GST for Tradies: A Plain-English Explainer

What Is GST?

GST (Goods and Services Tax) is a 10% tax added to most goods and services sold in Australia. If your business earns $75,000 or more per year, you must register for GST. Once registered, you collect GST from your customers and send it to the ATO — but you can also claim back the GST you pay on your business expenses.

Do You Need to Register?

You must register for GST if your annual turnover is $75,000 or more (or $150,000 for non-profits). Even if you're under this threshold, you can choose to register voluntarily — which may benefit you if you have significant business expenses.

How GST Works in Practice

Let's say you quote a job for $1,000. If you're registered for GST:

• You charge the client $1,100 (your $1,000 + $100 GST)
• You collect that $100 on behalf of the ATO
• You can also claim back the GST on things you buy for the job

At BAS time, you pay the ATO the difference between the GST you collected and the GST you paid.

What is a BAS?

A Business Activity Statement (BAS) is the form you lodge with the ATO to report and pay your GST (and sometimes PAYG withholding). Most small tradies lodge quarterly. You can do it through your myGov account, accounting software, or via your accountant.

GST-Free vs GST-Exempt Items

Not everything attracts GST. Some items are GST-free, such as basic foods and some health services. As a tradie, most of your income and expenses will have GST, but it's worth knowing the exceptions.

Tips for Staying on Top of GST

• Set aside 10% of every invoice payment into a separate "tax account"
• Use accounting software that calculates GST automatically
• Never miss a BAS lodgement — penalties apply
• Reconcile your accounts regularly, not just at BAS time

GST in Plain English — The Basics

GST (Goods and Services Tax) is a 10% tax added to most goods and services sold in Australia. If you are registered for GST, you add 10% to your invoices, collect it from clients, and then pay it to the ATO quarterly through your BAS — minus any GST you paid on your own business expenses.

GST Registration Threshold — $75,000

You must register for GST when your annual turnover hits $75,000. Once registered:

• Add 10% GST to every invoice
• Lodge a BAS every quarter (or monthly if turnover is high)
• Claim back GST you paid on business purchases
• Keep tax invoices for all purchases over $82.50

The GST Maths — Real Example

## How to Calculate and Claim GST on Your Tradie Invoice Once you're registered for GST, your invoicing process changes slightly — and getting it right matters, because the ATO audits tradie businesses regularly. Here's the practical reality: you need to charge GST on your labour and materials, then pass that 10% to the ATO quarterly. **Setting up your invoice correctly:** When a customer asks, "How much for a full rewire?" and you'd normally charge $2,200, your GST-registered price becomes $2,420 (that's $2,200 plus $220 GST). The customer pays $2,420 total. You keep the $2,200 and send $220 to the ATO. Every invoice you issue must include: - Your ABN - The date of the invoice - A clear GST amount (or clearly stated as GST-inclusive) - The customer's details - A description of work completed - The price excluding GST, the GST amount, and the total The sneaky part that catches tradies out: if you haven't clearly separated the GST on your invoice, the ATO might not accept your claim. Use invoicing software like Tradify that automatically formats this correctly — it saves hours each quarter and keeps you compliant. **What you can claim back:** This is where GST gets interesting for your cash flow. You claim back the GST you pay on: - Materials and tools - Vehicle expenses (fuel, servicing, repairs — at 88c/km or actual expenses) - Equipment rental - Subcontractors (if they're GST-registered) - Uniforms and safety gear - Insurance premiums - Software subscriptions - Training courses You **cannot** claim back GST on: - Personal expenses mixed with business - Meals and entertainment - Vehicle depreciation (only actual expenses count) - Fines or penalties Keep every receipt. The ATO expects GST-registered businesses to have documentation for every claim. A receipt from Bunnings for $110 (inc. GST)? You can claim back the $10 GST component. A fuel receipt for $65? Claim the $5.91 GST. Over a year, these add up substantially. **When you have a GST liability:** Some quarters you'll owe the ATO money. Other quarters, especially if you've had big material purchases or equipment costs, you might get a refund. Here's a real example: - GST collected from customers: $4,500 - GST paid on expenses: $3,200 - You owe the ATO: $1,300 Conversely: - GST collected: $2,800 - GST paid on expenses: $4,100 - The ATO owes you: $1,300 (credited to your next quarter) This is normal. Don't panic about owing money — it means you're earning. Just budget for it. ## Managing Cash Flow Around GST Payments Here's what the accountants don't always mention: GST is a cash flow killer if you're not prepared. You collect GST from customers but don't send it to the ATO for three months. That money sits in your account, and it's tempting to spend it on a new impact driver or to pay yourself a bit extra. Then quarter-end arrives, and you owe $3,500 to the ATO. If you've spent that money, you've got a problem. **The tradie solution:** Set up a separate savings account — even just a spare offset account linked to your home loan. Every time you invoice a customer for GST, transfer 10% to this account immediately. Or automate it: if you use Xero, you can set up rules that automatically set aside GST amounts. By the time your GST quarter is due, the money's already separated and ready. No stress, no scrambling to find funds, no unpleasant chats with your accountant. **Payment timing:** GST is due by the 21st of the month following the end of the quarter. Your quarters end on 30 June, 30 September, 31 December, and 31 March. So if it's a June quarter, your return is due by 21 July. File and pay late, and penalties kick in immediately. The ATO doesn't mess around here — they charge interest on overdue amounts plus penalties. Just pay on time. ## GST Registration: Quick Comparison | **Factor** | **Turnover Under $75k** | **Turnover $75k+** | |---|---|---| | **GST Registration** | Optional (you can choose) | Mandatory | | **Collect GST** | Only if you register voluntarily | Yes, on all invoices | | **Claim back GST** | Only if registered | Yes | | **Admin load** | Minimal | Quarterly BAS to ATO | | **Customer impact** | Charge lower prices (no GST) | Prices are 10% higher | | **Cash flow** | Simpler | Requires management | | **When to consider registering early** | Heavy equipment purchases, B2B clients, planning growth | Not applicable | **Quick tips:** - If you're near the $75k threshold, register early — claiming back GST on a $15,000 equipment purchase immediately helps - If you're under $75k and mostly do residential work, staying unregistered keeps prices competitive - If you do commercial work, customers expect GST anyway; registration makes you look more professional ## FAQ: GST Questions Tradies Ask