GST for Australian dropshippers and online sellers

GST is one of the first tax questions new online sellers ask about, and one of the most misunderstood. When do you have to register? Should you include GST in your prices? Can you claim the GST on supplier invoices? What happens when your supplier is overseas?

This guide answers those questions using the ATO's published guidance. It is general information only. GST has many special rules, so check the ATO website and talk to a registered tax agent or BAS agent about your situation.

What GST is

Goods and services tax (GST) is a broad-based tax of 10% on most goods, services and other items sold or consumed in Australia. Businesses registered for GST:

• charge GST on their taxable sales;
• claim GST credits for the GST included in the price of their business purchases;
• report and pay the difference to the ATO, usually through a business activity statement (BAS).

The customer ultimately bears the tax, and businesses act as collectors.

When you must register

The ATO says you must register for GST if:

• your business has a GST turnover (gross income from sales, not profit) of $75,000 or more, current or projected; or
• you provide taxi or ride-sourcing travel, regardless of turnover (not usually relevant to dropshippers).

The test applies to both your current GST turnover (this month plus the previous 11 months) and your projected turnover (this month plus the next 11 months). Once you reach or expect to reach the threshold, you have 21 days to register.

Note that the threshold is about turnover, not profit. Dropshipping often has thin margins, so you can reach $75,000 in sales well before you are making much money.

Registering voluntarily

You can register for GST even if your turnover is below the threshold. If you do, you generally need to stay registered for at least 12 months. Voluntary registration lets you claim GST credits on business purchases, but you must then charge GST on your taxable sales and lodge activity statements. Whether it suits you depends on your customers and costs, so get advice.

Charging GST and pricing

If you are registered, GST is generally included in the price of your taxable sales to Australian customers. For a GST-inclusive price, the GST component is one-eleventh of the price.

This is why registering can make a big difference to your margins. If you keep your price the same after registering, one-eleventh of each sale is no longer yours. Our margin calculator includes a GST toggle so you can test this.

Showing prices to customers

The ACCC's guidance on displaying prices says that when you advertise a price to consumers, you must show the total price, including GST and any other compulsory fees or charges that can be calculated. Delivery fees must also be disclosed. Don't advertise a GST-exclusive price to consumers and add GST at checkout.

Tax invoices

When you are registered, you need valid tax invoices from suppliers to claim GST credits on purchases over a certain amount, and you must give tax invoices to your customers in some situations.

The ATO says that if a customer asks for a tax invoice for a taxable sale of more than $82.50 (including GST), you must provide one within 28 days. Tax invoices must include certain information, such as:

• that the document is intended to be a tax invoice;
• your identity and ABN;
• the date of issue;
• a brief description of the items sold, with quantity and price;
• the GST amount (if any) or a statement that the total price includes GST.

Most ecommerce platforms can generate compliant invoices automatically, but check that the settings are correct.

Claiming GST credits

You can generally claim a GST credit for the GST included in the price of goods and services you buy for your business, if you hold a valid tax invoice where required. For dropshippers, this may include:

• stock purchased from Australian GST-registered suppliers;
• platform subscriptions and some software;
• advertising (if the provider charges Australian GST);
• professional fees, such as an accountant.

You can only claim credits for GST you actually paid. Many overseas services and goods don't include Australian GST.

Overseas suppliers and GST

Australia applies GST to low value imported goods (generally those worth A$1,000 or less) sold to consumers. According to the ATO, overseas vendors, online marketplaces and redeliverers that meet the registration threshold must register and collect GST on these sales to Australian consumers.

This affects dropshippers in a few ways:

• If you are GST-registered, the ATO explains you can tell an overseas supplier your ABN and that you are registered for GST, so GST is not charged on your business purchases. You then account for GST on your own sales to customers in the normal way.
• If you are not registered, an overseas supplier may charge you GST, which becomes part of your cost.
• For goods over A$1,000, GST and any duty are generally collected at the border. See our imports guide.

These rules are detailed. If you rely heavily on overseas suppliers, get advice on how GST applies to your setup.

Business activity statements

Once registered, you report GST through a business activity statement (BAS). The ATO assigns a reporting cycle, commonly quarterly for small businesses, though monthly or annual options apply in some cases. On each BAS you report:

• GST collected on sales;
• GST credits for purchases;
• other taxes if applicable, such as PAYG withholding for employees.

You can lodge online, through your accounting software or through a registered BAS or tax agent. Lodge and pay on time to avoid penalties and interest.

Practical tips

1. Track turnover monthly so you know when you are approaching the threshold.
2. Use accounting software connected to your bank and store platform.
3. Keep supplier invoices and check they are valid tax invoices.
4. Separate GST in your pricing so you know your true margin.
5. Set aside GST in a separate account each week so it is ready when your BAS is due.
6. Ask a professional about special cases, such as GST-free items or sales to overseas customers.

Key points

GST is 10% on most taxable sales in Australia. You must register within 21 days once your GST turnover reaches $75,000, current or projected, and you can register earlier by choice. Registered sellers charge GST (one-eleventh of a GST-inclusive price), claim credits on business purchases with valid tax invoices, and lodge a BAS. Consumer prices must show the total price including GST. Overseas suppliers may charge GST on low value goods unless you are registered and quote your ABN.

Related guides

Read income tax and record keeping, overseas suppliers and imports and pricing and margins.