How to Work Out GST: Practical Examples and Tips for Australians

Why Getting GST Right Matters for Your Business

GST is a part of daily business life in Australia, and getting your calculations right is important for your records, invoices, and compliance. Mistakes can lead to confusion, incorrect invoicing, or even trouble with the tax office. Knowing the right formulas and how to use them helps you stay on top of your finances and gives you peace of mind.

Let’s look at the simple ways you can calculate GST, whether you’re adding it to a price, finding out how much GST is included, or working out the original price before GST was added.

The Basics of GST Calculation

When you’re running a business, you’ll often need to add GST to your prices, figure out how much GST is in a total, or remove GST to find the base price. Here are the straightforward formulas you’ll use.

How to Add GST to a Price

If you have a price that doesn’t include GST and you want to work out the total price with GST, multiply the original price by 1.1. For example, if your base price is $100, the GST-inclusive price is $100 × 1.1, which equals $110.

Finding the GST Amount in a Total Price

To find out how much GST is included in a GST-inclusive price, divide the total amount by 11. So, if your total price is $110, the GST component is $110 ÷ 11, which equals $10.

Removing GST to Find the Original Price

If you have a GST-inclusive amount and want to know the price before GST was added, divide the total by 1.1. For example, $110 ÷ 1.1 equals $100.

GST Calculation in Real Business Situations

Applying these formulas is easier when you see how they work in real situations. Here are some practical examples that show how GST calculations come up in everyday business.

Setting Retail Prices

Imagine you sell a product for $500 before GST. If you want to add a 40% markup before GST, first calculate the new price: $500 plus 40% of $500, which is $700. Then, to add GST, multiply $700 by 1.1, giving you a GST-inclusive price of $770. The GST amount in this case is $70.

Invoicing for Services

Suppose you charge $85 an hour for consulting, not including GST, and you work 10 hours. Your total before GST is $85 × 10, which is $850. Adding GST, $850 × 1.1 equals $935. So, your GST-inclusive invoice is $935, with $85 of that being GST.

Finding GST in a Supplier Invoice

If you receive an invoice for $264 (GST included), you can find the GST by dividing by 11. That’s $264 ÷ 11, which is $24. The original price before GST was added is $240.

GST-Free and Taxable Purchases

Let’s say your supermarket buys $1,100 worth of goods: $900 for taxable items and $200 for GST-free products (like basic food). To find the GST on taxable sales, divide $900 by 11, which is $81.82. This is the amount you can claim as a GST credit.

To avoid missing out on valuable GST credits or making costly errors with your business claims, read our article on How to Maximise GST Credits.

Common GST Calculation Mistakes to Avoid

Even experienced business owners can make mistakes when working out GST. Here are some common issues to double check:

Subtracting GST Incorrectly

Don’t just subtract 10% from a GST inclusive price to find the GST exclusive price. Use the correct GST formula: divide by 1.1.

Not Identifying GST Free or Input Taxed Items

Some goods and services are GST free or input taxed. Make sure you only calculate GST on taxable sales, not on exempt or GST free items.

Rounding Errors

When calculating GST for multiple items, work out the GST for each item first, then add them together before rounding. This helps avoid errors in the total GST amount.

Missing or Incomplete Tax Invoices

You need valid tax invoices to claim GST credits. Make sure your invoices show the GST amount, your ABN, and other required details.

Lodging Your BAS and Paying GST

If your business is registered for GST, you need to report and pay GST to the Australian Taxation Office using a Business Activity Statement (BAS). Here are the main steps:

• Work out your net GST by subtracting GST credits from GST collected.

• Submit your BAS on time. The due date depends on whether you report monthly, quarterly, or annually.

• Keep all tax invoices and receipts for at least five years.

• Use a GST calculator or accounting software to help with your calculations and BAS preparation.

If you need help lodging your BAS correctly or fixing mistakes, check out our article about How to Lodge BAS Correctly: Avoiding Common Mistakes.

Helpful Tools for GST Calculations

There are several ways to make GST calculations easier and more accurate.

• Online GST Calculators – You can use a GST calculator, like the one on the ATO or MoneySmart website, to quickly calculate GST, find the GST amount, or check if GST is included in a price.

• Accounting Software – Accounting software can automate GST calculations, issue GST invoices, and help you claim GST credits. This is especially useful for small business owners and sole traders.

• Spreadsheet Templates – A simple spreadsheet can help you track GST on sales, purchases, and payments, making it easier to calculate GST for your BAS.

Tips for Managing GST Efficiently

Here are some practical tips to help you stay on top of your GST obligations and avoid penalties:

• Keep GST collected in a separate account, so you have enough to pay GST when your BAS is due.

• Check if your GST turnover has changed. If you need to register for GST or update your GST registration, do it promptly to avoid issues.

• You can account for GST on a cash or accrual basis. Many small businesses find the cash method easier, as you only pay GST when you receive payment.

• If you’re unsure about GST calculations, GST free items, or how to claim GST credits, talk to a registered tax agent. Getting advice can help you avoid mistakes and face penalties.

To avoid missing important BAS lodgment deadlines and risking penalties, read our article on BAS Due Dates for a clear overview of all the key reporting dates.

Conclusion

Knowing how to calculate GST is essential for anyone dealing with goods and services in Australia. By using the right GST formula, understanding GST exclusive and GST inclusive prices, and keeping good records, you can manage your GST obligations with confidence.

Remember to double check your GST calculations, use a GST calculator or accounting software when needed, and keep all your tax invoices. Whether you’re adding GST to your prices, working out the GST amount in a total price, or preparing your BAS, these practical tips will help you stay compliant and avoid unnecessary stress.