You make a sale. You prepare the invoice. Then you stop and think: “Do I add 10% GST?” Not always. Some goods and services in Australia are GST-free. This means you generally don’t charge GST to your customer.
But there is an important part that many business owners miss. GST-free does not mean the sale is ignored for GST purposes. You may still be able to claim GST credits on eligible business purchases. So let’s make GST-free sales simple.
What Is a GST-Free Sale?
A GST-free sale is a sale where GST is not charged to the customer.
For example, you make a GST-free sale worth: $1,000.
You generally don't add another $100 GST.
The customer pays: $1,000.
So the invoice may show: Sale: $1,000.
GST: $0.
Total: $1,000.
That is the basic idea.
GST-Free Does Not Mean You Are Not Registered for GST
This is an important difference. You can be registered for GST and still make GST-free sales. In fact, a GST-registered business can have a mix of: Taxable sales, GST-free sales, Input-taxed supplies.
The GST treatment depends on what you are selling. So don’t assume: “There is no GST on this sale, so my business must not be registered.” That is not how it works.
What Are Some Common GST-Free Sales?
There are specific categories of goods and services that can be GST-free. Some common examples include:
- Certain basic food.
- Certain medical and health services.
- Certain education services.
- Certain childcare services.
- Exports of goods.
- Certain supplies related to international transport.
There are specific rules for each category. So just because something sounds like it should be GST-free doesn’t mean it automatically is.
Example: GST-Free Food
Imagine you run a business selling basic food products.
You sell eligible GST-free food worth: $500.
You generally don't add GST.
So: Sale: $500.
GST: $0.
Customer pays: $500.
But if you sell other products that are taxable, you may need to charge GST on those sales. This is why businesses selling food need to understand the GST treatment of individual products. Not everything sold by a food business is necessarily GST-free.
Example: GST-Free Health Services
Some health services can be GST-free when the relevant requirements are met.
Imagine you provide an eligible health service worth: $200.
You generally don't add $20 GST.
The customer pays: $200
But the GST treatment depends on the type of service, the provider and the circumstances. So don’t simply assume every health-related service is GST-free. The specific GST rules need to be checked.
What About Exports?
Exports are another important area. Certain exports can be GST-free. For example, an Australian business may sell goods to an overseas customer. If the relevant export requirements are satisfied, the business may be able to treat the sale as GST-free.
This means: Sale: $10,000.
GST: $0.
Customer pays: $10,000
But there are specific conditions that need to be met. So if you sell overseas, make sure you understand the export rules before treating the sale as GST-free.
Can You Claim GST Credits on GST-Free Sales?
This is one of the biggest differences between GST-free and input-taxed supplies. If you make GST-free sales, you generally don’t charge GST to your customer. But you may still be able to claim GST credits on eligible business purchases.
Let's say you make GST-free sales of: $20,000.
During the same period, you purchase eligible business supplies for: $5,500 including GST.
The GST included is: $5,500 ÷ 11 = $500.
If the purchase meets the relevant requirements, you may be able to claim the $500 GST credit.
So: GST-free sale: No GST charged. Eligible business purchase: GST credit may still be available. This is an important point to remember.
GST-Free vs Input-Taxed
These two are often confused. Both can mean you don’t charge GST to your customer. But they are not the same. With a GST-free sale, you generally don’t charge GST, but you may still be able to claim GST credits on eligible related purchases. With an input-taxed supply, you generally don’t charge GST and generally cannot claim GST credits for purchases that relate to making those supplies.
GST-free = No GST charged + GST credits may be available.
That difference can have a big impact on your BAS.
Input-taxed = No GST charged + related GST credits generally not available.
GST-Free Does Not Mean “GST Doesn’t Matter”
This is another common misunderstanding. You might make a GST-free sale. There is no GST on the invoice. So you think: “GST doesn’t apply to this transaction.”
But GST can still matter. The sale may still be relevant when calculating your GST turnover. It may also affect your GST reporting. And the expenses connected with the sale may still have GST credits attached to them. So GST-free does not mean “ignore GST”. It simply means GST is not charged on that particular supply.
What About GST Turnover?
This is especially important for businesses approaching the GST registration threshold. GST-free sales can generally still count towards your GST turnover.
For example, your business makes: Taxable sales: $50,000.
GST-free sales: $30,000.
You might think: “Only $50,000 is taxable, so I'm below the $75,000 GST threshold.”
Not necessarily. GST-free sales can still be included when working out GST turnover. So your GST turnover may be: $80,000. This could mean you need to review your GST registration obligations. The type of sale matters. But the fact that you didn’t charge GST does not automatically mean the sale is excluded from your turnover calculation.
Don’t Assume Everything Is GST-Free
This is probably the biggest trap. You sell something that seems essential. You assume it is GST-free. But GST law can be very specific. For example, with food, the treatment can depend on exactly what is being sold and how it is prepared or supplied.
The same applies to health, education and other categories. So before marking a product as GST-free in your accounting software, check the actual GST treatment. A wrong setting can create problems across hundreds of transactions.
What Should You Show on the Invoice?
If you make a GST-free sale, you don’t add GST to the price.
For example: Service: $1,000.
GST: $0.
Total: $1,000.
Your invoice should also meet the relevant invoicing requirements for the type of transaction. The important thing is to make the GST treatment clear. Your customer should not be left wondering: “Is GST included in this price?”
A Simple Example
Let's say you run a business that makes both taxable and GST-free sales.
During the month: Taxable sales: $10,000.
GST-free sales: $5,000.
You also have eligible business purchases containing: $1,000 GST.
For your taxable sales, you may collect: $10,000 × 10% = $1,000 GST.
The GST-free sales have: $0 GST.
If the $1,000 GST on your purchases is fully creditable, your simple GST position could be:
$1,000 GST collected − $1,000 GST credits = $0.
This is a simplified example.
Your actual BAS can include other amounts and adjustments. But it shows how GST-free sales and GST credits can work together.
A Simple Checklist
Before treating a sale as GST-free, ask:
1. What exactly am I selling?
2. Is this type of supply covered by a GST-free rule?
3. Do the specific requirements for that GST-free treatment apply?
4. Have I correctly recorded the sale in my accounting system?
5. Does the sale still count towards my GST turnover?
6. Can I claim GST credits on related business purchases?
These questions can help you avoid common GST mistakes.
The Bottom Line
A GST-free sale means you generally don’t charge GST to your customer. But that doesn’t mean GST disappears completely. You may still be able to claim GST credits on eligible business purchases. The sale may still count towards your GST turnover. And you need to make sure the sale actually qualifies as GST-free.
So the next time you prepare an invoice and think: “I don’t think I should charge GST on this.” Don’t just remove the GST and move on. Check why the sale is GST-free. Make sure the requirements are met. Record it correctly.
Because with GST, “GST-free” doesn’t mean “no GST rules apply.”