly. If your cash flow is tight, it’s better to lodge on time and request a payment plan rather than avoid payment and wait for enforcement action.

Keeping insufficient records

The ATO expects you to keep accurate GST records—tax invoices, receipts, and supporting documentation—for at least five years. If you don’t, you might lose legitimate GST credits during an audit, and you could face penalties if unsubstantiated claims are viewed as false or misleading.

Keep your invoices and ledgers organized. This is low-effort insurance against trouble.

Deliberately evading GST obligations

Willful GST fraud (e.g., hiding cash sales, fabricating tax invoices, knowingly filing a false BAS) can result in:

• Large financial penalties

• Criminal charges

• Audits and compliance monitoring for years

The ATO uses data-matching tools, bank records, and industry benchmarks to detect suspicious patterns. If you’re cutting corners or falsifying numbers, you should assume the ATO will eventually notice.

If you missed a deadline, filed something incorrectly, or didn’t register when you should have, it’s better to be proactive. The ATO sometimes reduces or waives penalties when you voluntarily disclose an error before it identifies the issue. Acting early shows good faith and can keep a fixable mistake from escalating.