Non-taxable and GST-free supplies

There are three types of exemption from charging GST. These are: supplies outside the GST system; GST-free supplies; and input taxed supplies.

Supplies outside the GST system

The GST rules generally do not apply to supplies made before 1 July 2000. Nor, in general, will they apply to gifts, to supplies made by unregistrable persons who are not in business or transactions that have no connection with Australia. For example, sales made at a private garage sale are not caught by the GST. The Commonwealth Government itself is not liable to pay GST (sec 177-1). Appropriations made between government agencies are also not subject to GST (sec 9-15).

GST-free supplies

If a supply is GST-free, this means that no GST is payable on it, but that the supplier is entitled to claim credits for the GST payable on its business inputs that relate to that supply (sec 9-5; 11-15). For this reason, it is quite different from a supply which is outside the GST system altogether.

A greengrocers business consists wholly of selling fresh food. The sale of that food is GST-free. The greengrocer therefore will not charge GST on the food it sells, and claim input tax credits for the GST it pays on goods and services it acquires in carrying on its business, e.g. rent and equipment.

Note: If the greengrocer used some of those goods for private, non-business purposes, only a proportion of the input tax credit for GST on those goods would be allowed.

GST-free supplies include:

• Exports
• Health and medical care
• Education
• Food
• Child care
• Certain activities of charities and gift-deductible bodies
• Religious services
• Sales of businesses
• Water, sewerage and drainage
• Certain transactions involving precious metals
• International travel
• International mail
• Supplies through inwards duty free shops
• Crown land
• Farm land
• Subdivisions of farm land for family residential purposes
• Cars for disabled people
• Certain supplies under contracts made before 8 July 1999
• Certain prepaid funerals

Despite some political pressures, supplies of items such as retail books, public transport or domestic tourism are not GST-free.

The greatest impact of GST-free status will normally be felt where the customer is a private consumer. It will not matter so much where the customer is a business that can get an input tax credit for GST in any event, though there may be some cashflow implications.

Input taxed supplies

If a supply is "input taxed", no GST is payable on it, but the supplier normally cannot claim input tax credits for the GST payable on its business inputs that relate to that supply (sec 9-5; 11-15).

A landlord's business consists wholly of letting private residential premises. These are input taxed supplies. The landlord therefore will not charge GST on the rent, and cannot claim input tax credits for the GST it pays on the goods and services it acquires to run the business.

Note: If the landlord also used some of the goods and services in other business activities that were taxable (or GST-free), it could claim a proportion of the GST as an input tax credit. Input taxed supplies are set out in Div 40 (sec 9-5).

They include:

• financial supplies such as loans, dealings in money and issuing securities (note that in this particular case, limited input tax credits may be available);
• residential rent;
• sales of residential premises (but not new homes or commercial premises);
• food at school tuckshops (optional)
• food at school tuckshops (optional)
• certain transactions involving precious metals
• certain fund raising activities of charities