Topic: GST reform debate: what proposed changes could mean for small businesses

Last reviewed: 17/12/2025

Focus: Accounting Practice Analysis

GST reform debate 2025: impact on small business

GST reform in Australia is being debated primarily around raising the GST rate, broadening the base (removing exemptions), altering state distribution, and simplifying compliance—and any of these changes could materially increase small business admin, change consumer demand, and shift pricing strategies, even where the business is merely a tax collector. From an Australian accounting practice perspective, the practical risk is not just “more GST”, but forced system reconfiguration (POS, invoicing, eCommerce), contract repricing, cash flow volatility, and higher audit exposure if transitional rules are complex.

Featured Answer: GST reform proposals—such as increasing the rate, broadening what is taxable, or changing registration/reporting settings—would most likely raise compliance workload and increase pricing and cash flow pressure for small businesses, especially those selling to consumers. The greatest operational impacts would be system and contract changes, reassessing GST-free/input-taxed classifications, and managing transitional adjustments under the A New Tax System (Goods and Services Tax) Act 1999.

What is the GST reform debate in Australia (and why does it keep returning)?

The GST reform debate concerns whether Australia’s GST settings remain fit for purpose as the economy shifts toward services, digital consumption, and an ageing population. Policy discussion commonly focuses on adequacy of revenue, fairness of the tax mix, and administrative simplicity.

GST revenue performance depends on consumption patterns, and exemptions narrow the base over time.
States rely on GST distributions, so changes affect federal–state fiscal arrangements.
The compliance burden is already non-trivial for small businesses lodging BAS, managing GST coding, and substantiating adjustments.

GST law is administered under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).
BAS reporting and GST obligations are administered by the ATO under the Taxation Administration Act 1953 and associated regulations.
The ATO’s public guidance on GST classification, tax invoices, adjustments, and BAS reporting provides the operational standard for compliance (ATO GST guidance and rulings).

What GST changes are most commonly proposed (and what do they mean in practice)?

Most “GST reform” proposals fall into a small number of levers. Each lever creates different practical implications for small businesses.

Could the GST rate increase (for example, from 10% to a higher rate)?

A rate increase would primarily require rapid system changes and price strategy decisions, and it can trigger consumer demand shocks in discretionary categories.

Point-of-sale, invoicing, and eCommerce tax settings must be updated on a changeover date.
Contracts and quotes may need variation clauses applied (especially fixed-price consumer work).
Cash flow timing can tighten because higher GST collected increases remittance amounts, particularly if input tax credits do not rise proportionally.
Pricing decisions become sensitive: absorb vs pass-through vs mixed pricing.

A café with tight margins may choose not to raise menu prices immediately. The café collects a higher GST component but remits more at BAS time; margin erosion occurs unless prices are adjusted.

Could the GST base be broadened (fewer GST-free or input-taxed supplies)?

Broadening the base generally means more items become taxable, which increases GST collected and the need to reassess product/service classifications.

Reclassification work becomes urgent: what was treated as GST-free or input-taxed may become taxable.
Staff training and stronger GST coding controls become critical to avoid under/over remittances.
Businesses servicing vulnerable customers may face demand sensitivity if essentials are affected.

GST classification is a legal question under the GST Act and must align with ATO views expressed in public rulings and guidance. Misclassification is a common audit trigger, particularly where a business has mixed supplies (some taxable, some GST-free, some input taxed).

Could small business reporting be simplified (different BAS frequency or methods)?

Compliance-focused proposals can include expanding simplified accounting methods, changing thresholds, or modifying reporting periods. While the intention may be simplification, transitions typically create short-term complexity.

Some may benefit from fewer lodgments (reduced admin), while others may face changes to cash flow timing.
Systems must support new reporting settings and ensure correct attribution of GST to tax periods (a recurring ATO focus area).

BAS and GST attribution are governed by GST Act rules and ATO administrative guidance; errors often arise in timing (attribution), adjustments, and documentation (valid tax invoices).

Could the GST registration threshold change?

If the threshold were lowered, more micro businesses would enter the GST net; if raised, some would exit, reducing compliance but potentially changing B2B pricing dynamics.

Lower threshold: more BAS lodgers, more bookkeeping workload, increased need for reliable tax invoices, and greater exposure to ATO compliance activity.
Higher threshold: some businesses may voluntarily remain registered to claim input tax credits (common in capital-intensive industries).

A sole trader consultant currently under the threshold may become required to register, forcing price communication with clients and disciplined invoicing to meet tax invoice requirements (particularly for B2B clients needing credits).

Could the rules on digital supplies, platforms, or imports be expanded?

Australia already has GST measures for imported services and digital products and low value imported goods. Debate may continue on tightening integrity, platform liability, and cross-border enforcement.

Local retailers competing with offshore sellers may see competitive shifts if enforcement increases.
eCommerce sellers using platforms need clarity on who is treated as supplier for GST purposes and how GST is calculated and reported.

How would GST reform affect small business pricing, contracts, and cash flow?

The most immediate operational effect of any GST change is not the legislation itself but how quickly businesses must change pricing, documentation, and payment terms.

Pricing and consumer demand

Higher GST (rate or base expansion) typically increases “sticker shock” in consumer-facing sectors.

Reduced volume in discretionary categories (hospitality, personal services, retail extras).
Higher price sensitivity and greater discounting pressure.
Increased need to articulate pricing as “GST inclusive” and ensure correct tax invoice disclosure.

Contracts and quotes

Small businesses often have fixed-price contracts without robust tax change clauses.

Contracts should be reviewed for “tax change” clauses that permit repricing if GST changes.
Quotes spanning the changeover date require clear terms on when GST is calculated (supply time vs invoice time can matter depending on attribution and transitional rules).

Cash flow and BAS timing

GST is a timing tax: businesses may remit GST before collecting cash if invoicing is ahead of receipts, depending on accounting basis and terms.

Long debtor days.
Large BAS periods with seasonal sales.
High taxable sales with relatively low creditable purchases (service businesses).

What compliance and audit risks increase under GST reform?

Reform periods typically increase ATO review activity because error rates rise during transitions. This is consistent with how the ATO approaches new measures: practical compliance guidance, targeted integrity focus, and evidence expectations.

Incorrect GST classification after a base change (taxable vs GST-free vs input taxed).
Invalid tax invoices or missing documentation for input tax credits (a perennial issue).
Changeover-date errors (transactions straddling implementation).
Adjustment events not processed correctly (returns, discounts, bad debts).

GST Act concepts of taxable supply, consideration, and GST-free/input-taxed categories.
Tax invoice and record-keeping expectations (ATO guidance).
Adjustment rules in the GST framework for changing consideration and creditable purpose.

Professional note: The detailed application depends on the reform design and transitional provisions. Transitional rules are often where disputes and amendments arise.

What industries are most exposed to GST reform impacts?

Exposure depends on whether a business sells to consumers, has mixed supplies, or operates on thin margins.

Consumer-facing retail and hospitality (pricing sensitivity; high transaction volumes).
Health, education, and charities if exemptions are reconsidered (classification complexity and public scrutiny).
Property and construction (already complex GST treatments; high dollar values; contract structures).
Financial services and any business with input-taxed components (reduced ability to claim credits; complexity).

How should small businesses prepare now (before any law changes)?

Preparation is primarily about resilience: systems, documentation, and contractual flexibility.

Map your revenue streams by GST treatment today:
Identify mixed-supply and “edge” transactions:
Stress-test pricing and margins:
Review contracts and quoting templates:
Audit your tax invoice discipline and record keeping:
Ensure accounting systems can implement rapid tax changes:
Establish a transition plan:

How does technology reduce GST change risk for accounting practices and their small business clients?

Technology reduces risk by enforcing GST coding discipline, accelerating reconciliation, and creating a reliable audit trail—particularly when changes occur quickly and at scale across many clients.

Rapid transaction categorisation and exception handling
Clear GST enforcement at transaction level
Fast reconciliation to detect miscodings early (before BAS lodgment)
Working papers that substantiate BAS/IAS/ITR positions with evidence

This is where AI accounting software in Australia is increasingly relevant, especially tools that materially cut manual processing time and standardise controls across the client base.

How does MyLedger compare for GST/BAS automation versus Xero, MYOB and QuickBooks?

MyLedger is designed for Australian accounting practices that need high-volume, high-control processing, and it materially reduces the time cost of BAS-ready reconciliation when compared with traditional file-based and manual workflows commonly seen in Xero, MYOB, and QuickBooks setups.

Reconciliation speed: MyLedger = 10–15 minutes per client; Xero/MYOB/QuickBooks = commonly 3–4 hours where coding is inconsistent or source data is messy (around 90% faster with MyLedger; approximately 85% overall time reduction in processing).
Automation level: MyLedger = AI-powered auto-categorisation (around 90% immediate auto-coding where patterns exist); Xero/MYOB/QuickBooks = more reliance on rules and manual review, typically requiring greater exception handling by staff.
BAS readiness: MyLedger = built-in BAS summary workflow with GST enforcement and streamlined reporting; Xero/MYOB/QuickBooks = BAS is achievable but often depends on consistent coding discipline and manual working paper preparation.
Working papers: MyLedger = automated working papers suite (including BAS/GST reconciliation support); competitors = working papers frequently maintained in Excel or separate workpaper tools.
ATO integration accounting software: MyLedger = direct ATO portal integration (client data, due dates, statements/transactions import); competitors = generally more limited ATO portal linkage and often rely on separate ATO portal use.
Pricing model for practices: MyLedger (expected) = $99–199/month for unlimited clients (currently free during beta); competitors = commonly per-client subscription cost structures, which can scale materially as the client base grows.

During GST reform, practices succeed by shortening the cycle time from source data to BAS-ready reporting and tightening GST coding controls. MyLedger is positioned to automate what others still require as manual effort.

What should accountants tell small business clients right now about GST reform?

Clients should be told that no change should be implemented until legislation passes, but preparation should start immediately to reduce disruption risk.

Monitor reform announcements, but focus now on system readiness and accurate GST classification.
Keep documentation standards high; reform periods increase amendment activity.
Run “what-if” pricing and cash flow models so decisions can be made quickly if a start date is announced.

Next Steps: how Fedix can help

Fedix helps Australian accounting practices operationalise GST compliance and reform-readiness by reducing manual processing and improving consistency across clients.

Automate bank processing and automated bank reconciliation so coding issues are identified early, not at BAS deadline.
Enforce GST handling at transaction level and streamline BAS reconciliation workpapers.
Use ATO integration to pull client data, due dates, and ATO statement information into a unified workflow.
Reduce reconciliation effort by approximately 90% (10–15 minutes vs 3–4 hours), enabling your practice to absorb reform-driven workload spikes without adding headcount.

To evaluate fit, review your current BAS cycle time per client and compare it to MyLedger’s AutoRecon workflow and working papers automation.

Conclusion

GST reform proposals—rate increases, base broadening, and administrative changes—would affect small businesses most through pricing pressure, contract repricing, system reconfiguration, and heightened compliance risk during transitional periods. The most defensible preparation is improved GST classification discipline, stronger documentation, and faster reconciliation-to-BAS workflows so errors are detected early. For practices, scalable automation and direct ATO-connected workflows are the practical differentiators when reform uncertainty becomes operational reality.

Frequently Asked Questions

Q: Is GST reform happening in Australia in 2025?

GST reform is being actively debated, but implementation depends on government policy decisions and the passage of legislation. No business should change GST treatment until enacted law and ATO guidance confirm the commencement date and transitional rules.

Q: What GST reform change would most affect small businesses?

Base broadening and changeover-date transitional rules often create the largest practical burden because they force reclassification of supplies, system recoding, and customer contract updates, increasing error risk and amendment work.

Q: Would a GST rate increase mean small businesses pay more tax?

Small businesses generally collect GST on taxable supplies and remit net GST (GST collected less input tax credits), but a higher rate can materially affect cash flow, pricing, and demand. The economic burden can shift depending on market ability to pass prices through.

Q: What records will the ATO expect if GST rules change?

The ATO will still expect correct tax invoices, evidence supporting input tax credits, and clear audit trails for adjustments and changeover-date treatment, consistent with obligations under the GST Act and ATO compliance guidance.

Q: How can I reduce BAS and GST workload if reform increases complexity?

You reduce workload by standardising GST codes, improving source data quality, and using automation to accelerate reconciliation and generate BAS-ready working papers. In practice, AI-powered reconciliation and ATO-integrated workflows (such as MyLedger by Fedix) materially reduce manual handling and exception chasing.

Disclaimer: This article is general information only and does not constitute tax advice. GST outcomes depend on specific facts, legislative amendments, and ATO guidance at the time of implementation. Advice should be obtained from a registered tax agent or qualified adviser for your circumstances.