GST for Small Business 2026: Registration, BAS & Common Mistakes

15 March 2026|6 min read

Essential GST guide for Australian small businesses. When you must register, how to lodge your BAS, what is GST-free, and the most common mistakes that trigger ATO penalties.

The $75K threshold: when you must register for GST

You must register for GST if your business has a GST turnover of $75,000 or more per year ($150,000 for non-profit organisations). GST turnover includes all the income your business earns from its normal activities — sales of goods, services, fees, and commissions — but excludes input-taxed sales (such as residential rent and financial supplies), sales not connected with your enterprise, and sales of capital assets. If your current or projected GST turnover reaches $75,000 in any 12-month period, you must register within 21 days. This is not based on the financial year — the ATO looks at any rolling 12-month period. If you are a ride-share driver, taxi driver, or limousine operator, you must register for GST regardless of your turnover. If you exceed the threshold and fail to register, you are still liable for the GST you should have collected, and you may face penalties for late registration. The ATO's data-matching programs flag businesses that appear to exceed the threshold based on bank deposit data and payment platform reporting.

Voluntary registration: when it makes sense

Even if your turnover is below $75,000, voluntary GST registration can be beneficial in certain situations. The main advantage is that you can claim input tax credits (ITCs) on your business purchases — recovering the GST included in the price of supplies, equipment, software, and services you buy for your business. If your business expenses include significant GST-inclusive costs (such as purchasing stock, equipment, or professional services), the ITCs you claim can exceed the GST you collect, resulting in a net refund. Voluntary registration also presents a more professional image to clients and avoids the disruption of having to suddenly add GST to your prices when you cross the threshold. However, voluntary registration means you must lodge Business Activity Statements, charge GST on your sales, maintain GST-compliant records, and comply with all GST obligations. If most of your customers are consumers (not businesses), adding 10% to your prices may make you less competitive. For businesses that sell primarily to other GST-registered businesses, the impact is neutral because your customers claim back the GST as an input tax credit.

Quarterly BAS: what to report and when

Most small businesses lodge their BAS quarterly, with due dates of 28 October (July-September quarter), 28 February (October-December), 28 April (January-March), and 28 July (April-June). If you use a registered tax agent, you generally receive a four-week extension. Your BAS reports your total sales, GST collected on sales, GST paid on purchases (input tax credits), PAYG income tax instalments if applicable, and PAYG withholding if you have employees. The net amount of GST collected minus input tax credits determines whether you owe the ATO or receive a refund. Small businesses with a turnover under $10 million can choose to report GST on a cash basis (reporting GST when you actually receive or pay) rather than an accrual basis (reporting when you issue or receive invoices). Cash basis is simpler and better for cash flow because you do not owe GST on invoices your customers have not yet paid. Lodge and pay on time — late lodgement penalties start at $313 per 28-day period, and interest applies to late payments.

What is GST-free: health, education, and fresh food

Not everything attracts GST. GST-free supplies include most basic food items (fresh fruit, vegetables, meat, bread, milk, eggs, and other unprocessed foods), most health services provided by registered practitioners (doctor visits, dental, physiotherapy, optometry), most education courses provided by approved education providers, childcare services, medical aids and appliances, water and sewerage services, and exports of goods and services. The food rules are notoriously complex — a plain bread roll is GST-free, but a garlic bread roll is not. A fresh salad is GST-free, but a pre-packaged salad with dressing is not. Hot takeaway food and prepared meals are generally subject to GST. If your business sells a mix of GST-taxable and GST-free items, you must correctly categorise each sale on your BAS. Input-taxed supplies — primarily residential rent and most financial services — are different from GST-free supplies. You do not charge GST on input-taxed sales, and you cannot claim input tax credits on the related expenses, making them the least favourable GST category for businesses.

Input tax credits: claiming GST on your purchases

Input tax credits (ITCs) allow you to claim back the GST included in the price of goods and services you purchase for your business. To claim an ITC, the purchase must be for your business (not personal use), the supplier must have charged you GST, you must have a tax invoice for purchases over $82.50 (including GST), and the purchase must not relate to making input-taxed sales. If a purchase is partly for business and partly for personal use, you can only claim the business portion. For example, if you use your mobile phone 70% for business, you can claim 70% of the GST on your phone bill. Common business purchases eligible for ITCs include office supplies, equipment and tools, professional services (accounting, legal), advertising and marketing costs, business insurance, and software subscriptions. Note that some items have special rules — motor vehicle purchases are capped at the luxury car tax threshold for ITC purposes, and you cannot claim ITCs on purchases used to make input-taxed sales such as residential rental income. Use our GST Calculator to quickly determine the GST component in any price.

Cash vs accrual accounting for GST

The choice between cash and accrual accounting for GST purposes affects when you report GST on your BAS. Under cash accounting, you report GST on sales when you receive payment and claim ITCs on purchases when you make payment. Under accrual accounting, you report GST when you issue an invoice and claim ITCs when you receive an invoice — regardless of when money actually changes hands. Cash accounting is generally better for small businesses because it improves cash flow — you do not owe GST on outstanding invoices your customers have not paid yet. It is also simpler to reconcile because your BAS matches your bank transactions. You are eligible to use cash accounting if your GST turnover is under $10 million. Accrual accounting may be preferable if your business receives payment before issuing invoices (such as deposits or prepayments) or if you want your BAS to align with your accrual-based financial statements. You can switch between methods, but you must account for any transitional adjustments. Whichever method you choose, maintain consistent records and ensure your accounting software is set to the correct method to avoid reporting errors on your BAS.