02 The types of sales you make
This section describes the three types of sales you can make for GST purposes:
Taxable sales
You must pay GST on taxable sales that you make. You can claim GST credits for purchases you used to make these taxable sales.
You make a taxable sale if you are registered or required to be registered for GST and:
- you make the sale for payment
- you make the sale in the course of operating your business
- the sale is connected with Australia.
A sale is not a taxable sale if it is a GST-free or input taxed sale.
Some sales may be partly taxable and partly GST-free or input taxed. This is where a taxable sale can be separated into identifiable parts and one or more of those parts are GST-free or input taxed. These sales are called mixed supplies.
If you are registered or required to be registered for GST, sales of business assets such as office equipment and motor vehicles are usually taxable sales. GST also applies to business assets you trade in or otherwise dispose of by transferring ownership.
Sales for payment
For a sale to be taxable, it must be made for payment. This is usually monetary, but can be some other form of payment, such as:
- goods or services provided instead of money, as in barter transactions
- payment in the form of refraining from doing something.
Example: Non-monetary payment
A plumber who is registered for GST installs an electrician's new spa.
The electrician is also registered for GST and wires the plumber's new shed as payment for installing the spa.
Although no money changes hands, the:
- plumber must pay GST on the value of the spa installation they provided
- electrician must pay GST on the value of the electrical wiring service for the shed.
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For more information about paying GST where payment is in a form other than money, refer to GSTR 2001/6 - Goods and services tax: non-monetary consideration.
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Sales in the course of operating your business
This usually means that you provide the goods or services as part of conducting your business. It includes all sales of business assets, including items such as motor vehicles and office plant and equipment. It also includes things done in the course of setting up, or winding down your business.
Example
If your business provides electrical services and sells some electrical cable left over from a job for its copper content, the sale is part of your business activities. By contrast, if you decide to sell a private vehicle that is not used in the business, the sale is private.
Sales connected with Australia
A sale of goods is connected with Australia if the goods are any of the following:
- delivered or made available in Australia to the purchaser
- removed from Australia
- brought to Australia, provided the seller either imports the goods into Australia or installs or assembles the goods in Australia.
A sale of property is connected with Australia if the property is in Australia. For GST purposes, property includes:
- land
- land and buildings
- interest in land
- rights over land
- a licence to occupy land.
A sale of something other than goods or property is connected with Australia if any of the following apply:
- the thing is done in Australia
- the seller makes the sale through a business they carry on in Australia
- the sale is of a right to purchase something that would be connected with Australia.
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For more information about sales connected with Australia, refer to GSTR 2000/31 - Goods and services tax: supplies connected with Australia.
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GST-free sales
You do not include GST in the price of things you sell that are GST-free, but you can still claim credits for the GST included in the price of your taxable purchases you use to make these GST-free sales.
Things that are GST-free include:
- most basic food
- some education courses, course materials and related excursions or field trips
- some medical, health and care services
- some medical aids and appliances
- some medicines
- some exports
- some childcare
- some religious services and charitable activities
- supplying accommodation and meals to residents of retirement villages by certain operators
- cars for use by people with a disability, as long as certain requirements are met
- water, sewerage and drainage
- supplies of 'going concerns'
- international transport and related matters
- precious metals
- supplies through inward duty-free shops
- grants of land by government
- farmland
- international mail.
Example: GST-free sales
A farmer grows potatoes and sells them at the produce markets. The potatoes are GST-free as basic food so the farmer does not include GST in their price. The farmer can claim GST credits for the GST included in the price of purchases relating to potato growing, for example, fertiliser, fuel and freight.
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For more information about what sales are GST-free in the areas of:
- food, refer to:
- the GST food guide (NAT 3338), which contains an alphabetical list showing whether general food and drink products are taxable or GST-free
- GSTD 2002/2 - Goods and services tax: what supplies of fruit and vegetable juices are GST-free?
- health, refer to:
- education, refer to:
- GST for preschool operators (NAT 12579)
- GSTR 2000/27 - Goods and services tax: adult and community education courses; meaning of 'likely to add to employment related skills'
- GSTR 2000/30 - Goods and services tax: supplies that are GST-free for pre-school, primary and secondary education courses
- GSTR 2001/1 - Goods and services tax: supplies that are GST-free for tertiary education courses
- GSTR 2002/1 - Goods and services tax: supplies that are GST-free as special education courses
- GSTR 2003/1 - Goods and services tax: supplies that are GST-free as professional or trade courses
- GSTD 2000/11 - Goods and services tax: is the supply of commercial pilot training GST-free as an education course under section 38-85 of the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act)?
- GSTD 2000/7 - Goods and services tax: is the supply of the services of apprentices or trainees by a Group Training Company to host employers under a Group Training Scheme a taxable supply in terms of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act)?
- non-commercial activities of charities, refer to:
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The sale of a business as a going concern
The sale of a business as a going concern is GST-free if:
- everything for the business' continued operation is supplied to the buyer
- the seller carries on the business until the day it is sold
- the buyer is registered or required to be registered for GST
- the sale is for payment
- before the sale, the buyer and seller agree in writing that the sale is of a going concern.
Example: Selling a business
You are registered for GST and you sell your florist business. The sale includes the shop, delivery vehicle, stock, equipment and all the other things necessary to continue operating the business. You continue to operate the business until the buyer takes over. The buyer is registered for GST, and you and the buyer have agreed in writing that the sale is of a going concern. This is a GST-free sale.
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For more information about the sale of a going concern, refer to:
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Input taxed sales
You do not include GST in the price of input taxed sales you make and you cannot claim GST credits for purchases that you use to make input taxed sales.
The two most common input taxed sales for small businesses are:
Financial supplies
You generally make a financial supply when you do any of the following:
- lend or borrow money
- grant credit to a customer
- buy or sell shares or other securities
- create, transfer, assign or receive an interest in, or a right under, a superannuation fund
- provide or receive credit under a hire purchase agreement if the credit is provided for a separate charge that is disclosed to the purchaser.
In special cases, you may be able to claim a GST credit for a purchase that relates to making a financial supply if one of the following applies:
Example
Bill's Department Store sells a fridge to Louise for $1,100 (including $100 GST). Bill's Department Store sells the fridge to Louise on credit, and charges interest on the credit.
As providing credit is a financial supply, Bill's Department Store does not include GST on the amount of interest it charges to Louise.
In total, Louise pays Bill's $1,165, made up of:
- the purchase price of $1,100
- interest of $65.
Bill's Department Store must pay $100 to us, as this was the amount of GST included in the price of the goods.
Bill's Department Store can only claim GST credits for purchases it used to provide the credit, if either of the following apply:
- the store's turnover does not exceed the financial acquisitions threshold
- the purchases that related to providing the credit are reduced credit acquisitions (in which case Bill's Department Store will be entitled to a reduced input tax credit of 75% of the GST payable on the supply of the acquisition).
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For more information about GST and making financial supplies, refer to:
- Financial services - questions and answers
- GSTR 2006/3 - Goods and services tax: determining the extent of creditable purpose for providers of financial supplies
- GSTR 2002/2 - Goods and services tax: GST treatment of financial supplies and related supplies and acquisitions (an addendum exists for this ruling)
- GSTR 2003/9 - Goods and services tax: financial acquisitions threshold
- GSTR 2004/1 - Goods and services tax: reduced credit acquisitions.
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Residential premises
If you rent out a residential premises for residential accommodation (that is, not a commercial residential premises), you do not include GST in the price of the rent. You also cannot claim credits for the GST included in any costs relating to the rental, such as agent's commission or repairs and maintenance on the premises.
In contrast, supplying commercial premises is taxable. If you are registered or required to be registered for GST and rent out a factory or shop, you must include GST in the rent you charge.
If you carry on your business from rented commercial premises, GST is included in your rent and you can generally claim a credit for that GST because it is a business expense.
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For more information about GST and property, refer to:
- GST and property (NAT 72957)
- GST and the margin scheme (NAT 15145)
- GSTR 2000/20 - Goods and services tax: commercial residential premises (an addendum and erratum exist for this ruling)
- GSTR 2003/3 - Goods and services tax: when is a sale of real property a sale of new residential premises (an erratum exists for this ruling)
- GSTR 2000/21 - Goods and services tax: the margin scheme for supplies of real property held prior to 1 July 2000 (an erratum and addendum exist for this ruling)
- GSTR 2006/7 - Goods and services tax: how the margin scheme applies to a supply of real property made on or after 1 December 2005 that was acquired or held before 1 July 2000
- GSTR 2006/8 - Goods and services tax: the margin scheme for supplies of real property acquired on or after 1 July 2000
- GSTR 2009/4 - Goods and services tax: new residential premises and adjustments for changes in extent of creditable purpose.
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Last Modified: Monday, 2 July 2012