How GST Affects Your Small Business Pricing in 2025-26

What is GST and when do you need to charge it?

GST (Goods and Services Tax) is a 10% tax on most goods, services and other items sold or consumed in Australia. If your business has a GST turnover of $75,000 or more ($150,000 for non-profits), you must register for GST. You can also choose to register voluntarily if your turnover is below that, which can let you claim credits for GST paid on business purchases.

Once registered, you add 10% to most sales and remit that to the ATO through your Business Activity Statement (BAS), usually quarterly. You also claim back the GST you’ve paid on eligible business expenses, which is called an input tax credit.

Understanding how GST flows through your pricing is essential, because it affects your profit margins, your cash flow and how your prices compare to competitors. Get it wrong and you could either undercharge (eating into profit) or overcharge (losing sales).

What’s taxable and what’s not (in 2025-26)

Most supplies are taxable, but there are important exceptions. Here’s a quick rundown:

Taxable (GST applies):

• Most goods and services sold to consumers
• Digital products and downloads
• Imported services and digital products (from overseas suppliers)
• Rent from commercial property (usually)
• New residential property (but not existing homes)

GST-free (no GST charged, but you can still claim credits):

• Basic food (like milk, bread, fruit, vegetables)
• Some education and medical services
• Exported goods and services
• Certain charitable supplies

Input-taxed (no GST charged, and you can’t claim credits on related costs):

• Residential rent
• Financial supplies (like interest on loans)
• Some precious metals

If you sell a mix, you need to apportion your input tax credits. For example, a property investor who rents out a residential unit (input-taxed) can’t claim GST on the mortgage interest, but can claim GST on property management fees for a commercial property that is taxable.

How to price with GST included

Most Australian businesses advertise prices “including GST” to consumers. That means the sticker price is 110% of your pre-GST price. To work out your actual revenue, divide the total by 11. For example:

• You sell a service for $110 (including GST)
• GST component = $110 ÷ 11 = $10
• Your revenue = $100

If you’re setting prices from scratch, decide on your desired pre-GST price and multiply by 1.1. So a product that costs you $50 to make and you want a $50 margin -> pre-GST price $100 -> sell at $110.

For business-to-business sales, you might quote prices exclusive of GST and note ”+ GST” on invoices. That’s fine as long as both parties are registered. But for consumer sales, you must show GST-inclusive prices in most circumstances.

Using the GST calculator to avoid pricing mistakes

Our free GST calculator lets you quickly switch between GST-inclusive and GST-exclusive amounts. You can use it to:

• Work out the GST component of a sale (divide by 11)
• Add GST to a pre-tax price (multiply by 1.1)
• Check your BAS figures before you lodge

For example, if you’re invoicing a client for $2,200 including GST, the calculator shows the GST is $200 and your taxable supply is $2,000. That’s exactly what you’ll report on your BAS.

Many small businesses make errors because they simply add 10% to the sale price and think that’s GST. But if you sell something for $100 and add 10%, you’re actually charging $110 and the GST is $10 - that’s correct. But if you receive $110 and think GST is $11, you’d be over-remitting. The calculator helps you avoid that common mistake.

Common GST mistakes and how to avoid them

Here are the typical traps that trip up small businesses:

• Not registering on time – If your turnover hits $75,000, you must register within 21 days of reaching that threshold. Late registration can mean backdated GST liabilities.
• Claiming GST on personal expenses – You can only claim input tax credits on business purchases. Mixing personal and business use? Only claim the business portion.
• Forgetting about non-deductible items – You can’t claim GST on things like entertainment, most food and drink for staff, or penalties and fines.
• Ignoring the margin scheme – For property developers, the margin scheme can reduce GST on the sale of new residential premises. Get advice if this applies to you.
• Mixing up cash vs accrual accounting – Most small businesses use the cash basis for GST (record when money changes hands), but if you choose accrual, you must record when the invoice is issued. Stick to one consistently.

How GST affects your cash flow

GST can create a cash flow squeeze if you’re not prepared. When you make a sale, you collect the GST and hold it until your BAS is due. But you might also have to pay GST on purchases that you haven’t yet claimed back. Here’s a typical cycle:

• You invoice a client $1,100 (including $100 GST)
• You record $100 GST payable to the ATO
• You buy supplies for $550 (including $50 GST)
• You claim $50 as an input tax credit
• Net GST payable = $50

If you’re on quarterly reporting, you pay that net amount to the ATO by the due date. If you don’t set aside the GST portion from each sale, you can find yourself short when the BAS comes due. A simple habit: transfer the GST component of every sale into a separate savings account.

Also, if you use the cash basis, you only account for GST when you actually receive payment. That can help if your customers are slow payers, but it means you can’t claim input tax credits until you’ve paid your suppliers either.

Plan for GST from day one

Whether you’re starting a side hustle or running an established business, GST should be part of your pricing strategy from the start. If you’re not registered, you can’t add GST to your prices, so your prices are effectively 10% cheaper than a registered competitor – but you also can’t claim credits, which may make your inputs more expensive.

Once you’re registered, use the GST calculator to double-check every quote and invoice. It takes seconds and prevents costly errors. And if you’re ever unsure whether a supply is taxable, check the ATO’s GST guidelines or talk to a tax professional.

This is general information only, not financial advice.