The ATO One-Eleventh (1/11th) Rule Explained

In Australia, GST is charged at a flat 10% on the pre-tax (ex-GST) price. Because the tax is embedded inside the final shelf price, calculating how much GST was charged backwards requires dividing by 11 rather than multiplying by 10%.

Adding GST (Ex-GST → Inc-GST):
GST = Ex-GST Price × 0.10
Inc-GST Total = Ex-GST Price × 1.10

Removing GST (Inc-GST → Ex-GST & Tax):
GST = Inc-GST Total ÷ 11
Ex-GST Price = Inc-GST Total − GST = Inc-GST Total × (10 ÷ 11)
WORKED EXAMPLE • $550 SUPPLIER INVOICE

You receive an Australian supplier invoice with a total amount of $550.00 AUD (inc GST):

• Step 1 (Find GST): $550.00 ÷ 11 = $50.00 GST

• Step 2 (Find Ex-GST): $550.00 − $50.00 = $500.00 net cost

• Verification: $500.00 × 10% = $50.00. Total = $550.00.

GST Registration & Business Activity Statements (BAS)

Australian businesses registered for GST collect GST on taxable sales and claim GST credits (Input Tax Credits) for GST included in purchases. You report these figures to the ATO on your Business Activity Statement (BAS):

  • Label G1: Total sales (including GST).
  • Label 1A: GST on sales (amount owed to ATO).
  • Label 1B: GST on purchases (credits claimed from ATO).
  • Net Payment or Refund: 1A − 1B.

Frequently Asked Questions

Why is GST calculated by dividing by 11 instead of 10%?

When 10% is added to a base price of $100, the result is $110. The GST of $10 represents 10/110 = 1/11 (approx. 9.09%) of the total gross price. Taking 10% of $110 would yield $11.00, which would overstate the tax and understate your revenue. Dividing by 11 gives the exact true GST component.

When do Australian businesses need to register for GST?

You must register for GST with the ATO if your business turnover reaches or is expected to reach $75,000 AUD per year ($150,000 for non-profit entities), or if you provide ride-sourcing (e.g. Uber) or taxi travel regardless of turnover.

What items are GST-free in Australia?

Most basic foods (bread, fresh fruit, vegetables, milk, meat), medical services, disability supplies, prescription medicines, and eligible educational courses are GST-free under ATO regulations.