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:

• Cars for disabled people
• Charities:
  • Donated second-hand goods
  • Non-commercial activities
  • Raffles and bingo
  • Retirement village services
• Child Care
• Education
• Exports
• Exported insurance
• Food
• Funerals contracted pre 1st December 1999
• Health and medical
• Health Insurance
• International mail
• Pre-GST supplies, until 1 July 2005, under certain transitional contracts
• Precious metals, supplies to dealers
• Professional and trade qualification courses
• Real estate transactions:
  • Farm sales
  • Farm subdivisions
  • Government land grants
• Religious services
• Sale of business:
  • Sale of farm
  • Sale of going concern
• Second-hand goods
  • Charities
• Travel and Tourism
  • International travel
  • Inwards duty free shops
  • Travel agent's fees on exempt travel, overseas accommodation, etc
  • Travel insurance on exempt travel
• Water, sewerage and drainage

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 cash flow 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 existing residential premises (not new homes or commercial premises);
• Food at school tuckshops (optional);
• Certain transactions involving precious metals;
• Certain fund raising activities of charities; and
• ATM transactions.

Our dedicated team can assist you with all your accounting and GST related matters. Complete and submit the Express Enquiry form on the top right hand side of this page and we will contact you to discuss your enquiry or call us on 1300 QUINNS (1300 784 667) or on +61 2 9223 9166 to arrange an appointment.