GST Inclusive vs GST Exclusive: Meaning and Conversion

The two formulas, and why they are not symmetrical

Adding GST is a percentage of the smaller number; removing it is a fraction of the larger one. Exclusive to inclusive: price × 1.1. Inclusive to exclusive: price ÷ 1.1, which is the same as price × 10/11. The GST itself is price × 10% in the first case and price ÷ 11 in the second. The asymmetry is why "GST is 10%" and "GST is one-eleventh" are both true: 10% of the exclusive price, one-eleventh of the inclusive one. Section 9-70 of the GST Act sets the first, section 9-75 derives the second by defining value as ten-elevenths of the price.

Which price to show to whom

Retail customers expect, and are entitled to, the full price. Shelf labels, menus, online shops and advertised prices aimed at consumers are therefore GST-inclusive, and many never mention GST at all. Your tax invoice, if a business customer asks for one, then shows the GST contained in that price.

Business customers think in exclusive prices, because the GST they pay comes back to them as a credit on their BAS. A builder comparing two subcontractors compares the ex GST figures; the GST is cash that passes through. That is why trade price lists, tenders and day rates for contractors are usually written "+ GST".

Unregistered sellers have no GST to include or exclude. If your business is not registered for GST, your price is simply your price; you must not add GST to it or show a GST amount on an invoice. Business.gov.au puts it plainly: under the threshold and not registered, you do not include GST in your prices, and your invoices should show that GST was not included.

The margin trap: pricing on the wrong side of GST

Suppose a product costs you $60.00 ex GST and you want a 50% markup. The selling price before GST is $90.00, and the price on the shelf must be $99.00. A shop owner who puts $90.00 on the shelf has, without noticing, made that the GST-inclusive price: $8.18 of it belongs to the ATO and only $81.82 is revenue. The markup has shrunk from 50% to about 36%. On every sale, a tenth of the price was given away.

The safe habit: calculate costs and margins ex GST, then convert to inclusive at the very end for anything a consumer sees. Your accounting software does the same internally, which is why its reports are ex GST by default.

Quotes, invoices and the words that settle disputes

A quote that reads "$1 250" without more is an argument waiting to happen: the client thinks they will pay $1 250, you intend to invoice $1 375.00. Writing "$1 250 + GST ($1 375.00 inc GST)" costs a few characters and removes the ambiguity. On the tax invoice itself, the GST must be shown, either as an amount per item or as a statement that the total price includes GST, along with the other details the ATO lists for tax invoices. Purchases of $82.50 or less including GST do not need a tax invoice for the buyer to claim the credit.

Inclusive and exclusive in your bookkeeping

Accounting packages ask, for each invoice or bill, whether the amounts are "tax inclusive" or "tax exclusive", and then apply a tax code per line (GST on income, GST-free, input-taxed, GST on expenses, no GST). If you enter an inclusive receipt with the setting on exclusive, the software adds 10% to a price that already contained it, and both your expense and your credit are overstated. A quick monthly check: total the GST column and compare it with one-eleventh of your taxable inclusive sales and purchases. A gap of about ten per cent on any line usually means one setting was wrong. The GST calculator lets you paste a column of amounts to run that check in one go.

Common conversions people search for

"GST exclusive formula" is price × 1.1 for the total and × 0.1 for the GST. "GST inclusive formula" is price ÷ 1.1 for the value and ÷ 11 for the GST. In a spreadsheet, with the price in cell A2, the GST in an inclusive price is =ROUND(A2/11,2) and the exclusive amount =A2-ROUND(A2/11,2); for an exclusive price, the GST is =ROUND(A2*0.1,2). The ROUND to two decimals matches the Act's rule of rounding to the nearest cent, half a cent upwards, for a single item. For a column of items on one invoice, read the GST rounding rules first: rounding each row and then adding can differ by a cent from the total rounded once, and both are lawful.