When you sell products or services it is important to know which products or services are GST free and which are not. Generally, there are three types of GST exemptions. These include, supplies outside the GST system, GST-free supplies, and input taxed supplies. To help you know whether your products fall into any of these categories, we have created this guide.
Supplies outside the GST system
The GST system does not apply in a combination of scenarios. These include supplies made prior to July 1st 2000, supplies made by unregistered entities, supplies made by businesses that are not required to be registered, or any transactions that have no connections to Australia. The Government is not liable to pay GST nor are transactions made between government agencies subject to GST.
A great example of supplies outside of the GST system would be the sale of a product at a garage sale. As the person who sold the product is not required to be registered for GST, the sale is GST free.
A GST-Free supply is one that exists in the GST system; however, the sale of the product is GST free. This means that the business can claim GST credits on the item.
Certain supplies are GST-free including staple foods like eggs. However, the sale of live animals is not GST free. So, a chicken farmer would not charge GST on their eggs but would pay GST when they purchased their chickens. The farmer would then claim a GST credit on those chickens.
Other GST-free supplies include:
- Cars for people with a disability
- Certain activities of charities
- Certain prepaid funerals
- Certain supplies under contracts made before 8 July 1999
- Certain transactions involving precision metals
- Child Care
- Crown Land
- Health and medical care
- International mail
- International travel and transportation of goods
- Sale of businesses
- Subdivisions of farmland for family residential purposes
- Supplies through inwards duty-free shops
- Water, sewerage and drainage
- Religious services
Input taxed supplies
No GST is required to be paid on items that are input tax. That does mean that a business cannot claim GST credits on GST related to that item.
So, a landlord whose business consists of renting private residential homes will be input taxed. The landlord will not charge GST on the rent; however, they cannot claim GST credits on the items they use to run the business.
Other input taxed supplies may include:
- Loans, dealings in money and the issue of securities
- Renting out a residential property
- The sale of residential properties
- Food at school tuckshops
- Some transactions involving precious metals
- Some fund-raising activities of charities
Sometimes an input taxed item will also be classified as GST-free. In this case the GST-free status takes precedent.
To claim GST tax credits, you need to be registered for GST. You can still register for GST even if you only sell GST-free products. The easiest way to register for GST is through GSTregister.com.au. All you will need to do is fill out a simple form and we will do the rest. Through GSTregister.com.au you can also backdate your GST registration to ensure that you can claim as many GST credits as possible.
If you have any further questions about GST-free goods or want to know more about GST registration, have a chat with us today!