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Short answer: In Australia, work out what you are supplying before calculating GST. If delivery is integral, ancillary or incidental to delivered goods, the GST character of those goods generally governs the whole delivered-goods supply, so delivery consideration follows the goods. A separate line on an invoice is not conclusive. If you are making a separate delivery supply, that service is generally taxable. Mixed orders require a reasonable allocation of a separately charged delivery fee between taxable and non-taxable goods. Record the customer delivery charge separately from the freight cost you pay to a carrier, and claim a purchase-side GST credit only for eligible GST actually included in the freight invoice.
Start with your GST registration status
GST treatment matters only in the way described below if you are registered, required to register, or dealing with a transaction that creates a registration obligation. The Australian Taxation Office says an ordinary business must register when its current or projected GST turnover reaches A$75,000. That is turnover, not profit: do not subtract postage, packaging, advertising or other expenses before testing the threshold. Special rules apply to some activities and entities, so check the ATO’s current registration guidance when your circumstances are unusual or your turnover is approaching the threshold.
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Keep a written turnover calculation showing the period covered, the sales included and the assumptions used. A seller who is not registered generally cannot charge GST on sales and cannot claim GST credits on business purchases. A registered seller must account for GST collected and may claim credits for eligible GST included in business purchases, subject to the applicable records and invoice requirements.
Classify the sale, not just the shipping line
The central question is whether delivery is part of the supply of delivered goods or a separate service. The Australian Taxation Office’s GST Determination GSTD 2002/3 describes delivery that is “integral, ancillary or incidental to the composite supply of delivered goods.” In that situation, the goods’ GST character governs the delivered-goods supply. The fact that your checkout or invoice shows “shipping” as a separate amount does not, by itself, turn delivery into a separate taxable supply.
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Analyse the commercial arrangement and the customer’s rights:
- Is your obligation to supply the goods to the customer’s address, rather than to make them available for collection?
- Can the customer collect the goods or independently arrange transport without changing the goods transaction?
- Is delivery compulsory for the sale, or can the customer choose an optional service with a distinct price and terms?
- Would the customer reasonably see the transport as a way of receiving the goods, or as a separately purchased logistics service?
- Do your terms, checkout choices and invoices describe one delivered-goods obligation or two supplies?
Use the actual contract and options presented to the customer. Do not rely on the label “postage,” “freight” or “delivery” alone.
Apply the ATO treatment to each arrangement
| Arrangement | GST treatment indicated by the ATO guidance | Accounting action |
|---|---|---|
| Taxable goods delivered; delivery is integral, ancillary or incidental | GST applies to the total consideration, including the delivery fee. | Include the customer delivery amount in the taxable delivered-goods total. |
| GST-free or other non-taxable goods delivered; delivery is integral, ancillary or incidental | The goods’ character governs. For an order consisting entirely of non-taxable goods, the ruling’s table produces no GST on that delivered-goods supply. | Preserve the goods classification and the evidence supporting it. |
| Mixed taxable and non-taxable goods with a separately charged delivery fee | Apportion the delivery fee between the taxable and non-taxable components. The taxable share forms part of the taxable consideration. | Keep a reasonable, repeatable allocation calculation with the order record. |
| Separately supplied optional delivery service | The ruling says a separate delivery supply is taxable regardless of whether the associated goods are taxable or non-taxable, subject to the ruling’s assumptions. | Evaluate and record the delivery contract as its own taxable supply. |
| You pay a carrier or supplier for freight | A purchase-side GST credit depends on GST actually being included, business use, registration and adequate documentation. | Record the freight invoice separately and claim only the eligible GST component. |
Calculate the customer-side GST
All-taxable delivered goods
When all goods are taxable and delivery is part of the delivered-goods supply, the delivery consideration is included in the GST base. For GST-inclusive prices, the GST component is one-eleventh of the total consideration.
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Example: A customer pays $88 for taxable goods, $33 for a second taxable item and $11 delivery. The delivered-goods consideration is $132. The GST component is $132 ÷ 11 = $12. Your sales record should show the two goods, the customer delivery amount and the $12 GST total, even if the checkout displays delivery on its own line.
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All GST-free or other non-taxable goods
If every item is genuinely GST-free or otherwise non-taxable and delivery is integral, ancillary or incidental to supplying the delivered goods, the ATO ruling’s table gives no GST on that composite supply. Keep the evidence for the goods’ status; “non-taxable” is not a substitute for checking whether the item is GST-free, input taxed or subject to another rule.
Mixed orders with a separate delivery fee
For an order containing taxable and non-taxable goods, allocate a separately charged delivery fee between the components. The allocation must be reasonable and supportable for the facts. A value-based allocation is one practical method when the goods are shipped together, but the best method can depend on weight, volume, destination, handling or the contractual terms. Apply the same method consistently unless the facts change, and retain the calculation.
Illustrative calculation: Assume GST-inclusive taxable goods of $110, GST-free goods of $50 and a separately charged delivery fee of $16. Using the relative value of the goods, the taxable proportion is $110 ÷ ($110 + $50) = 68.75%. The taxable share of delivery is $16 × 68.75% = $11; the remaining $5 is allocated to the non-taxable goods. Taxable consideration is therefore $110 + $11 = $121, and the GST component is $121 ÷ 11 = $11. This is an example of a supportable method, not a universal formula: document why your chosen basis reflects the actual supply.
A separate delivery service
If the customer can buy an optional delivery service as a distinct supply, apply the separate-supply analysis. GSTD 2002/3 states: “Where you supply a delivery service that is a separate supply, or a separate part of a mixed supply, the supply of the service will be taxable regardless of whether it is associated with the supply of taxable or non-taxable goods.”
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Example: A customer buys $100 of GST-free goods and elects an optional delivery service priced at $22 GST-inclusive. The goods remain GST-free, while the separate delivery service has a GST component of $22 ÷ 11 = $2. Your records should identify the two supplies rather than treating the entire order as GST-free.
A practical bookkeeping workflow
- Confirm registration and turnover. Test current and projected GST turnover against the A$75,000 ordinary-business threshold and check for exceptions. Record whether you are registered on the transaction date.
- Classify each product. Mark every SKU or product category as taxable, GST-free, input taxed or another applicable category. Keep the reason and supporting documentation, particularly where a product’s treatment is not obvious.
- Read the delivery obligation. Review checkout choices, terms and customer communications. Decide whether delivery is integral, ancillary or incidental to the goods, or a separate optional service. Do not let an invoice layout make this decision for you.
- Determine the customer-side GST. Include delivery consideration in an all-taxable delivered-goods supply; apply the non-taxable treatment to an all-non-taxable composite supply; apportion a separate delivery fee for mixed goods; or treat a distinct delivery service as taxable.
- Create separate ledger fields. Capture product sales, customer delivery charges, GST collected, freight or postage expense, and GST on eligible freight purchases as distinct fields. This prevents a carrier cost from being mistaken for the GST collected from a customer.
- Enter the carrier or supplier invoice. Record the supplier identity, invoice date, amount, whether GST is included, the business purpose and any private or non-business portion. A gross freight amount is not itself a GST credit.
- Claim only eligible purchase credits. A registered business can generally claim the GST component actually included in an eligible business purchase when the required evidence is held. If the carrier did not charge GST, there is no GST amount to claim. Apportion mixed business and private use.
- Reconcile before lodging the BAS. Compare orders, refunds, delivery charges, carrier invoices, GST collected and eligible GST credits with bank and platform records. Investigate differences rather than forcing a balancing entry.
Accounting software can issue invoices and summarise GST liabilities and credits, but it cannot determine whether your delivery contract is a composite supply or a separate service. Review the tax settings and product mappings whenever you change delivery options, marketplaces or product lines.
Keep the customer charge and carrier cost separate
There are two different transactions in a typical online order:
- Customer side: the amount you charge for delivery forms part of the consideration for the goods supply or is consideration for a separate delivery service. Its GST treatment follows the classification above.
- Purchase side: the amount you pay a courier, postal operator, warehouse or supplier is a business expense. Any GST credit is limited to GST actually included in that purchase and supported by the required records.
Example: You receive a freight invoice for $44 GST-inclusive. If the purchase is wholly for your GST-registered business and the invoice supports the claim, the GST component is $44 ÷ 11 = $4; the remaining $40 is the net freight cost. If the supplier is not charging GST, or the expense is private, do not create a GST credit merely because the invoice total is $44.
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Store the customer order, tax invoice where required, carrier invoice, payment record and any allocation worksheet together or in a system that links them. Keep records for the period required by Australian tax law and make them retrievable if the ATO asks how a figure was calculated.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Common mistakes and how to correct them
Assuming every shipping line is taxable
A delivery line can be part of a composite supply of GST-free goods. Revisit the contract and customer options before changing tax codes.
Assuming every shipping line is GST-free
An optional, separately supplied delivery service can be taxable even when the associated goods are GST-free. Identify distinct services at checkout and in your records.
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Mixed taxable and non-taxable goods require an allocation of a separate delivery fee. Keep the ratio, basis and rounding rules with the transaction so another person can reproduce it.
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Claiming GST on the whole freight bill
The credit is for eligible GST included in the purchase, not for the gross shipping cost. Check the invoice, registration status of the supplier, business use and any private portion.
Testing the registration threshold against profit
The A$75,000 ordinary-business test concerns current or projected GST turnover. A low-margin store can still have a registration obligation.
Letting marketplace defaults decide the result
Platforms may apply a default tax code or display shipping separately. Treat that output as a starting record, then verify it against your actual contract and the goods’ GST classification.
Ignoring refunds and shipping adjustments
When an order is cancelled, partly returned or re-shipped, adjust the original goods and delivery treatment together. Preserve the original invoice, credit note or refund evidence and the reason for the adjustment.
Domestic, imported and unusual arrangements
The rules above are focused on Australian domestic seller transactions covered by the ATO’s delivered-goods guidance. International transport, overseas sellers, low-value imported goods, platform-facilitated sales and transactions involving import GST can add separate obligations. The ATO’s low-value imported-goods guidance generally treats merchant-arranged transport, insurance and packing as part of delivered-goods consideration, but specialised facts can change the analysis.
Get Australian tax advice before relying on a domestic workflow for cross-border orders, drop-shipped imports, freight arranged by a marketplace, or a transaction in which different parties contract with the customer. Document who supplied the transport, who collected the money and who bore the delivery obligation.
What to review each month
- New products or bundles have a documented GST classification.
- Delivery options and terms still match the tax treatment used in your checkout.
- Mixed-order allocation calculations are reproducible and exceptions are explained.
- Customer delivery revenue is reconciled to orders and refunds.
- Carrier and supplier invoices identify whether GST was charged.
- GST credits are restricted to registered-business purchases with adequate evidence.
- Projected GST turnover is updated, including sales from every channel.
- BAS totals agree with source orders, freight records and bank or platform settlements.
Recheck the ATO’s live registration and GST guidance before lodging if your turnover, products, delivery model or geographic reach has changed. The A$75,000 threshold and GST rules can change, and the legal character of a supply always depends on the facts of the arrangement.
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