The GST (Goods and Services Tax) is a value added tax on the supply of goods and services in Australia, including items that are imported. In most cases, GST does not apply to exports of goods or services, or other items consumed outside Australia.

It was introduced by the Howard Government on 1st July 2000, replacing the previous Federal wholesale sales tax system and designed to phase out a number of various State and Territory Government taxes, duties and levies such as banking taxes and stamp duty. The basic premise of the new tax was to broaden the tax base, which was heavily biased toward
the provision of services.

Prior to the GST, Australia operated a Wholesale Sales Tax (WST) which imposed a tax on wholesales of goods. The WST was implemented in the 30's when Australia had an economy dominated by goods. Over the years however, Australia's economy evolved to be more services based, and the GST served to strip the unfair tax advantage that service providing businesses had over suppliers of goods.

The GST is levied at a flat rate of 10% on most goods and services, apart from GST exempt
items, and input taxed goods and services.

GST is administered by the Tax Office on behalf of the Australian Government, and is appropriated to the states and territories.

Registration under GST

Not every business in Australia needs to register for GST. A company should register for
GST if both the following conditions are satisfied:

  1. The company is carrying on a business and
  2. The annual turnover will exceed $75,000 If the company is not registered under the GST, if it meets the GST turnover threshold, then the company will be liable for 1/11th of its income (plus penalties).

Charge GST

A business is liable to charge GST if is registered under GST and it makes a taxable supply. A business makes a taxable supply when:

  • It is registered;
  • There is a supply for consideration;
  • The supply is connected with Australia and
  • The supply is not GST – free or input taxed.

Claim back GST

If the business is registered, then the GST can be claimed back on any creditable acquisition or creditable importation. This term is similar to claiming credit of amount of GST paid.
A creditable acquisition (or creditable importation) is made if the business:

  • Acquires something for a creditable purpose; and
  • that something is a taxable supply; and
  • consideration is given for that something; and
  • it is registered.

Some common creditable acquisitions include:

  • Computers;
  • Trading stock;
  • Travel expenses;
  • Motor vehicles and their running costs;
  • and anything that is required to run the business.

Creditable purpose is something that is acquired for the purpose of the enterprise. The GST can be claimed back when submitting the Business Activity Statement (BAS). The Business Activity Statement (BAS) is a form submitted to the Australian Taxation Office by all businesses to report their taxation obligations. BAS is similar to the returns that are filed under India’s taxation system.

Submission of Business Activity Statement

If the turnover is less than $2,000,000 and is a small business entity, then it can elect to lodge the Business Activity Statement (BAS) either monthly, quarterly, or annually. If the turnover is more than $2,000,000 then it must be lodged monthly in the Australian Taxation Office.

Maintenance of Records

To claim the GST back on a creditable acquisition, there must be a valid tax invoice from the supplier.
There is an exception for individual items costing less than $75.
Generally, the tax invoice should contain the following

  • supplier's name and ABN (Australian Business Number);
  • description of the goods or service purchased; and
  • The price including the GST paid.

These invoices should be kept for a period of 5 years.

GST Free Supplies

There are a small number of supplies that are GST free.
If a GST free supply is made, then GST cannot be charged, but the GST paid can be claimed back.
GST supplies include:

Health and Medical Care

  • Services by medical practitioners and pathologists;
  • Services by allied health practitioners such as physiotherapists, naturopaths, nurses and optometrists;
  • Hospital treatment;
  • Disability services;
  • Medical aids and appliances;
  • Pharmaceuticals;
  • Health insurance.

Educational Supplies and Childcare

  • School and university fees
  • Certain coarse materials
  • Student accommodation
  • Professional and trade courses
  • Approved childcare

Fresh Food and Beverages

  • food and ingredients for food for human consumption
  • beverages for human consumption and ingredients for such beverages
  • goods to be mixed with or added to food for human consumption (including condiments, spicings, seasonings, sweetening agents or flavorings)
  • fats and oils marketed for culinary purposes
  • any combination of any of the above

Items specifically excluded from the definition of food are:

  • live animals, except crustations and molluscs
  • unprocessed cow’s milk
  • unprocessed or untreated grain, cereal or sugar cane which is unchanged in form, nature or condition
  • cultivated plants that can be consumed as food for humans without processing or treatment

In effect, the exclusions mean that food will not generally be excluded from the GST until
they have been processed or treated in some way. So sale of products by primary producers
to processors or treaters will be subject to GST.

Other GST-Free Supplies

  • Sale of a ""going concern""
  • a grant of crown land
  • certain sales of farm land
  • water, sewerage and drainage;
  • cars for disabled people

Input taxed Supplies

There are a small number of supplies that are Input-taxed.
If an input taxed supply is made, then GST cannot be charged ad GST paid also cannot be claimed back.

Input-taxed supplies include:

  • Financial supplies
  • Residential premises for rent
  • Sales of residential premises (but not new homes)
  • food at school tuckshops (optional);
  • fundraising activities of charities (optional)
  • certain transactions involving precious metals
    When a supply is both a GST-free supply and an input-taxed supply, it is treated as the former.

Find HSN Code & GST Rates

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