Clearing up the confusion: a guide to GST free items for your business

Managing GST is a core part of running an Australian business, but not every sale carries the standard 10% charge. Knowing which items are GST free is essential for keeping your books accurate and your prices fair.

What counts as GST free?

The ATO classifies several categories as GST free. This means you do not charge GST to your customers, yet you can still claim GST credits on your business purchases related to making those sales. Common examples include:

Basic food: Most food for human consumption is GST free (such as milk, bread, eggs and fresh fruit), though there are exceptions for prepared or hot food.

International Services: Many international software providers or services don’t charge GST.

Education: Recognised education courses such as school, TAFE and university programs.

Exports: Goods sent from Australia to an overseas destination.

Common traps

Even with these categories, it is easy to trip up on the finer details. Many businesses accidentally claim GST credits on expenses that never included it to begin with, such as bank fees, interest charges or government fees like ASIC renewals and council rates. Another common error is registration charges from your road authority - these are made up of several components, some of which are GST free. Similarly, it is important to remember that the stamp duty component of an insurance premium does not include GST and should be coded separately in your software.

Another common trap involves items that change tax status based on how they are sold. While a bag of fresh apples is GST free, a fruit platter or a hot meal is usually taxable. You also need to be careful with international software or services.. you cannot claim a GST credit if the overseas provider hasn’t actually charged you Australian GST on their invoice.

Why categorisation matters

Getting your tax codes right is about more than just tidy folders. If you incorrectly charge GST on a GST free item, you are overcharging your clients. On the flip side, if you fail to charge GST on a taxable item, that 10% cost comes out of your own profit when it is time to lodge your BAS.

Correct coding also keeps you compliant. The ATO looks for consistency, so mistakes in your GST free reporting can lead to unnecessary reviews or penalties. By ensuring your items are mapped correctly from the start, you can trust your financial reports and save yourself hours of manual corrections at the end of the quarter.

If you are feeling unsure about your GST coding or just want a professional eye to check your file before the next lodgement, reach out to us. We are here to help you get your numbers right.

This information is intended to be general in nature and is not personal financial advice. It does not take into account your objectives, financial situation or needs. Before acting on any information, you should consider the appropriateness of the information provided in relation to your own circumstances.