Goods and services tax (GST)

Definition

Goods and services tax (GST) is a broad-based consumption tax imposed on the supply of most goods and services consumed within Australia. 

What is the goods and services tax?

GST applies to most goods and services sold or consumed in Australia, including imports. This includes sales of goods, provision of services, leases, and hire-purchase agreements. Certain supplies, such as basic food items, some medical and health services, and exports, are GST-free, meaning GST does not apply to them.

The current rate of GST is 10%, which is applied to the taxable value of goods and services supplied. The taxable value is usually the selling price, excluding GST. 

Businesses with annual revenue over $75,000 are required to register for GST. Once registered, businesses must charge GST on their taxable supplies and remit the collected GST to the Australian Taxation Office (ATO) through their business activity statements (BAS). 

GST is generally borne by the end consumer, as businesses pass on the cost of GST to their customers through higher prices. However, businesses can claim input tax credits for GST paid on their purchases, which helps reduce the burden of GST on business-to-business transactions.

GST is a significant source of revenue for the Australian government, which is used to fund government programs and services, including healthcare, education, infrastructure, and social welfare.

Example of goods and services tax

Sarah purchases a new laptop from an electronics store for $1,000. As GST is applicable to most goods sold in Australia at a rate of 10%, the final price includes the GST component.

Original price of laptop: $1,000

GST calculation: $1,000 x 10% = $100

Total price paid by Sarah: $1,000 (original price) + $100 (GST) = $1,100

Sarah pays a total of $1,100 for the laptop, which includes $100 in GST. The electronics store collects the GST component and remits it to the Australian Taxation Office as part of its GST obligations.