GST is a broad based consumption tax, generally charged at 10% on most goods and services consumed in Australia.

GST was introduced on 1 July 2000 and replaces wholesales sales tax and a number of State indirect taxes.

The effects of GST are felt by all the links in the chain of production. However, it is the consumer who ultimately bears the cost of the GST.

The supplier acts as the tax collector and is required to account for the GST to the Australian Tax Office [ATO]. The supplier who is registered for GST is able to offset GST collected on supplies made against GST paid on acquisitions.

Example: Taxable supply – How does it work

In this example an undergraduate has purchased a book from the University bookshop for $110. The price of the book includes GST of $10 which has already been paid over to the ATO as follows:
  University book shop $4
  Printer $4
  Textbook author $2
For each link in chain before the undergraduate, there is no monetary effect from the inclusion of GST. Both before and after GST the revenue earned would be:
  University book shop $20   profit $20
  Printer $60   profit $40
  Textbook author $100   profit $40
There could potentially be a cash flow difference depending on whether the supplies are made in the same GST period [see “What is a Business Activity Statement and when should it be completed?’]. It is the consumer, the undergraduate in our example, who is bearing the additional cost of the GST.

To calculate the GST included in a price, multiply the price by 1/11 e.g. in the example above the GST included in the price of the chair is $165 x 1/11 = $15..