To become an expert in the types of GST sales that you can make as a small business in Australia, please read on! We’re going to be looking at the three types of sales you can make for GST purposes: taxable sales, GST free sales, and input taxed sales
What are taxable sales?
Sales of goods and services in Australia that must include GST in their price are referred to as ‘taxable sales’.
As a business, you make a taxable sale if you’re registered or required to be registered for GST. There are some conditions:
- You must make the sale for the purposes of payment (excludes bartering).
- You’re making the sale in the course or continuance of your business.
- The sale is ‘connected with Australia’ (more on this later).
If you’re making a taxable sale, you must include GST in the price of your sale and this should also be reflected in your tax invoices.
However, you can claim GST credits for purchases you used to make these taxable sales. These are called ‘inputs’.
For example, if you sell printed t-shirts, you can claim credits for the materials and tools (plain cotton t-shirts, printing equipment) you used to create the t-shirts, assuming you paid GST on these ‘inputs’.
See below for a cheat sheet on working out whether a sale is a taxable one:
GST also applies to business assets that you might trade in or otherwise dispose of by transferring ownership. This is deemed to be a sale made for payment.
Examples of taxable sales
Let’s say you sell jewellery online through your eCommerce store. GST must be included in the price of the jewellery you sell if you’re registered, or required to register, for GST.
What you’ll need to do when making such a sale:
- Include GST in the price.
- Issue a tax invoice to the buyer indicating GST was paid.
- Pay the GST you received when you lodge your business activity statement (BAS).
If you aren’t sure how much GST you should include in the price, check our article to learn how to calculate GST.
Sales of goods are connected to Australia if they are:
- delivered or made available in Australia to the purchaser
- removed from Australia
- brought to Australia.
Sales of property must be within the country and include:
- land and buildings
- interest in land
- rights over land
Sales of something other than goods or property are connected to Australia if:
- the thing is done in Australia
- the seller makes the sale through a business they carry on in Australia
- the sale is of a right to purchase something that would be connected with Australia.
GST free sales
You cannot include GST on GST free sales (but you can still claim credits for the GST included in the price of taxable purchases, or inputs, you use to make these types of sales).
Things that are GST free include:
Input taxed sales
What are input taxed sales?
Certain goods and services can be sold without including GST in the price. Despite the usual fact that GST was included in the price of the business-related expenses or inputs used to make or supply the goods in question, with an input taxed sale you cannot claim GST credits.
The inability to claim GST credits is what differentiates an input taxed sale from a GST free sale.
Since the product you’re selling doesn’t contain GST in the sale price due to its nature (or you’re not required to include GST due to being under the GST threshold), you’re not allowed claim GST credits for the inputs used to create the sale. This is the nature of an input taxed sale.
Common input taxed sales include, but are not limited to:
- financial sales
- supply of residential premises via rent or sale
- precious metal supplies
- fundraising events by charities
- sales by a business not registered for GST
For more detail on GST, please refer to the Australian Government’s GST for small business guide.
