Quick answer
GST-free items appear on your invoice with the same description as anything else, but with 0% GST and a clear label. You still issue a normal invoice. If the same invoice mixes GST-free and taxable items, you must separate them clearly — the ATO requires the buyer to be able to identify the GST applied to each item.
The three (really four) GST categories
To invoice correctly, you have to understand what category each item falls into. Mixing them up is the most common mistake.
1. Taxable supplies (most things)
The default. You add 10% GST. You can claim input tax credits on the GST you paid for related expenses.
2. GST-free supplies
No GST added to the sale. You can still claim input tax credits on the GST you paid for inputs. This is the “best of both worlds” treatment that exporters and food producers benefit from.
Common GST-free categories:
- Most basic food (fresh produce, milk, bread, plain rice/pasta)
- Most health services from recognised practitioners (GP, physio, dentist)
- Education courses from recognised providers
- Childcare from approved providers
- Exports of goods and services (see overseas client invoicing)
- Water, sewerage, and drainage services
- Cars and car parts for eligible disabled people
- Religious services
- Some medical aids and appliances
3. Input-taxed supplies
No GST added to the sale, but you CANNOT claim input tax credits on related expenses. Common examples:
- Residential rent
- Most financial supplies (interest, bank fees on loans)
- Precious metals trading
4. “Out of scope”
Not a taxable supply at all — e.g. wages paid to employees, dividends, gifts. Doesn’t appear on a customer invoice in the first place.
How to invoice a pure GST-free sale
Same as a normal invoice, but:
- The line shows the price ex-GST (which equals the total since GST is $0)
- Label the line “GST-free” or include a footer note
- GST subtotal is $0.00
- The words “Tax invoice” aren’t legally required — but leave them on for consistency
Sample wording:
Description Qty Rate Amount ------------------------------------------------------------- Group fitness class — 4 sessions 4 $30 $120.00 (GST-free educational supply) Subtotal $120.00 GST $0.00 Total $120.00
How to invoice a mixed invoice (taxable + GST-free)
This is where mistakes happen. The ATO requires that for any invoice $1,000 or over, you make it possible to identify the GST applied to each item. Best-practice format:
Description Qty Rate GST? Amount ----------------------------------------------------------------------- Nutrition consultation 1 $180 Free $180.00 Supplement pack (taxable) 1 $80 10% $80.00 Recipe e-book download 1 $20 10% $20.00 Subtotal (taxable items) $100.00 GST (10% on taxable) $10.00 Subtotal (GST-free items) $180.00 Total $290.00
This makes audit-time trivial — for both you and the buyer.
The mistake that costs you on audit
The biggest GST-free invoicing mistake is mislabelling an input-taxed supply as GST-free. The two look identical on the invoice (no GST charged), but they have opposite consequences for your input tax credits.
Practical example: a coaching course delivered by a non-recognised provider isn’t GST-free — it’s either taxable or out-of-scope depending on substance. Calling it “GST-free” on the invoice while claiming input tax credits for your home office can flag in audit.
When in doubt: ask your BAS agent which category each item sits in, and write it down in your chart of accounts.
Do GST-free sales count toward the $75k threshold?
Yes. The $75,000 GST registration threshold is calculated on total GST turnover, which includes GST-free supplies but excludes input-taxed supplies.
Implication: if you run a healthy export-only services business doing $90k/year — all GST-free — you still need to register. Once registered, you charge GST on Australian sales, exports stay GST-free, and you can claim input tax credits on Australian expenses.
BAS treatment
On the BAS, GST-free sales sit in box G3 (other GST-free sales) plus G2 (exports) where relevant. The total goes on G1 (total sales). You still report them — just no GST collected.
GST you paid on related expenses still goes into your input tax credit claim (G10 + G11) and reduces what you owe.
What “recognised” means
A few categories depend on who delivers the supply:
- Health — must be a service listed in s.38-10 of the GST Act, delivered by a registered practitioner
- Education — must be a course of study delivered by an approved education provider, or a tertiary course, school course, etc. (Skill-up YouTube channels are not GST-free.)
- Childcare — approved childcare service under family assistance law
If you’re uncertain whether your service qualifies, get advice before treating it as GST-free — mislabelling here is one of the more frequent ATO correction letters.
How Free Invoice App handles GST-free items
Free Invoice App lets you mark any line item “GST-free” with a click. The invoice automatically:
- Calculates GST on the taxable portion only
- Shows separate subtotals for taxable vs GST-free
- Adds a footer note explaining the GST treatment
- Stores the GST treatment in your revenue history for BAS reporting
Frequently asked questions
What does “GST-free” mean on an invoice?
GST-free means no 10% GST is added to the sale, but the supplier can still claim input tax credits on the GST they paid for related expenses. It’s different from “input-taxed” (no GST charged, no credits claimed) and “out of scope” (not a taxable supply at all).
Do I still issue a tax invoice for GST-free sales?
You issue a regular invoice. The words “Tax invoice” are only legally required when GST is included. For GST-free sales the document is just an invoice — but most businesses still title it “Tax invoice” out of habit, and it does no harm.
How do I show GST-free items on a mixed invoice?
Mark each line as either taxable or GST-free, calculate GST only on the taxable portion, and show subtotals clearly. The ATO requires you to make it obvious how much GST applies and to which items — a single “Total includes GST” line is not enough for a mixed invoice.
What are common GST-free items I might invoice?
Basic food (most fresh produce), most health services delivered by recognised practitioners, education courses delivered by recognised providers, childcare, exports of goods or services, water and sewerage services, and some medical aids. Coffee shops, restaurants, and prepared food are usually taxable.
Do GST-free sales count toward the $75,000 GST registration threshold?
Yes. The $75,000 threshold is based on total GST turnover, which includes GST-free supplies. Input-taxed sales (like residential rent and most financial supplies) are excluded. So GST-free exporters can still be required to register.