Adding is easy, removing is where people slip
Adding GST is a straight 10 percent: multiply the ex-GST figure by 1.1. Removing it is not a straight 10 percent, because the GST was added to the smaller number. To get back to the ex-GST figure, divide the inclusive price by 1.1, and to find the GST itself, divide the inclusive price by 11.
inclusive = exclusive × 1.1 exclusive = inclusive ÷ 1.1 GST = inclusive ÷ 11
Take an $11,000 inclusive invoice. Ten percent of it is $1,100, but the GST in it is $1,000, because the ex-GST price was $10,000. Subtracting 10 percent gives $9,900, which is wrong by $100, and on a $500,000 contract the same mistake is $4,545. It turns up in variation pricing, in comparing quotes where one is ex and one is inc, and in working out the GST on a progress claim.
| Ex GST | GST | Inc GST | Wrong "minus 10%" |
|---|---|---|---|
| $1,000 | $100 | $1,100 | $990 |
| $10,000 | $1,000 | $11,000 | $9,900 |
| $85,000 | $8,500 | $93,500 | $84,150 |
| $450,000 | $45,000 | $495,000 | $445,500 |
Quoting to homeowners
When a price is stated to a consumer, the Australian Consumer Law requires a single total figure that includes GST. A building quote to a homeowner that says "$85,000 plus GST" is not compliant; it needs to say $93,500, and can break the GST out underneath. Between businesses, ex-GST pricing with GST shown separately is normal and acceptable, which is why a subcontractor's quote to a builder and the builder's quote to the client look different.
Tax invoices and BAS
A GST-registered builder charges GST on the full price of the work and claims input tax credits for the GST paid on materials, plant hire and subcontractors. The difference is paid to the ATO on the business activity statement. A tax invoice for more than $82.50 must show the supplier's ABN, the words "tax invoice", the date, a description of the work, and the GST amount or a statement that the total includes GST. Progress claims under a building contract are usually tax invoices in their own right.
Worked example
A client's budget is $500,000 including GST for a renovation. The builder needs to know the ex-GST figure to estimate against: $500,000 ÷ 1.1 = $454,545, with $45,455 of GST. A subcontractor quotes $18,500 plus GST for the electrical: $20,350 inclusive, $1,850 GST. A variation is agreed at $3,300 inclusive: the ex-GST value is $3,000 and the GST is $300, not $330.
Common questions
How do I take GST off?
Divide by 1.1, or find the GST by dividing by 11. Never subtract 10 percent.
How do I add GST?
Multiply by 1.1.
Must quotes to homeowners include GST?
Yes, a single total including GST under the Australian Consumer Law.
Is building work subject to GST?
Yes, at 10 percent, with input credits on materials and subcontractors.
Arithmetic only, not tax advice. Registration thresholds, GST-free supplies, the margin scheme and BAS reporting are matters for your accountant and the ATO.