A BAS can look straightforward until the numbers do not match what is sitting in your bank account. Knowing how to calculate GST payable gives you a clearer view of what belongs to the ATO, what you can claim back, and how much cash your business can safely use.
For most GST-registered Gippsland businesses, the calculation is simple in principle: add the GST collected on taxable sales, then subtract the GST credits you can claim on eligible business purchases. The detail matters because a missed invoice, private expense or incorrectly treated sale can affect both your BAS and your cash flow.
The basic GST payable formula
Your GST payable amount is generally calculated as:
GST on sales – GST credits on purchases = GST payable
If the result is positive, you will generally pay that amount to the ATO when lodging your BAS. If your GST credits are higher than the GST collected on sales, you may be entitled to a GST refund, subject to the ATO processing your activity statement.
GST is usually charged at 10 per cent. When your prices are GST exclusive, the calculation is direct. A $1,000 service invoice attracts $100 GST, making the total amount charged to the customer $1,100.
When a price includes GST, do not simply take 10 per cent of the total. The GST component is one-eleventh of the GST-inclusive amount. For example, if a retailer sells stock for $550 including GST, the sale contains $50 GST. The GST-exclusive sales value is $500.
This one-eleventh rule is particularly useful for trades, transport operators and small retailers who receive GST-inclusive supplier invoices or quote customers an all-inclusive price.
How to calculate GST payable step by step
Start with the transactions recorded for the BAS period, whether you report monthly, quarterly or annually. Good bookkeeping makes this process much easier, but it is still worth reviewing the figures before lodging.
1. Identify your taxable sales
Taxable sales are sales where you charge GST. For a builder, this may include labour and materials billed to a client. For a cleaning business, it may be commercial cleaning services. For a manufacturer, it may be finished goods sold to customers.
Add the GST on these sales. If your invoices show GST separately, use the GST amount shown. If sales are recorded as GST-inclusive totals, divide the total by 11 to find the GST component.
For example, a plumber issues $33,000 in GST-inclusive invoices during the quarter. The GST on those sales is:
$33,000 ÷ 11 = $3,000 GST on sales
Not every amount received is a taxable sale. Loan proceeds, money introduced by an owner, insurance settlements and transfers between business accounts are not ordinary sales and should not have GST added to them.
2. Check which purchases carry claimable GST
Next, identify business purchases that include GST and are connected with earning your business income. Common examples include tools, materials, office supplies, accounting fees, vehicle running costs, commercial rent where GST is charged, and subcontractor invoices that include GST.
You can generally claim the GST shown on a valid tax invoice, provided the expense is for business use and is not excluded from GST credits. If an invoice total is $1,100 including GST, the GST credit is usually $100.
Suppose the plumber paid $11,000 in GST-inclusive business expenses for parts, tools and advertising during the same quarter. The available GST credits would be:
$11,000 ÷ 11 = $1,000 GST credits
3. Subtract GST credits from GST on sales
Using the two figures above:
$3,000 GST on sales – $1,000 GST credits = $2,000 GST payable
The plumber would report the relevant GST figures on the BAS and would generally have $2,000 payable to the ATO for that reporting period, before considering other BAS amounts such as PAYG withholding or PAYG instalments.
A GST payable amount is not the same as your overall BAS payment. If you have employees, the activity statement may also include PAYG withholding. Some businesses may have fuel tax credits, PAYG instalments or other obligations that change the final amount payable or refundable.
Know what you cannot claim
A common mistake is treating every business bank transaction as a GST credit. Some expenses do not include GST, while others are only partly claimable.
Wages, superannuation contributions, bank fees charged by financial institutions, loan repayments and most insurance policies do not usually carry claimable GST. You also cannot claim GST on purchases from suppliers who are not registered for GST, as there is no GST to recover.
Other expenses need to be adjusted for private use. If a sole trader uses a mobile, ute or home internet connection partly for personal reasons, only the business portion of the GST may be claimed. The same applies where meals, travel or vehicle costs have a mixed business and private purpose.
Input-taxed purchases require care as well. Residential rent and many financial supplies are generally input taxed, which means GST credits may not be available. Health, education and basic food can be GST-free in particular circumstances. GST-free sales do not have GST added, but they may still allow related GST credits where the normal requirements are met.
Use the right accounting basis
The timing of your GST calculation depends on whether you report on a cash or non-cash basis.
Under the cash basis, you generally account for GST when you receive payment from a customer and when you pay a supplier. This can help cash flow because you do not need to remit GST on an unpaid customer invoice. It is often suitable for smaller businesses.
Under the non-cash basis, also called accruals, you generally account for GST when you issue an invoice or receive a supplier invoice, even if payment happens later. This approach can give a fuller picture of activity for the period, but it can create a GST liability before customers have paid.
Your BAS reporting method should match the method approved for your business. Do not switch figures between cash and accrual treatment simply because a quarter has been busy or cash is tight.
Match your records to the BAS labels
For many businesses, the key GST labels are G1 for total sales, 1A for GST on sales and 1B for GST on purchases. Your activity statement may differ depending on your reporting arrangement, so always follow the labels shown on your BAS.
Before lodging, reconcile your sales records, purchase records and bank transactions. Check that sales invoices are not duplicated, supplier bills have been entered once only, and credit notes or refunds have been accounted for. A refund given to a customer can reduce GST on sales, while a supplier credit can reduce the GST credit you originally claimed.
If you use accounting software, do not assume the BAS report is automatically correct. Review the tax codes applied to unusual transactions, asset purchases and payments to subcontractors. A new vehicle, machinery purchase or inventory adjustment can be recorded incorrectly if GST settings are not checked.
Keep tax invoices and supporting records
Clear records protect your GST claims and make BAS preparation less stressful. Keep tax invoices, receipts, sales invoices, bank records and evidence supporting any private-use adjustments. For larger purchases, retain finance documents as well as the supplier invoice, because the loan repayment itself is not a GST-bearing expense.
A valid tax invoice generally needs to show the supplier’s ABN, the date, what was supplied, the price and the GST amount or a statement that the total price includes GST. For purchases of $82.50 or more including GST, a tax invoice is generally required to claim a GST credit.
Regular bookkeeping is more reliable than sorting through a quarter of receipts at the BAS deadline. Setting aside the GST portion of customer payments in a separate account can also prevent a surprise cash-flow gap when the BAS falls due.
When a transaction is unusual, expensive or partly private, it is worth checking the GST treatment before lodging. Tax and Accounting Solutions Gippsland can help review BAS figures, organise your records and keep your reporting accurate, clear and manageable.
A well-prepared BAS does more than meet an ATO deadline. It gives you a practical picture of sales, costs and cash flow, so you can make business decisions with greater confidence.