Zone Relevance: AU (Australia)

Sometimes a bill or invoice contains items that are GST-free, but the GST-free portion is not clearly identified on the invoice. This is a frequent occurrence on phone bills, insurance policies, and payments for services involving a portion of government services which are often GST-free (e.g. buying a Proprietary Limited Company from an accountant).

Example

The following example demonstrates the process of determining the GST and GST-free portions of the total amount. Lets say you receive an invoice that states a GST amount of $8.00 in a total invoice for $108. Create an invoice using the following method for the items in the invoice:

1. We need to establish what portion includes GST. To do this, multiply the total GST that appears on the invoice you received by eleven.
   $8.00 x 11 = $88.00
   Why 11? GST is 10%, therefore a product that costs $100.00 before GST is added should have 10% added. The total cost including GST would then be $110.00. $10.00 is 1/11th of $110.00, so if you divide the total amount including GST by 11 you can determine the amount of GST.
2. For the first invoice item enter $88.00 using the Exp: Purchase Incl. GST tax code
   (the portion with GST we just calculated)
3. For the second invoice item enter $20.00 using the Exp: Purchase GST Free tax code
   (the remaining portion making up the balance of the invoice)

The GST Free portion may also be Input Taxed or another Tax type that doesn’t attract GST. Which tax code you use depends on the service provided by the supplier. It will often be described somewhere on the invoice. This is so that consumers know how to treat the purchase for tax purposes. Look for information somewhere on the Tax Invoice. If you are unsure, consult your Tax Practitioner or the ATO