Business norms method

Note: A reference to 'sales' in this section means sales of trading stock and any other trading income but not sales of capital assets or other supplies you might make solely in ceasing or scaling down your business. Trading income includes things like receipts from services.

The Business norms method is the simplest way for you to work out your GST.

You can use this method if you meet all of the following conditions:

• Available to specified business types only listed in the Business norms table and pharmacies that sell food and rural convenience stores.
• Nature of business – reseller and/or converter.
• Point-of-sale equipment – inadequate.
• Same premises – sell taxable and GST-free food on the same premises.
• Turnover threshold – SAM turnover of $2 million or less.

With this SAM, you apply the business norms percentages that apply to your business to your total sales and your total trading stock purchases to determine your GST-free sales and GST-free trading stock purchases.

We consulted with industry representatives and gathered data directly from retailers to determine the business norms percentages.

Table 2: Business norms method

Type of retailer	Percentage for GST-free sales	Percentage for GST-free trading stock purchases
Cake shop	2%	95%
Continental delicatessen	85%	90%
Convenience store that prepares takeaway food	22.5%	30%
Convenience store that does not prepare takeaway food	30%	30%
Fresh fish shop	35%	98%
Health food shop	35%	35%
Hot bread shop	50%	75%

For the purposes of the Business norms method, the following business types mean:

• Cake shop – you mainly sell cakes, pastries or similar products as opposed to bakeries or breads shops that mainly sell bread or similar bread products. You must not operate as a café.
• Continental delicatessen – you mainly sell processed meats, smallgoods, salamis, cheeses and similar items. However, you are not eligible to use the Business norms method if you  
  • mainly sell grocery items, even if your business is called a deli, delicatessen or continental delicatessen, and
  • make any café or restaurant sales.
• Convenience store – you sell a mixture of goods including bread, milk, dairy products, cigarettes, confectionery, grocery lines and takeaway food (for example, freshly prepared sandwiches). However, you will not be eligible to use the Business norms method if you either  
  • mainly sell takeaway or dine-in food (for example, a fish and chip shop)
  • sell fuel or alcohol.
• Fresh fish shop – you mainly sell fresh fish and other seafood, with some sales of cooked fish and chips. However, you will not be eligible to use the Business norms method if you mainly sell cooked fish and chips with only a small amount of fresh seafood sales.
• Health food shop – you mainly sell food, food supplements, vitamins and other heath food products. You must not convert GST-free food into taxable foods, that is, you only resell items and don't prepare sandwiches or make your own health food bars.
• Hot bread shop – you mainly sell bread as opposed to cakes.

How it works

To estimate your GST-free sales:

• work out your total sales for a tax period
• multiply your total sales by the sales percentage from Table 2 – Business norms method that is relevant to your business. The result is your total GST-free sales.

To estimate your GST-free trading stock purchases:

• work out your total trading stock purchases for a tax period
• multiply your total trading stock purchases by the trading stock percentage from the Table 2 – Business norms method that is relevant to your business. The result is your total GST-free trading stock purchases.

Note: If you are a pharmacy or rural convenience store additional rules apply when you use the Business norms method.

Pharmacies that also sell food

To use the Business norms method for a pharmacy, you must have:

• Pharmaceutical Benefits Scheme (PBS) and non-PBS prescription sales
• over the counter sales
• food sales
• a SAM turnover of $2 million or less excluding PBS prescription sales.

To work out your total GST-free sales:

• Step 1 – identify your PBS prescription sales
• Step 2 – identify your non-PBS prescription sales and over the counter sales and apply the relevant business norms percentages to these components to work out your GST-free sales for each component
• Step 3 – add all the figures worked out in Steps 1 and 2 (PBS prescription sales + GST-free non-prescription sales + GST-free over the counter sales).

To work out your total GST-free trading stock purchases:

• Step 1 – identify your non-PBS prescription and over-the-counter trading stock purchases
• Step 2 – apply the relevant business norms percentages to these components to work out your GST-free trading stock purchases.

Table 3: Pharmacies that also sell food

Sales	Percentage of GST-free sales	Percentage of GST-free trading stock purchases
Non-PBS prescription	98%	Nil
Over-the-counter	47.5%	2%

Rural convenience stores

For the Business norms method to apply to your rural convenience store (also known as a mixed business, milk bar or deli), you must:

• mainly sell 'mixed business' product lines, such as, bread, milk, dairy products, cigarettes, confectionery and grocery lines, but not where the majority of sales are of takeaway food items
• sell fuel
• not sell alcohol
• have a SAM turnover $2 million or less after deducting any sales for both  
  • fuel
  • an Australia Post agency business.

Before applying the business norms percentages:

• deduct sales for fuel or your Australia Post agency business (if any) from your total sales for each tax period
• deduct trading stock purchases for fuel or your Australia Post agency business (if any) from your total trading stock purchases for each tax period.

Then apply the relevant business norms percentages to the reduced sales and stock purchases figures depending if you are either a

• reseller
• converter.

Any sales for fuel and/or Australia Post agency should be included in total sales at box G1 of your activity statement.

Table 4: Rural convenience stores

Business types	Percentage of GST-free sales	Percentage of GST-free trading stock purchases
Converter	22.5%	30%
Re-seller	30%	30%

Find out about:

• Stock purchases method
• Snapshot method
• Sales percentage method
• Purchases snapshot method
• Completing your activity statement