The two directions
GST in Australia is 10%. Which way you apply it depends on whether your starting price already includes it.
On a GST-EXCLUSIVE price, you add 10%: $100 becomes $110, and the GST is $10.
On a GST-INCLUSIVE price, the GST is already inside the number, and it is one eleventh of the total - not ten percent of it.
Why one eleventh
Start with $100 of goods. Add 10% GST and the total is $110. The GST portion, $10, is now part of a $110 total. As a fraction of that total it is 10 / 110, which simplifies to 1 / 11.
Take ten percent of the $110 total instead and you get $11 - which would only be right if the $110 were the pre-GST price. It is not. That $1 error repeats on every line of every invoice.
| Method | GST | Correct? |
|---|---|---|
| Total ÷ 11 | $10.00 | Yes |
| Total × 10% | $11.00 | No - overstates by 10% |
The rule in one line
To find the GST in a GST-inclusive price, divide by 11. To find the price before GST, divide by 11 and subtract, or equivalently multiply by 10 and divide by 11.
Integer-cents arithmetic matters here. Working in dollars-and-decimals invites rounding drift that leaves a till or an invoice a cent out for no findable reason. Our invoice and till tools compute in whole cents throughout.
Why it's specifically eleven, and not some other number
The divisor comes directly from the rate, not from a separate rule you have to memorise alongside it. For a tax-inclusive price at rate r%, the tax portion is always r divided by (100 + r) of the total - at 10%, that's 10/110, which reduces to 1/11. Change the rate and the same reasoning gives a different divisor: a 5% tax-inclusive price puts the tax at 5/105 of the total (1/21), and a 20% tax-inclusive price puts it at 20/120 (1/6). The 'divide by eleven' shortcut only works because Australia's GST rate happens to be 10% - it isn't a universal tax rule, it's what 10% specifically produces.
This is also why the same backwards mistake - taking the rate as a straight percentage of an already-inclusive total - overstates the tax by a larger margin at higher rates. At 10% the error is one dollar in eleven; at 20% it would overstate the tax by a full sixth of the true amount.
Not every sale has GST in it at all
Before applying the 1/11 rule to a total, it's worth checking whether GST applies to that sale in the first place. Australia treats some categories as GST-free - most basic food, many health and medical services, and most education courses are the commonly cited examples - meaning the listed price already is the full price, with no GST component to extract at all. Running the 1/11 calculation on a GST-free total doesn't produce a small error, it produces a GST figure that doesn't exist in the transaction.
GST-free categories and their exact boundaries are defined by tax law and have specific edge cases (for example, some packaged or prepared foods are taxable where the same food sold plain is not). For anything beyond a rough estimate, treat the ATO's own guidance as the authority, not this generalisation.
Where this comes from
- GST rate (10%) and the one-eleventh rule for GST-inclusive amounts: standard ATO guidance, consistent with business.gov.au.
- GST-free categories (basic food, health, education among them) are set out in the ATO's guidance on GST-free sales; the general tax-inclusive divisor formula (rate / (100 + rate)) is standard arithmetic, not a tax-specific rule.