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GST-Free Items in Australia: The Complete Reference Guide

Under Australia's Goods and Services Tax system, most goods and services attract a 10% tax at the point of sale. However, the A New Tax System (Goods and Services Tax) Act 1999 specifically exempts a wide range of items from GST. These are known as GST-free supplies, and understanding exactly what qualifies is essential for businesses that sell them, consumers who buy them, and accountants who report on them.

This guide provides a thorough, category-by-category breakdown of GST-free items in Australia. Whether you are a business owner trying to determine whether to charge GST on a product, a bookkeeper preparing a BAS, or simply a consumer curious about why your grocery receipt shows some items taxed and others not, this reference will give you the clarity you need.

What Does "GST-Free" Actually Mean?

A GST-free supply is a sale where no GST is charged to the buyer, but the seller can still claim input tax credits on the costs of making that supply. This is a critical distinction from "input-taxed" supplies (discussed in detail later in this guide), where no GST is charged but the seller cannot claim input tax credits either.

You may also encounter the term "zero-rated," which is used in other countries like New Zealand and the UK. In those jurisdictions, zero-rated means the same thing as GST-free in Australia: the effective tax rate is 0%, but the supplier retains the right to claim credits on their inputs. Australia's GST legislation uses "GST-free" rather than "zero-rated," but the economic effect is identical.

For businesses, the distinction matters enormously. If you sell GST-free goods, you do not collect GST from customers, which keeps your prices lower. At the same time, you can still recover the GST you paid on ingredients, raw materials, equipment, and other business costs. This is fundamentally different from being unregistered or selling input-taxed supplies.

Food and Beverages

Food is one of the most complex areas of GST classification in Australia. The general principle is that basic food for human consumption is GST-free, while prepared food, restaurant meals, confectionery, and certain snack foods are taxable. Division 38 of the GST Act, together with Schedule 1 (which lists items that are specifically not GST-free), governs these rules.

GST-Free Food Items

The following categories of food are GST-free when sold for human consumption:

Food That Is NOT GST-Free (Taxable at 10%)

The following food items attract the full 10% GST. Many of these catch people off guard, so pay close attention if your business sells food products:

The "Basic Food" Test

The ATO applies what is often called the "basic food test" to determine if a food item is GST-free. The test considers several factors:

1. Is it food for human consumption? Pet food is taxable. Food marketed for human consumption starts with the presumption of being GST-free.
2. Is it listed in Schedule 1 of the GST Act? Schedule 1 specifically lists categories of food that are not GST-free, including confectionery, savoury snacks, ice cream, soft drinks, and prepared meals. If the item falls into one of these categories, it is taxable regardless of its ingredients.
3. Is it sold hot or as a prepared meal? Food sold hot, or food that has been prepared and is ready for immediate consumption as a meal, is generally taxable. A cold meat pie on a shelf is GST-free; the same pie heated up and handed over is not.
4. How is it marketed and packaged? The way food is presented matters. A packet of mixed nuts in the baking aisle may be GST-free. The same mixed nuts in a snack-sized bag marketed as a snack food may be taxable.

This area is genuinely complex, and the ATO has issued numerous rulings and determinations on specific products. If your business manufactures or sells food products and you are uncertain about the GST classification, it is worth seeking a private ruling from the ATO or advice from a qualified tax professional.

Health and Medical

Australia's GST system provides broad exemptions for health and medical services, reflecting the policy that access to healthcare should not be made more expensive by taxation. Division 38 of the GST Act covers these exemptions in detail.

GST-Free Medical Services

Health Items That Are NOT GST-Free

Not everything related to health is exempt. The following commonly attract GST:

• Cosmetic surgery and treatments — procedures that are purely cosmetic (e.g., Botox for wrinkles, cosmetic liposuction, teeth whitening for appearance) are taxable unless they are performed for therapeutic reasons certified by a medical practitioner
• Over-the-counter medicines not on the PBS — vitamins, supplements, cold and flu tablets, pain relievers, and other products that can be purchased without a prescription are generally subject to GST
• Non-therapeutic health products — sunscreen, moisturisers, fitness equipment, gym memberships
• Alternative therapies by non-registered practitioners — services such as aromatherapy, naturopathy (where the practitioner is not AHPRA-registered), and similar treatments may not qualify for the exemption

Education

Educational services receive significant GST exemptions in Australia, but the rules depend heavily on the type of course and the institution delivering it. The key distinction is whether the course leads to a recognised qualification or is a curriculum-based educational program.

GST-Free Education Supplies

Education That Is NOT GST-Free

• Short courses and workshops — professional development seminars, weekend workshops, and other courses that do not lead to a recognised qualification (e.g., a one-day photography workshop, a weekend cooking class)
• Hobby and recreational courses — art classes, dance lessons, music lessons (when not part of a formal qualification), and similar recreational learning
• Materials sold separately — textbooks, stationery, uniforms, and equipment sold by educational institutions as separate supplies (not bundled into course fees) are taxable
• Private tutoring — generally taxable unless the tutor is delivering the service as part of a formal educational institution's program
• Student accommodation — on-campus accommodation that is not part of a boarding arrangement at a school is typically input-taxed (as residential rent) rather than GST-free

Childcare

Childcare services are GST-free in Australia, recognising the essential role they play in enabling families to participate in the workforce. This exemption applies broadly across different types of care arrangements.

Note that babysitting services provided by independent individuals (not through an approved childcare service) are generally not covered by this exemption. If the babysitter is running a business and exceeds the GST registration threshold, their services would typically be taxable.

Exports

Exports of goods and services from Australia are GST-free. This is a fundamental principle of destination-based consumption taxes: GST should be levied where goods and services are consumed, not where they are produced. Division 38 of the GST Act sets out the requirements.

GST-Free Export Supplies

Requirements for GST-Free Export Status

Claiming GST-free status on exports is not automatic. You must satisfy specific conditions:

1. For goods: The goods must be exported within 60 days of receiving payment or within 60 days of the supplier issuing an invoice (whichever comes first). Extensions can be granted by the ATO in certain circumstances.
2. For services: The service must be provided to a non-resident who is not in Australia at the time the service is performed. If the service relates to real property in Australia or is provided directly to someone who is in Australia, it may not qualify.
3. Documentation: You must keep evidence of the export, including customs documentation, bills of lading or airway bills, evidence that the recipient is a non-resident, and records of the services provided.

If you cannot prove that an export actually occurred, the ATO can assess GST on the supply as if it were a domestic taxable sale. Maintaining thorough export documentation is essential.

Other GST-Free Categories

Beyond the major categories above, Australian GST law provides exemptions for a range of other supplies. Some of these are niche, but they are important for the businesses and individuals they affect.

Water, Sewerage, and Drainage

Water, sewerage, and drainage services provided by government entities or government-related entities are GST-free. This includes water supplied through mains, sewerage services, and stormwater drainage. Note that this exemption applies specifically to government-provided utilities. Bottled water is covered under the food rules, and private water services may not qualify.

Precious Metals

The supply of precious metals (gold, silver, and platinum) is GST-free when the metal is the first supply of a precious metal after refining, or when it is supplied in an investment form (e.g., bullion bars of at least 99.5% purity for gold). This exemption is designed to support Australia's precious metals industry and facilitate investment. Jewellery and manufactured goods made from precious metals are not GST-free.

Going Concerns (Sale of a Business)

The sale of a business as a going concern is GST-free, provided certain conditions are met. Both the buyer and seller must be registered (or required to be registered) for GST, and both must agree in writing that the supply is of a going concern. The seller must supply the buyer with everything needed to continue operating the business. This provision prevents GST from becoming a barrier to business sales and acquisitions.

Farmland

The supply of farmland between related parties (such as family members) can be GST-free if certain conditions are met. The land must have been used for farming for at least five years, and the recipient must intend to use it for farming. This provision supports intergenerational farm transfers, which are common in Australian agriculture.

Cars for People with Disabilities

The supply of a car to a person with a disability can be GST-free under the GST-free car scheme. The person must have an eligible disability, hold (or be eligible to hold) a disability parking permit, and meet the criteria set out in the relevant GST determination. The exemption applies to the purchase of one car at a time and aims to reduce the financial burden on people with mobility impairments.

Road Tolls

Road tolls charged by operators of toll roads are GST-free. This applies to tolls on motorways and bridges operated under government concession agreements throughout Australia.

International Transport

International transport of goods and passengers is GST-free. This includes international flights (the portion of the journey outside Australia), international shipping of goods, and related transport services. Domestic legs of an international journey may also qualify as GST-free in certain circumstances.

Religious Services

Supplies of religious services by religious institutions are GST-free. This covers church services, religious ceremonies, pastoral care, and similar activities carried out by organisations that meet the definition of a religious institution under the GST Act.

Non-Commercial Activities of Charities

Certain supplies by endorsed charities, gift-deductible entities, and government schools can be GST-free if provided for nominal consideration (well below market value) or for no consideration at all. This supports the charitable sector by ensuring that free or heavily discounted services are not inadvertently taxed.

Input-Taxed vs GST-Free: The Critical Distinction

One of the most common sources of confusion in Australian GST is the difference between GST-free supplies and input-taxed supplies. Both result in no GST being charged to the buyer, but they have very different consequences for the seller. Understanding this distinction is essential for any business that makes these types of supplies.

Why This Matters for Businesses

Consider a residential property investor who earns rental income. The rent they charge to tenants is input-taxed, meaning no GST is added to the rent. However, the investor also cannot claim back the GST paid on property management fees, repairs, maintenance, insurance, and other costs associated with the rental property. That GST is a real cost that reduces the investor's net income.

Contrast this with a farmer who sells fresh produce. The produce is GST-free, so no GST is charged to the buyer. But the farmer can claim back the GST paid on fertiliser, equipment, fuel, accounting services, and every other taxable input. The farmer's business inputs are effectively 10% cheaper in real terms.

A common area of confusion is residential rent. Many people assume residential rent is "GST-free," but it is actually input-taxed. The practical difference is significant: landlords cannot claim GST credits on costs related to their residential rental properties. Commercial rent, by contrast, is a taxable supply (GST is charged), which means commercial landlords can claim full input tax credits.

Similarly, many financial services are input-taxed rather than GST-free. Bank interest, loan fees, and certain insurance products fall into this category. Financial institutions have complex apportionment rules to deal with the mixture of taxable, GST-free, and input-taxed supplies they make.

Mixed Supplies and Apportionment

If your business makes a combination of taxable, GST-free, and input-taxed supplies, you will need to apportion your input tax credits. You can only claim full credits for inputs that relate directly to taxable or GST-free supplies. For inputs that relate to input-taxed supplies, no credit is available. For inputs that relate to a mixture of supply types (such as general overhead costs like office rent), you must calculate a fair and reasonable apportionment.

How GST-Free Supplies Affect Your Business

If your business makes GST-free supplies, there are specific obligations and considerations you need to be aware of, even though you are not collecting GST on those sales.

Record-Keeping Requirements

You must still keep accurate records of all GST-free sales. Even though no GST is collected, the ATO requires you to maintain records that show the nature of each supply and the basis on which you determined it to be GST-free. If the ATO audits your business and you cannot substantiate the GST-free classification, the supplies may be reclassified as taxable, resulting in back-dated GST liability plus penalties and interest.

Your records should include:

• Invoices that clearly identify which items are GST-free and which are taxable
• Documentation supporting the GST-free classification (e.g., evidence that a food item is a basic food, that an educational course leads to a recognised qualification, or that goods were exported)
• Records of the GST credits claimed on inputs related to making GST-free supplies

BAS Reporting for GST-Free Sales

GST-free sales are reported on your Business Activity Statement at Label G1 (Total sales) but are not included at Label 1A (GST on sales), since no GST was collected. Your GST-free sales are also specifically reported at Label G3 (Other GST-free sales, excluding exports) or Label G2 (Export sales). This allows the ATO to verify that your GST-free claims are consistent and reasonable relative to your total sales.

Accurately separating your taxable, GST-free, and input-taxed sales on the BAS is essential. Errors in classification flow through to your GST payable amount and can trigger ATO review. Use our GST calculator to verify individual transaction amounts as you prepare your records.

Tax Invoices for GST-Free Sales

When you make GST-free sales, you are not required to issue a tax invoice (since there is no GST to claim). However, you should still issue a regular invoice or receipt that clearly states the supply is GST-free. This helps your customers understand why no GST appears on the invoice and helps your own record-keeping.

Practical Checklist: Is Your Supply GST-Free?

Use this checklist when you are unsure whether a supply your business makes is GST-free. Work through the steps in order: