What's GST-free
The main categories, in short:
- Basic food: bread, milk, fresh fruit and vegetables, meat. Prepared, hot and takeaway food is taxable.
- Most health services from a recognised health professional, where the service is generally accepted as necessary treatment.
- Most education courses from recognised providers.
- Childcare from an approved provider.
- Exports: goods that leave Australia within 60 days, and most services for clients outside Australia. GST for overseas clients has the detail.
Everything else you sell is taxable unless a specific rule says otherwise. If you're not sure about an item, the ATO's GST-free pages go through each category.
GST-free isn't the same as input-taxed
- GST-free: no GST on the sale, and you can still claim the GST credits on what you bought to make it.
- Input-taxed: no GST on the sale, and no GST credits either. That's mostly financial services and residential rent, so a sole trader rarely meets it, except when renting out a house.
- Not registered: no GST on anything you sell. None of this applies until you register.
How to show it on a tax invoice
- Mark each GST-free line: "GST-free" in the description, or an asterisk with a key such as "* GST-free".
- Work out the GST on the taxable lines only, and show the GST amount.
- Show the total.
- Don't rely on "Total price includes GST" by itself. On a mixed invoice the GST isn't one-eleventh of the total, so the statement doesn't tell your client how much GST they can claim.
If every item on the invoice is GST-free, you don't need a tax invoice at all: a plain invoice with your ABN does the job.
Worked example
Sam is a physiotherapist and is registered for GST. A client pays for a consultation, which is GST-free, and buys a foam roller, which is taxable.
| Amount | |
|---|---|
| Physiotherapy consultation, GST-free | $95.00 |
| Foam roller | $40.00 |
| Subtotal | $135.00 |
| GST on the taxable item | $4.00 |
| Total | $139.00 |
The GST is $4.00, not one-eleventh of the total ($12.64), which is why the invoice shows the amount instead of saying "Total price includes GST".
On your BAS
Most small businesses use Simpler BAS. GST-free sales go into your total sales at G1, and only the GST on your taxable sales goes into GST on sales at 1A. You still claim the GST credits on the purchases behind your GST-free sales at 1B.