The goods and services tax in Australia is a 10% tax added to most goods and services sold or consumed in the country. It began on 1 July 2000 and works as a value-added tax: businesses collect it at each stage of production and distribution, remit it to the Australian Taxation Office (ATO), and the final consumer ends up carrying the cost.1Australian Taxation Office. Overview of GST Unlike income tax, it taxes spending rather than earning, and it shows up on almost everything you buy.
How the 10% Moves Through the Supply Chain
For every $100 of a taxable good or service, the seller adds $10 in GST, and the customer pays $110. Businesses registered for GST collect that 10% on their sales and send it to the ATO. What stops the tax from stacking up at every step is the input tax credit: businesses claim back the GST they paid on their own purchases, so only the value they add is taxed.
A short example makes this concrete. A manufacturer buys raw materials for $110 (including $10 GST) and sells the finished product to a retailer for $220 (including $20 GST). The manufacturer remits $10 to the ATO — the $20 collected minus the $10 already paid. The retailer sells the product to a customer for $330 (including $30 GST) and remits $10 ($30 collected minus $20 paid). At each step, only new value is taxed. The consumer at the end of the chain pays the full $30 embedded in the price and cannot claim it back.
What GST Applies To
GST covers a broad sweep of transactions. Retail purchases, professional services such as legal or accounting advice, imported goods, and most commercial activities carry the 10% tax. New residential properties and commercial property sales or leases are also taxable when the seller is GST-registered.2Australian Taxation Office. GST and Residential Property3Australian Taxation Office. Commercial Residential Property If you buy a newly built home, the price includes GST, and the buyer is often required to pay a withholding amount directly to the ATO at settlement rather than to the developer.
GST-Free Goods and Services
Some goods and services carry no GST. Businesses selling them don’t add the 10%, but they can still claim input tax credits on their related purchases. The ATO’s GST-free list is wide:4Australian Taxation Office. GST-free Sales
- Most basic food: fresh fruit and vegetables, bread, meat, dairy, and similar staples. Prepared meals, confectionery, and restaurant food are not GST-free.
- Medical services provided by doctors, plus a defined list of allied health services (dental, chiropractic, physiotherapy, psychology, optometry, and others) when performed by a recognised professional and considered necessary treatment.5Australian Taxation Office. Other Health Services
- Some education courses, course materials, and related excursions.
- Goods and services exported from Australia.
- Some childcare services, water and sewerage, certain medicines and medical aids, menstrual products, precious metals, farmland, sales of businesses as going concerns, and international transport.
The health exemption trips people up because it only covers services on a specific list. Remedial massage, for instance, is not a listed health service, so it attracts GST even when a qualified therapist provides it.
Input-Taxed Supplies
Input-taxed supplies look like GST-free supplies at a glance because neither includes GST in the price. The important difference is that businesses making input-taxed supplies cannot claim input tax credits for the GST they pay on related purchases. That GST becomes a real cost the business absorbs.6Australian Taxation Office. Input-taxed Sales
The two most common input-taxed categories are financial services (lending money, providing credit for a fee) and residential property, meaning renting out or selling an existing home. If you’re a landlord, the rent you charge doesn’t include GST, but you also can’t claim back the GST on repairs, maintenance, or management fees. Selling an existing home is input-taxed as well, which is why established residential properties don’t carry GST for the buyer but do create unrecoverable GST costs for the seller’s related expenses.
Imports and Digital Products
Since 1 July 2017, overseas businesses selling digital products and services to Australian consumers have been required to register for GST and charge the 10% the same way a local business would.7Australian Taxation Office. GST on Imported Services and Digital Products This covers streaming subscriptions, e-books, apps, online games, software, distance learning courses, and services such as online dating or overseas legal and accounting advice.
For physical goods, the rules turn on value. Goods imported in a consignment with a customs value of $1,000 or less generally don’t attract GST or customs duty at the border, with alcohol and tobacco as exceptions. Consignments over $1,000 have GST, customs duty, and other charges payable by the importer at the time of import.8Australian Taxation Office. GST and Australian Businesses – Imported Services, Digital Products
Who Has to Register for GST
You must register for GST if your business has a GST turnover (gross income minus GST) of $75,000 or more per year.9Australian Taxation Office. Registering for GST Non-profit organisations get a higher threshold of $150,000. Two other situations trigger mandatory registration regardless of turnover: starting a new business where you expect to hit the threshold in the first year, and providing taxi or limousine travel, including ride-sourcing services such as Uber or DiDi.10business.gov.au. Register for Goods and Services Tax
If your turnover falls below $75,000, registration is optional, but once you register you generally must stay registered for at least 12 months. The main draw of voluntary registration is input tax credits. For a business spending heavily on setup costs with little early revenue, the credits can exceed the GST collected on sales and produce a refund. Registration can also help when your clients are themselves GST-registered businesses or government agencies that prefer registered suppliers, because the GST you charge them isn’t a real cost to them.
If your turnover drops below $75,000 you can choose to cancel your registration. If you stop trading entirely, you must cancel within 21 days.11Australian Taxation Office. Check Your GST Registration as the Year Wraps Up After cancellation you can no longer charge GST or claim input tax credits.
Reporting Through the BAS
Once registered, your main ongoing job is lodging a Business Activity Statement (BAS) with the ATO. The BAS reports the GST you collected on sales, the input tax credits you’re claiming on purchases, and the net amount you owe or are owed.
How often you lodge depends on turnover. Businesses with a GST turnover of $20 million or more must report monthly. Below that threshold, you can choose monthly, quarterly, or annually.12Australian Taxation Office. Monthly GST Reporting Quarterly is the most common choice for small and medium businesses. The ATO can direct a business to report monthly if it has a history of compliance problems.
Alongside each BAS you need to issue proper tax invoices for taxable sales. If a customer requests a tax invoice you must provide one within 28 days, unless the sale is $82.50 or less including GST. For sales under $1,000, the invoice must show seven details: that it’s intended as a tax invoice, the seller’s identity, the seller’s ABN, the date, a description of the items and price, the GST amount, and which items are taxable.13Australian Taxation Office. Tax Invoices You must keep GST records for five years from when you prepared or obtained the record, or completed the transaction it relates to, whichever is later.14Australian Taxation Office. GST Records – Business
Where the Revenue Goes
GST revenue doesn’t stay with the Commonwealth. The entire GST pool is distributed to Australia’s state and territory governments each year. The Commonwealth Grants Commission, an independent body, recommends how to divide it based on each state’s economic, social, and geographic circumstances.15Commonwealth Grants Commission. Guide to the 2026-27 GST Distribution The aim is to let all states provide broadly the same standard of government services regardless of their individual capacity to raise revenue.
Each state receives a share based on its assessed needs relative to its population. A state with a GST relativity of 0.85, for instance, receives 85% of what it would get under a simple equal-per-person split. Under legislation passed in 2018, no state’s relativity can fall below 0.75, and from the 2026-27 update onward, no state receives less than the lower relativity of New South Wales or Victoria. Because the total pool is fixed, any increase to one state’s share reduces what others receive. The distribution is one of the more politically contested pieces of Australian fiscal policy and is renegotiated periodically.