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Use our free Australian GST calculator tool to work out the amount of GST that must be applied in your transactions. Want to know how to calculate GST on the go? Read on for the easy formula.
In Australia, we are legally required to pay GST on most items. This includes:
Certain items, such as basic food, health services, and education, are exempt from this tax. The money goes to the federal government and is then distributed to the states and territories to fund public services like healthcare, education and infrastructure. When you run your own small business and generate enough income, you are required to charge and collect GST. Juggling all these small details, on top of your actual work, can leave you feeling inundated and confused. You may find yourself asking: How do I calculate GST?
The standard rate of GST in Australia is 10%, which means that a 10% tax is applied to the price of most goods and services.
To determine the amount of GST to add on to a price (i.e. "How much GST should I charge?"), you can use this very simple formula:
For example, on a $100 product, we would do 100 x 0.10 = 10. Therefore, the GST is $10, and we now add back on to the original price. The new total price the customer must pay is $110 including GST.
If you want to find out how to calculate GST from the total amount (i.e. "How much GST have I already paid?"), you can reverse this calculation using the formula:
If we take that $110 product and do 110 ÷ 1.10 = $100, we now know that the original price excluding GST was $100.
Understanding these formulas ensures that you can quickly calculate the GST on any product or service. Just pick the appropriate formula depending on whether you're adding GST to the price or working backward from a total that includes GST.
Not sure if all this GST stuff applies to you? Read this blog post to learn whether your business is required to register for and pay GST.
Calculating GST is essential for several reasons. First and foremost, it is a legal obligation. Failing to do so can result in legal penalties, fines or audits from tax authorities. This money must be collected and paid regularly, dependant on the amount.
| GST turnover | How often you need to pay |
| Over $20 million | Monthly |
| Less than $20 million | Quarterly |
| Under $75,000, but you are registered for GST | Annually |
Calculating GST allows you to accurately fill your business activity statements (BAS). If you fail to calculate and report your GST properly, you may face penalties or fines from the Australian Taxation Office (ATO) during tax assessments.
Accurately calculating GST also ensures that you’re not inadvertently reducing your profit margin. If you calculate your GST incorrectly, you may end up underestimating costs. By ensuring accurate GST calculations, you can plan your budget correctly and have a better understanding of expenses and revenues.
Accurate GST calculation also helps you avoid tax-related errors such as double taxation, where tax is mistakenly applied twice on the same transaction. It also prevents situations where GST is not charged when it should be. These kinds of discrepancies can lead to issues in your bookkeeping and result in either overpaying tax (reducing your profit margins) or underpaying tax (and potentially receiving a penalty).
When you as a business purchase goods or services, you too pay GST on those items. However, you can reclaim GST through what is known as input tax credit. This means your business can recover the GST you paid when buying things, which helps lower the total amount of tax you owe. It ensures that businesses only pay GST on what they sell, not on the items they buy to run their business.
Does all this sound a bit too complicated for you? Give Darcy Bookkeeping a call at 1300 728 875 or drop us a line and have one of our experienced bookkeepers sort it all out for you. Learn more about our services here.
Transparency in pricing is another reason to include GST in your pricing structure. Doing so ensures your customers know exactly how much they are paying for your services and how much of the total amount goes towards tax. You also avoid surprising them with a higher price later. This is crucial for customers to see you and your business as trustworthy.
Many small business owners are so busy managing their daily operations that they don’t have time to accurately track GST. However, this oversight can be harmful to your business, as it may lead to lost revenue or even legal issues and potential fines. We at Darcy Bookkeeping & Business Services want to ensure you don’t lose any profits or face unnecessary fees due to confusing GST issues.
If you need help calculating and tracking your GST, don’t hesitate to reach out! You can send us a message or give us a call on 1300 728 875 to find out how we can help you manage your GST effectively.
Are you just starting off in business and want to make sure you plan properly? Start off on the right foot with our guide to business for beginners.
