Is it true some things are exempt from GST?

HomeBlogIs it true some things are exempt from GST?

GST can be very confusing for businesses in Australia, especially if your company is in the business of importing and exporting. Read on to consider whether the goods and services you offer are exempt from GST. 

What is GST?

Goods and Services Tax (GST) is the tax on goods and services sold in Australia for consumption. The tax is included in the final sale amount in Australia, unlike other countries, and is collected and passed on to the government by the seller of the good or service. 

How much is GST?

GST in Australia sits at 10% of the price of the good or service. Thus, for business owners, a charge on one-eleventh of the sale price from a customer’s purchase will be paid to the ATO. 

What is the purpose of GST?

GST legislation was created in June 1999 and came into effect on 1 July 2000. The purpose of this legislation was to simplify the existing sales tax system by overhauling state and territory taxes with a single, 10% tax.

What is exempted from GST?

GST exemptions can be provided by the GST Act, and the exemptions listed by the Australian Taxation Office (ATO) include:

  • Exports
  • Some medical, health and care services
  • Some medicines
  • Most basic food
  • Some childcare services
  • Some education courses
  • Sales through duty-free shops
  • Grants of land by government
  • Water, sewerage and drainage
  • Some religious and charitable activities
  • Farmland
  • Precious metals
  • Cars for disabled people to use (pending meeting certain requirements)
  • International transport
  • Some menstrual products
  • Supplies of accomodation and meals to residents of retirement villages (pending meeting certain requirements)
  • International mail
  • Some telecommunication supplies
  • Eligible emission units
  • Sales of businesses as going concerns

What is included in GST?

Many items sold, imported and consumed in Australia are included in the GST tax. If your business is required to be registered for GST, you must collect this extra money from your customers/clients. 

Why are some items or services GST exempt?

Items such as those listed above are exempt from the GST tax which is collected by business owners on behalf of the ATO, as they are essential and need to remain affordable for Australians.

What is an input-taxed sale?

Input-taxed sales are sales of goods and services that do not include GST in their price. A business owner cannot claim GST credits for the GST included in the price of the ‘inputs’. The most common input-tax examples include financial supplies (such as lending money) and selling or renting out a residential property. This is explainable as these areas are technically difficult to tax and are not included as GST-free exemptions. 

What is the difference between input-taxed and GST free sales?

The ATO has set definitions regarding the difference between input-taxed and GST free sales, in which input-taxed sales are sales that attract no GST and are not allowed to be offset with GST on purchases in producing the goods or service sold. GST free sales are those which attract no GST however, they can be offset with the GST on purchases involved in producing the goods or service sold. 

How do I know if I have to pay GST if I am a business owner?

If you are a business owner registered for GST, you must charge one-eleventh of the sale price from your customers to pay to the ATO when it is due. You must register for GST if:

  • Your business has a GST turnover of +$75 000
  • Your non-profit organisation has a GST turnover of +$150 000
  • You provide taxi or limousine services
  • You wish to claim fuel tax credit for your business

Otherwise registration for GST is optional. 

What is a GST concession?

GST concessions apply and are available to not-for-profit organisations (NFP), which helps reduce their GST liability. The GST registration threshold for NFP organisations is $150 000. Further, additional GST concessions are available for Australian Charities and Not-for-profits Commission registered charities that are endorsed for GST concessions by the ATO, gift deductible entities and government schools. 

If you have any queries, or are unsure if your business is exempt from collecting GST tax, you should seek legal advice. Legal Kitz can direct you with your next step, in determining whether you have created a business in line with current regulations, or for any legal issues that may arise. Our Legal Kitz business specialists can assist with ensuring that your concerns are addressed, and can provide you with advice that is tailored to your situation. You can book a free 30-minute consultation via our website now.