Pricing and GST Considerations

Pricing conversations usually focus on what the market will bear. GST quietly decides how much of that price you actually keep, and it punishes vagueness. A quote that never says whether GST is included, or a price rise calculated on the wrong base, can hand a slice of your margin to the ATO — or to a customer dispute after the work is done.

Say whether the price includes GST

Between businesses, quoting GST-exclusive prices is common and perfectly fine — provided the quote says so clearly, every time. A quote that is silent on GST invites an argument, and that argument tends to be resolved in the customer's favour after the work is finished. Prices displayed or advertised to consumers are different: under Australian Consumer Law, a price shown to consumers generally must be the total GST-inclusive amount. Advertising an exclusive price and adding GST at the till is the kind of habit that attracts complaints, and it is an easy one to avoid — decide your display convention once and build it into every template.

Before and after GST registration

Registration becomes compulsory once your GST turnover reaches the threshold — currently $75,000 for most businesses; check the current ATO figure if you are close to it. Before registration you do not charge GST and cannot claim GST credits on purchases. After registration, GST must be added to your taxable sales, which forces a pricing decision most owners never make deliberately: lift prices so the GST sits on top, or hold prices and let the GST come out of what you were already charging. Holding prices feels customer-friendly, but it means part of every sale now belongs to the ATO out of a price that was set without GST in mind.

The one-eleventh rule

For a fully taxable sale, the GST component of a GST-inclusive price is generally one-eleventh of that price, based on the current 10% GST rate — check the current ATO rate. A $110 GST-inclusive price contains $10 of GST — not $11, which is what you get if you mistakenly take 10% of the inclusive figure. The same trap appears in reverse when raising prices: if you want a certain amount more in your own pocket per sale, the increase has to be worked out on the GST-exclusive amount and then grossed up, or the ATO takes its share of your rise too.

Do not quietly absorb GST

Absorbing GST means giving up roughly one-eleventh of your revenue off the top, before any costs are paid — for a business on thin margins, that can be most of the net margin. GST credits on your purchases claw some of it back, but for service businesses with few inputs the clawback is small. If a genuine commercial reason exists to hold prices — a contract, a sensitive customer segment — make it a conscious, costed decision with a review date, not a default you drift into at registration and never revisit.

What we commonly see go wrong

• Quotes silent on GST, resolved in the customer's favour after the work is done.
• Crossing the registration threshold mid-year without noticing, then dealing with GST on sales that were priced and invoiced without it.
• Working out GST as 10% of the GST-inclusive price instead of one-eleventh, so invoices and margin reports are both slightly wrong.
• Charging GST while not registered, or forgetting to charge it after registering — both messy to unwind, in opposite directions.

A worked example

As an illustration: a cleaner charging $100 per job passes the registration threshold and registers for GST. Holding the price at $100 means roughly one-eleventh of every job — about $9 — now goes to the ATO, before counting the modest GST credits on supplies. Lifting the price to $110 keeps the cleaner's own takings intact; business customers who claim GST credits are largely indifferent to the change, while household customers see a genuine price rise. Which way to go depends on the customer mix — the point is to choose deliberately, communicate it before invoices change, and never discover the decision was made by default when the first BAS arrives.

When to get help

If your turnover is approaching the registration threshold, if you are unsure whether your quotes should be inclusive or exclusive for your mix of customers, or if a price rise is planned and you want the GST arithmetic checked before it goes to print, a short review beforehand is worth far more than a tidy-up afterwards. Repricing after invoices have gone out is messy for you and confusing for customers.

Do my advertised prices have to include GST?

Prices displayed or advertised to consumers generally must be shown as the total GST-inclusive amount under Australian Consumer Law. Business-to-business quotes can be GST-exclusive, provided the quote states that clearly.

How do I work out how much GST is inside a price?

For a fully taxable sale, the GST component is generally one-eleventh of the GST-inclusive price, based on the current 10% rate — check the current ATO rate. Taking 10% of the inclusive price gives the wrong answer.

When do I have to register for GST?

Once your GST turnover reaches the threshold — currently $75,000 for most businesses; check the current ATO figure. Special rules apply to taxi and ride-sourcing drivers, who generally must register regardless of turnover, and registering earlier voluntarily is allowed.