A physiotherapy clinic in Marrickville invoices a standard consult as GST-free. At the front desk it also sells a resistance band and a heat pack. The band is taxable. The consult is not. The same EFTPOS tap can be both, and the same monthly rent can support both. That is a mixed-supply file. Most Australian small businesses have one and do not name it.

GST is 10 per cent when it applies. The work is deciding whether it applies, and then whether the thing you bought was a creditable acquisition. Software will happily put a tax rate on every line. It will not notice that you used the clinic rate on the retail shelf, or that you claimed the full GST on a car that goes to the coast on Saturday.

This essay is general information for Australian readers. It is not tax, legal or BAS advice. The schedules of GST-free and input-taxed supplies are in the GST law and the ATO’s public pages. Confirm the treatment of your supply — especially health, food, education, grants and property — before you copy a rate from a neighbouring file.

Three treatments, not two

Every supply you make is one of these, or a mix:

• Taxable. You charge GST of 10 per cent. You can generally claim input tax credits on related purchases. Ordinary consulting by a bookkeeper, a café coffee, a builder’s labour, a taxable retail item.
• GST-free. You charge no GST. You can generally still claim input tax credits on related purchases. Many basic foods, many medical and health services that meet the GST-free tests, most education courses that meet the tests, exports, some childcare.
• Input-taxed. You charge no GST. You generally cannot claim input tax credits on related purchases. The usual small-business examples are residential rent and many financial supplies.

People collapse the last two into “no GST”. That is how a file dies. GST-free is inside the system. Input-taxed is a different door. A not-for-profit that treats a residential property it lets to a tenant as “GST-free because we are nice” will claim credits it cannot have and under-describe the supply.

If a class of supply is regular, give it its own income account. The chart of accounts essay is blunt about this: mixing GST-free clinic fees into “Sales” with a tax rate you remember to change is how a Simpler BAS still goes wrong.

What a mixed supply actually is

A mixed supply is a single deal that contains more than one GST treatment, and the parts can be unbundled. The clinic consult plus the heat pack is the textbook. A café’s takeaway bag that holds a loaf of GST-free bread and a taxable ready-to-eat salad is another. An association invoice that bundles a GST-free education workshop with a taxable dinner is a third.

A composite supply is different: one dominant thing, with incidentals that take the same treatment. The ATO’s food and health pages walk the line. Your job as a bookkeeper is not to relitigate the line every Saturday. It is to pick a method, write it down, and apply it the same way each month.

Practical rules that survive a review:

1. If you price the parts separately, code the parts separately.
2. If you price a bundle, apportion on a reasonable basis (stand-alone selling prices are better than a guess) and keep the working paper.
3. Do not use a blended “7 per cent GST” rate. GST is 10 per cent on the taxable part and nil on the rest.
4. Train the till. A café that leaves the GST-free button next to the latte button will miscode on a Saturday morning, and Simpler BAS will not save the underlying records.

A clinic, in numbers you can check

Marrickville Physio, GST-registered, cash or accrual — the method is a separate essay.

• 80 consults in a week at $110 each, GST-free. Income $8,800. GST on sales: nil.
• Retail: bands and packs $1,650 including GST. Underlying sales $1,500, GST $150.
• Room rent paid to the landlord, $3,300 including GST, for a commercial suite. If the rent is a creditable acquisition, GST on purchases includes $300, subject to private-use and mixed-use tests below.
• A heat-pack order from a supplier, $550 including GST. Credit $50, if the packs are for taxable retail or for GST-free treatment stock used in GST-free consults — both are generally creditable. The same order used to stock the owner’s home first-aid drawer is not.

The activity statement should show GST on sales of $150 for that week’s shape, not “about 10 per cent of everything that hit the bank”. Health-fund and Medicare remittances are source documents for the consult side. They are not a licence to ignore the retail drawer.

If the principal also does medico-legal reports or workplace assessments, do not assume those are GST-free because the Tuesday consults are. Different supplies. Check the ATO health schedule or ask the agent before the first invoice.

A café, where food is the trap

Basic groceries can be GST-free. Restaurant food, hot food, and most prepared meals are taxable. Coffee is taxable. A loaf of bread sold cold from the counter can be GST-free. The same loaf toasted with butter is not.

The Enmore café does not need a lawyer at the till. It needs a mapped product list: each POS item tagged once, reviewed when the menu changes, and reconciled to G1 and 1A if they report full labels — or at least to 1A if they are on Simpler BAS. The tax-rate report at month-end is the control. If “GST-free” as a share of sales jumped the week they launched a toastie, someone mapped the toastie wrong.

Staff meals, owner meals and wastage are not sales. They are private use or cost of sales. Do not leave them in taxable sales and “make it up on purchases”.

Input tax credits are about creditable purpose

An input tax credit is the GST you paid on a purchase that you acquired to a creditable extent. Three tests sit underneath the software’s tax rate:

• you are registered (or required to be)
• you acquired the thing to some extent for a creditable purpose
• you hold a tax invoice if the document rules require one

Creditable purpose is the one files skip. A purchase used to make taxable or GST-free supplies is generally creditable. A purchase used to make input-taxed supplies is generally not. A purchase used privately is not. A purchase that is a mix must be apportioned.

The clinic’s commercial rent is usually creditable. If the same entity also owns a residential flat and pays an agent to manage it, that agent’s fee relates to an input-taxed supply and the GST on the fee is generally not creditable. Same ABN, different purpose.

A not-for-profit in inner Sydney that runs a GST-free community course and also lets a residential house it inherited has both treatments in one file. Split the costs that can be split. Apportion the bookkeeper’s fee, the software subscription and the audit if they serve both. Write the percentage down once a year and keep it until something material changes.

Private use is a percentage, not a vibe

Cars, phones and home internet are where private use hides. Super Guarantee of 12 per cent from 1 July 2025 and Payday Super from 1 July 2026 do not change this: a car fringe or a logbook is still a record-keeping problem. See source documents and the five-year rule.

If the clinic principal’s car is 70 per cent business on a current logbook, you claim 70 per cent of the GST on the running costs that have tax invoices, and you deal with the income-tax and FBT consequences separately. You do not claim 100 per cent “because the logo is on the door” and you do not claim nil “to be safe” if the logbook supports a real percentage.

A $1,100 phone bill including $100 of GST, used 40 per cent for the café roster and suppliers, supports a $40 credit — if you have the bill and a note for the 40 per cent. The other $60 of GST is private. Code it that way. Do not bury it in “telephone” and hope the tax agent finds it in July.

Tax invoices, $82.50, and the document you actually need

For purchases of $82.50 or more including GST, you generally need a tax invoice to claim the credit. The invoice must identify the supplier and their ABN, describe the supply, and show the GST. For larger supplies it must also identify you.

Ask for it in the week you buy. A Bunnings docket that is a tax invoice is fine. A square-reader email that is not a tax invoice is not. Recipient-created tax invoices are allowed where you have a valid RCTI agreement — common in some trade and produce supply chains. Keep the agreement with the five-year file.

You do not need a tax invoice to make a taxable sale. You need to issue one when the customer asks, and always when the supply is $82.50 or more and they will want the credit. The clinic’s retail drawer should be able to spit out a tax invoice for the $88 heat pack. The consult, being GST-free, still needs a proper invoice for the health fund; it just will not include GST.

Adjustments when the story changes

GST is not only the first coding. Adjustment events exist when:

• you issue a credit note or never get paid (and you have written it off under the rules)
• the private-use percentage changes in a way the law treats as a change in creditable purpose
• a purchase you claimed in full is later used for an input-taxed activity

A $22,000 (including GST) fit-out claimed in March, later partly used to run an input-taxed activity, may need an adjustment. This is not a journal you invent on 27 October. It is a working paper with the agent.

Bad debts have their own GST adjustments, and they interact with cash versus accrual. On cash GST you never reported the GST if you were never paid, so there is nothing to adjust. On accrual GST there is.

What the activity statement should be able to say

Whether you lodge Simpler BAS or a full statement, the ledger should still answer:

• taxable sales and the 10 per cent on them (label 1A)
• GST-free sales, even if you no longer write G3 on the form
• input-taxed sales, kept well away from G1 mistakes
• GST on purchases you are entitled to (label 1B), after private use and input-taxed use
• the invoices that support 1B

If those five cannot be reprinted, do not lodge. The BAS lodgement calendar is a reprint discipline, not a date to start thinking about heat packs.

The original Bookkeeping Centre copy said every business needs accurate books and that the needs vary. A clinic, a café and an association can share Xero and still need different tax rates, different income accounts and different apportionment notes. The BAS and GST hub is where those files are meant to sit: treatments named, credits supported, and no blended rate invented because the till was busy.