GST-Free vs BAS Excluded vs Input Taxed: The Tax Codes Explained

GST-free means no GST is charged but the transaction is still reported on your BAS; BAS excluded means the transaction doesn't belong on the BAS at all; input taxed means no GST is charged and you can't claim GST credits on the costs of making that sale. Mixing those three up is the most common coding mistake in small-business Xero and MYOB files, and while Simpler BAS hides most of the damage from the ATO, it still distorts your G1 total, your GST reconciliation and the numbers your accountant works from. Here's each code in plain English, a 27-line table of the transactions people get wrong, and a straight answer on whether you need a BAS at all if you're not registered for GST.

First: a BAS isn't the same thing as GST

GST is a tax. The BAS is a form.

GST (goods and services tax) is the 10% added to most goods and services sold in Australia. You must register once your GST turnover reaches $75,000 ($150,000 for not-for-profits) and you have 21 days to do it (as at September 2026).

The BAS (business activity statement) is the ATO form you lodge monthly, quarterly or annually to report and pay several obligations at once: GST, PAYG withholding from employees' wages, PAYG income tax instalments and, for some businesses, FBT instalments, fuel tax credits and wine equalisation tax. GST is usually the biggest section but it's only one section. Our BAS and GST guide covers the form itself; this page is about the tax codes you attach to every transaction before the form gets filled in.

Every time you code a bank line or a bill in your accounting software, you're telling it which BAS box (if any) that transaction feeds. That's what the tax code does. Get the code right and the BAS almost fills itself in. Get it wrong and you either over-claim GST credits, under-report sales, or both.

The four codes side by side

Code	GST rate	Appears on the BAS?	Can you claim GST credits on related costs?	Xero rate name	MYOB code
GST (taxable)	10%	Yes: G1, 1A on sales; 1B on purchases	Yes	GST on Income / GST on Expenses	GST (CAP for capital items)
GST-free	0%	Yes: sales count in G1, no GST at 1A	Yes	GST Free Income / GST Free Expenses	FRE (EXP for exports)
Input taxed	0%	Yes, as a sale with no GST	No	Input Taxed	ITS (sales) / INP (purchases)
BAS excluded	None	No, nowhere	Not applicable	BAS Excluded	N-T

GST: the default for most sales and purchases

If you're GST-registered and sell a plumbing job, a haircut, a website or a coffee, you charge 10% GST and report it at 1A. When you buy a laptop, pay rent on a shop or pay your accountant, the GST in the price is a credit you claim at 1B. In Xero that's "GST on Income" and "GST on Expenses"; in MYOB it's the GST code, with CAP used for capital purchases like vehicles and equipment.

GST-free: 0% GST, but it's still a sale (or a purchase)

GST-free supplies are listed in the GST Act and include basic food (bread, milk, fresh fruit and vegetables, unprocessed meat), most medical and health services, most education courses, childcare, water and sewerage, and most exports of goods and services to customers outside Australia. If you sell GST-free items you charge no GST, but the sale still counts in your G1 total sales, and you can still claim GST credits on the costs of running your business. A bakery selling plain bread charges no GST on the bread but claims the GST on its ovens and flour deliveries.

On the purchase side, GST-free also covers anything you buy where the supplier legitimately didn't charge GST: a GST-free item, or a purchase from a supplier who isn't registered for GST at all. The point is that it's a real business purchase with nothing to claim.

Input taxed: no GST charged, and no credits either

Input taxed is the code that catches people out because it looks like GST-free. The difference is on the credit side. Input taxed supplies include financial supplies (lending money, bank account services, interest, dealing in shares) and residential rent, as well as sales of existing residential premises. The seller charges no GST, and the seller also can't claim GST credits on the costs of making that supply. A landlord renting out a house pays GST on the plumber's repair bill and can't claim it back, because residential rent is input taxed.

For a normal trading business the input taxed code mostly shows up on the receiving end: bank fees, loan interest and interest earned on your business account. None of it carries GST. Code these Input Taxed (Xero) or INP/ITS (MYOB), not BAS Excluded, because they're genuine supplies that belong in your GST records even though the GST is nil. Earning a little bank interest doesn't cost you GST credits on your general overheads; the GST rules include a financial acquisitions threshold designed so that small amounts of financial supplies don't trigger any credit denial. If you do significant lending or share dealing, that's a conversation for your accountant.

BAS excluded: it isn't a GST transaction at all

BAS excluded (MYOB calls it N-T, "not reportable") is for money moving in or out of the business that isn't a sale or purchase of anything. There's no supply, so GST law simply doesn't apply, and the transaction shouldn't appear in any GST box on the BAS. The classic list:

• Wages and salaries
• Superannuation contributions
• PAYG withholding, PAYG instalments, income tax and GST payments or refunds to and from the ATO
• Loan principal repayments and loan drawdowns
• Owner drawings, dividends, trust distributions and capital contributions
• Depreciation and other journal entries
• Private expenses paid from the business account
• Transfers between your own bank accounts
• Fines and penalties
• Stamp duty and most government taxes
• Donations to deductible gift recipients where you receive nothing in return

Two nuances. Wages are BAS excluded for GST purposes, but if you withhold tax from wages, your gross wages and the tax withheld are reported on the same activity statement at labels W1 and W2. Those figures come from your payroll system, not from the tax code on the wage expense line, which is why the expense itself stays BAS Excluded. And super is BAS excluded full stop; it never appears anywhere on the form, even now that it's due on payday under the rules explained in our payday super guide.

GST-free vs BAS excluded: why it matters when the GST is $0 either way

On a purchase, both codes produce the same result at 1B: nothing to claim. So does the distinction matter? Yes, for three reasons.

Sales. GST-free sales count in G1 total sales. BAS excluded receipts don't. If you code a GST-free export sale as BAS Excluded, your G1 is understated and your BAS no longer reconciles to your profit and loss. If you code a loan drawdown or a capital injection as GST Free Income, your G1 is overstated and the ATO sees turnover that doesn't exist.

Full reporting. If you report on the full BAS (turnover of $10 million or more, or you've chosen to), GST-free purchases go into G11 total non-capital purchases, and BAS excluded items don't. The code drives the box.

Record quality. Even on Simpler BAS, your accountant, your BAS agent and any ATO reviewer read your GST audit report. A file where wages, super and tax payments sit in GST Free Expenses next to genuine GST-free purchases is a file that takes hours to clean up, and you pay for those hours. Our guide to hiring a bookkeeper or BAS agent covers what that clean-up typically costs.

The coding table: 27 common transactions

Codes below use Xero's names with the MYOB equivalent in brackets. Where a single bill needs to be split across two codes, the table says so; that split is the whole trick with insurance and vehicle registration.

Transaction	Correct code	Why
Sales of goods or services to Australian customers	GST on Income (GST)	Standard 10% taxable sale
Export sales to overseas customers	GST Free Income (EXP)	Most exports are GST-free; still counts in G1
Interest earned on the business bank account	Input Taxed (ITS)	Financial supply; no GST, still a sale for BAS records
Residential rent received	Input Taxed (ITS)	Input taxed supply; no credits on related costs
Bank account fees and bank merchant fees	Input Taxed (INP)	Financial supply by the bank; no GST charged, nothing to claim
Interest paid on a business loan or overdraft	Input Taxed (INP)	Lender's financial supply; no GST
Loan principal repayments	BAS Excluded (N-T)	Moving borrowed money, not a purchase
Stripe and Square processing fees	GST on Expenses (GST)	Stripe confirms GST applies to all its Australian fees; keep the monthly tax invoice
PayPal fees	Input Taxed (INP)	PayPal's product disclosure statement says its fees are exclusive of GST (only the Payments Pro and Virtual Terminal monthly fees include GST), so there's no credit to claim on standard transaction fees
Business insurance premium	Split: premium GST on Expenses (GST); stamp duty line BAS Excluded (N-T)	Premium includes GST; stamp duty carries none and must not be claimed
ASIC annual review fee, business name renewal	BAS Excluded (N-T)	Government fee exempt from GST under Division 81; some bookkeepers use GST Free, which gives the same result at 1B
Stamp duty on any transaction	BAS Excluded (N-T)	A tax, not a supply
Council rates, land tax	GST Free Expenses (FRE)	Government taxes exempt from GST; commonly coded GST-free
Water and sewerage rates	GST Free Expenses (FRE)	Water supply is GST-free under the GST Act
Vehicle registration renewal	Split by line: registration fee GST Free Expenses (FRE); CTP or TAC charge GST on Expenses (GST) where GST is shown; duty BAS Excluded (N-T)	Treatment varies by state; code each line as the renewal notice shows it
Wages and salaries	BAS Excluded (N-T)	Not a supply; W1 and W2 come from payroll
Superannuation contributions	BAS Excluded (N-T)	Never appears on a BAS
PAYG withholding, income tax, GST payments to the ATO	BAS Excluded (N-T)	Paying tax isn't buying anything
Owner drawings, dividends, trust distributions	BAS Excluded (N-T)	Equity movements
Depreciation	BAS Excluded (N-T)	Journal entry; GST was dealt with when the asset was bought
Donations to a DGR charity (nothing received in return)	BAS Excluded (N-T)	A gift isn't payment for a supply; sponsorship with benefits is different
Fines, parking and speeding penalties	BAS Excluded (N-T)	No supply
Overseas software subscription, ABN and GST status supplied, no GST on invoice	GST Free Expenses (FRE)	Non-resident supplier shouldn't charge a GST-registered business; nothing to claim
Overseas software subscription with Australian GST shown on the invoice	GST on Expenses (GST)	Claim it, but only if the invoice shows GST and the supplier's Australian registration
Purchases from a supplier not registered for GST	GST Free Expenses (FRE, or GNR in MYOB)	No GST was charged so there's nothing to claim; still a real purchase
Basic food for the office (milk, fruit, bread)	GST Free Expenses (FRE)	Basic food is GST-free
Transfers between your own accounts	BAS Excluded (N-T)	Not a transaction with anyone

Six transactions that trip everyone up

Bank fees vs merchant fees. Your bank's account-keeping fees and its merchant terminal fees are financial supplies and carry no GST. Stripe and Square aren't banks; they sell a payment-processing service and charge GST on it, which you can claim if you're registered. PayPal sits in the middle: its own product disclosure statement says its fees are exclusive of GST, apart from a couple of monthly product fees that include it. The only safe habit is to read the monthly tax invoice from each provider rather than assuming.

Insurance. The premium includes GST. The stamp duty line on the same invoice doesn't. The ATO's own instruction is to report the premium less stamp duty as your purchase, so enter the bill as two lines, never as one GST-inclusive total. A $2,200 premium with $180 of duty entered as a single GST line over-claims about $16 every time; across a fleet policy and a year of renewals it adds up to a real adjustment.

Vehicle registration. A registration renewal is usually three things on one page: the registration fee itself (no GST), a compulsory third-party or TAC insurance charge (GST included in most states, priced higher for GST-registered owners because they can claim it) and insurance duty (no GST). Victoria's renewal shows the split clearly; Western Australia charges no GST on any vehicle or licence fee. Code each line as the notice shows it, and don't claim GST on a registration bill that doesn't itemise any.

Overseas software and advertising. Since 2017, non-resident sellers of digital products and services must charge GST to Australian consumers. If you're GST-registered and give the supplier your ABN and confirm your registration, they shouldn't charge you GST, and there's nothing to claim. Meta works this way: with a valid ABN and confirmed GST registration, no GST is added to your ad spend. Google Ads is billed by Google Australia and includes GST regardless, which you can claim. Many other vendors (Adobe, Microsoft, Canva, Xero itself) bill from Australian entities and charge GST. The only rule that always works is: claim GST only when the tax invoice shows it. The reverse-charge rules that make the buyer self-assess GST on imported services only bite when the purchase isn't fully for your business, so for most small businesses there's nothing extra to do.

ASIC and other government fees. ASIC fees, business name renewals, licence fees and most permits are exempt from GST under Division 81 of the GST Act. There's no GST to claim, ever. Whether you code them BAS Excluded or GST Free doesn't change your BAS on Simpler reporting; pick one and be consistent, and if you're on full reporting follow your BAS agent's preference. Watch out for council charges that are services rather than taxes (hall hire, extra bins): those can carry GST.

Wages and super. Both are BAS excluded. The confusion comes from seeing wage figures on the BAS at W1 and W2. Those labels are PAYG withholding, fed by payroll, not GST, fed by tax codes. Leave the wage expense and super expense lines on BAS Excluded and let your payroll software populate W1 and W2 through Single Touch Payroll.

What is Simpler BAS?

Simpler BAS is the default GST reporting method for businesses with a GST turnover under $10 million. Instead of the full set of GST labels (G2 exports, G3 other GST-free sales, G10 capital purchases, G11 non-capital purchases and the rest), you report three:

• G1 total sales
• 1A GST on sales
• 1B GST on purchases

You don't complete a GST calculation worksheet, and you don't report your GST-free or input taxed purchases anywhere. That's why coding a purchase GST Free Expenses instead of BAS Excluded makes no difference to what the ATO receives from a Simpler BAS lodger: 1B is the only purchase figure on the form, and both codes contribute nothing to it.

What Simpler BAS doesn't do is change the underlying law or your record-keeping obligations. You still need tax invoices for every credit you claim, you still need to separate the GST-free component of a mixed invoice (the stamp duty on an insurance bill, the registration fee on a rego renewal), and G1 still has to be right. Xero and MYOB both default new Australian files to Simpler BAS, and Xero may hide (archive) capital-purchase rates such as GST on Capital in a Simpler BAS file, so if you're coding a fixed-asset bill and can't find the capital rate, restore it under Tax Rates rather than using GST on Expenses.

If your turnover is $10 million or more you report on the full BAS and every code in the table above lands in a specific box, which is where the discipline pays off.

Do I have to do a BAS if I'm not registered for GST?

Not for GST. If you're under the $75,000 threshold and haven't registered voluntarily, you don't charge GST, can't claim GST credits, and don't report GST at all. Your tax codes barely matter for compliance in that situation, because nothing you code feeds a GST box.

You'll still receive an activity statement if you have other obligations the ATO collects through the same system:

• PAYG withholding, because you employ staff (or withhold from contractors under a voluntary agreement). You report gross wages and tax withheld and pay it over, monthly or quarterly depending on how much you withhold.
• PAYG instalments, because the ATO has put you in the instalment system to pre-pay your income tax across the year.

When the statement carries these but no GST, it's usually called an instalment activity statement (IAS) rather than a BAS. The due dates line up with the BAS calendar: quarterly statements fall on 28 October, 28 February, 28 April and 28 July, with the standard extensions for lodging through a registered agent laid out in our BAS due dates guide. Lodging late attracts a failure-to-lodge penalty of one penalty unit per 28 days (or part thereof) for small entities, capped at five units; at $364 a unit that's up to $1,820 per statement (as at September 2026), and the ATO normally warns you first.

If you're registered for GST, you lodge a BAS every period regardless of turnover, even a nil one.

Key takeaways

• GST is a tax; the BAS is the form that reports it alongside PAYG withholding and instalments. They aren't the same thing.
• GST-free means 0% GST but the sale or purchase still belongs on the BAS. BAS excluded means it belongs nowhere on the BAS. Input taxed means no GST charged and no GST credits on the costs of making that supply.
• Wages, super, tax payments, loan principal, drawings, dividends, depreciation, fines, stamp duty and private spending are all BAS excluded. Bank fees, loan interest and interest received are input taxed, not BAS excluded.
• Split insurance (premium vs stamp duty) and vehicle registration (fee vs CTP vs duty) into separate lines, and only ever claim GST that a tax invoice actually shows, including on overseas subscriptions.
• Simpler BAS (turnover under $10 million) reports only G1, 1A and 1B, so GST-free vs BAS excluded doesn't change your purchase figures, but it still changes G1 and the quality of your file.
• No GST registration means no GST on your activity statement, but you'll still lodge an IAS if you withhold PAYG from wages or pay PAYG instalments.

Where to get help

• ATO: GST-free sales and input taxed sales at ato.gov.au list every category in the GST Act, and the ATO's Simpler BAS GST bookkeeping guide walks through common transactions.
• ATO: GST on imported services and digital products explains when an overseas supplier should and shouldn't charge you GST.
• Xero Central and MYOB Help each publish the default tax rate list for Australian files and how each rate maps to the activity statement.
• A registered BAS agent can review your coding before each lodgement and fix the file you're working from; our guide to what a BAS agent is and whether you need one explains what they can and can't do for you.
• Your accountant is the right person to settle anything specific to your situation, particularly if you make financial supplies, rent out residential property or deal with mixed private and business use.