A GST-free supply is one on which no GST is charged to the recipient, while the supplier remains entitled to claim input tax credits on the costs of making the supply. This is a key distinction from input-taxed supplies, where the supplier cannot claim those credits.
Main categories of GST-free supplies
- Basic food — fresh, unprocessed food (fruit, vegetables, meat, fish, eggs, milk, bread). Hot food and snack foods are taxable.
- Exports — goods physically exported from Australia and certain cross-border services.
- Health — most medical, allied health, and hospital services supplied by registered practitioners.
- Education — recognised courses and tuition at school, vocational, and higher education institutions.
- Childcare — registered childcare services.
- Religious services — supplies of a kind ordinarily supplied by certain non-profit religious organisations.
- Water and sewerage — supplies of water, sewerage, and drainage services to residential premises.
- Certain government charges — statutory fees and taxes imposed by law.
BAS reporting
GST-free sales are reported at label G3 on the BAS. They contribute to total GST turnover (G1) but have no GST component, so they do not increase the amount payable at label 1A. The supplier still includes the underlying purchases that relate to the GST-free supplies in G11, and claims the associated input tax credits at 1B.
Example
A dietitian charges $200 for a consultation. The supply is GST-free under the health services exemption. She reports $200 at G3 and $200 at G1, but nothing in 1A. She can still claim the GST on her clinic rent and supplies at 1B.
Common mistakes
- Treating mixed supplies (partly GST-free, partly taxable) as entirely GST-free without apportioning — for example, a meal kit with some basic food and some taxable snack items.
- Assuming all food is GST-free — hot takeaway food, confectionery, soft drinks, and snack foods are taxable.
- Failing to confirm that a health service is supplied by a registered practitioner; unregistered practitioners may not qualify.
If I make only GST-free supplies, do I need to register for GST?
Not necessarily — the registration threshold is based on GST turnover, not taxable turnover. However, if you do register voluntarily, you can claim input tax credits. Many exporters register specifically to claim back the GST on their Australian inputs.