What Is Reverse GST Calculation?
Reverse GST calculation (also called "backing out GST" or "GST extraction") is the process of determining the pre-tax amount and GST component from a GST-inclusive total price. This is essential for businesses completing tax returns, analyzing profit margins, expense tracking, and ensuring compliance with ATO and IRD requirements.
📘 Key Concept:
Forward calculation: $100 × 1.10 = $110 (adding GST)
Reverse calculation: $110 ÷ 1.10 = $100 (removing GST)
Why Reverse GST Calculation Is Important
- BAS/GST Returns: Calculate total GST collected from sales
- Expense Analysis: Determine input tax credits from purchases
- Profit Margins: Find true profit excluding GST
- Financial Reporting: Separate GST from revenue for accurate accounting
- Budgeting: Plan expenses excluding GST components
- Price Comparison: Compare quotes on apples-to-apples basis
The Reverse GST Formula
🇦🇺 Australia (10% GST)
To find the GST-exclusive amount:
Amount = Total ÷ 1.10
To find the GST component:
GST = Total ÷ 11
Or: Total × (1/11)
Or: Total - (Total ÷ 1.10)
Example:
Total: $1,100
Amount: $1,100 ÷ 1.10 = $1,000
GST: $1,100 ÷ 11 = $100
🇳🇿 New Zealand (15% GST)
To find the GST-exclusive amount:
Amount = Total ÷ 1.15
To find the GST component:
GST = Total × (3/23)
Or: Total × 0.130435
Or: Total - (Total ÷ 1.15)
Example:
Total: $1,150
Amount: $1,150 ÷ 1.15 = $1,000
GST: $1,150 × 3/23 = $150
Step-by-Step Reverse Calculation Examples
Example 1: Simple Invoice (Australia)
Scenario: You receive an invoice for $2,750 (GST-inclusive). What's the breakdown?
Step 1: Calculate GST-exclusive amount
$2,750 ÷ 1.10 = $2,500
Step 2: Calculate GST amount
$2,750 - $2,500 = $250
(Alternative: $2,750 ÷ 11 = $250)
Result:
GST-exclusive amount: $2,500
GST component: $250
Total (incl. GST): $2,750
Example 2: Multiple Items (New Zealand)
Scenario: Restaurant bill is $172.50 (GST-inclusive). Calculate GST.
Step 1: Find meal price (excl. GST)
$172.50 ÷ 1.15 = $150.00
Step 2: Calculate GST component
$172.50 - $150.00 = $22.50
(Alternative: $172.50 × 3/23 = $22.50)
Verification:
$150.00 × 1.15 = $172.50 ✅ Correct
Example 3: Large Purchase (Australia)
Scenario: Equipment purchased for $55,000 (GST-inclusive). Calculate input tax credit.
Step 1: Calculate equipment cost (excl. GST)
$55,000 ÷ 1.10 = $50,000
Step 2: Calculate GST (input tax credit claimable)
$55,000 - $50,000 = $5,000
(Alternative: $55,000 ÷ 11 = $5,000)
Result: You can claim $5,000 GST credit on your next BAS return.
Common Calculation Errors to Avoid
❌ Error #1: Multiplying by 0.10 or 0.15 to Find GST
Wrong approach:
$110 × 0.10 = $11 ❌ (This is wrong!)
Why it's wrong: You're finding 10% of the total, not the GST component. GST is 10% of the base amount ($100), not the total ($110).
Correct approach:
$110 ÷ 11 = $10 ✅ (This is correct)
❌ Error #2: Subtracting the Percentage
Wrong approach:
$115 - ($115 × 0.15) = $115 - $17.25 = $97.75 ❌
Why it's wrong: This removes 15% of the total, not the 15% GST that was added to the original price.
Correct approach:
$115 ÷ 1.15 = $100 ✅
❌ Error #3: Not Rounding Correctly
Wrong: $123.456 ÷ 1.10 = $112.2327... → $112.23 (not rounded per ATO rules)
Correct: Round to nearest cent. $123.456 ÷ 1.10 = $112.2327... → $112.23 (0.005 rounds up to $112.23)
Reverse GST Calculation Table
| Total (Inc. GST) | Country | Formula | Amount (Excl. GST) | GST Component |
|---|---|---|---|---|
| $55 | 🇦🇺 | $55 ÷ 1.10 | $50.00 | $5.00 |
| $57.50 | 🇳🇿 | $57.50 ÷ 1.15 | $50.00 | $7.50 |
| $550 | 🇦🇺 | $550 ÷ 1.10 | $500.00 | $50.00 |
| $575 | 🇳🇿 | $575 ÷ 1.15 | $500.00 | $75.00 |
| $11,000 | 🇦🇺 | $11,000 ÷ 1.10 | $10,000.00 | $1,000.00 |
| $11,500 | 🇳🇿 | $11,500 ÷ 1.15 | $10,000.00 | $1,500.00 |
Business Applications
Application 1: Completing BAS Returns (Australia)
Scenario: Total quarterly sales: $220,000 (GST-inclusive)
Calculation:
- Sales (excl. GST): $220,000 ÷ 1.10 = $200,000
- GST collected: $220,000 - $200,000 = $20,000
- Assume input tax credits (GST on expenses): $8,000
- Net GST payable: $20,000 - $8,000 = $12,000
You would report $20,000 GST collected, claim $8,000 credits, and pay $12,000 to the ATO.
Application 2: Profit Margin Analysis (New Zealand)
Scenario: Sold product for $575 (inc. GST), cost was $400 (excl. GST). What's the profit?
Calculation:
- Sale price (excl. GST): $575 ÷ 1.15 = $500
- Cost: $400
- Profit: $500 - $400 = $100
- Profit margin: ($100 ÷ $500) × 100 = 20%
Without reverse GST calculation, you might incorrectly calculate profit as $175 ($575 - $400), inflating your margin.
Application 3: Expense Tracking
Scenario: Monthly office expenses total $4,600 (GST-inclusive). Track base expenses for budgeting.
Australia:
- Base expenses: $4,600 ÷ 1.10 = $4,181.82
- GST claimable: $418.18
- Net cost to business: $4,181.82 (after claiming GST credit)
New Zealand:
- Base expenses: $4,600 ÷ 1.15 = $4,000
- GST claimable: $600
- Net cost to business: $4,000
Using Excel/Spreadsheets for Reverse GST
Australia Formulas (assuming total in cell A1):
Base Amount: =A1/1.1GST Amount: =A1/11Or: =A1-(A1/1.1)New Zealand Formulas (assuming total in cell A1):
Base Amount: =A1/1.15GST Amount: =A1*(3/23)Or: =A1-A1/1.15Verification Formula:=B1*1.1 (AUS) or =B1*1.15 (NZ) should equal A1
Calculator Shortcuts
🇦🇺 Australia Quick Method
Memory trick: "Divide by 11"
- Take GST-inclusive total
- Divide by 11
- Result = GST component
Example: $550 ÷ 11 = $50 GST
Base: $550 - $50 = $500
🇳🇿 New Zealand Quick Method
Memory trick: "Multiply by 3, divide by 23"
- Take GST-inclusive total
- Multiply by 3
- Divide by 23
- Result = GST component
Example: $575 × 3 ÷ 23 = $75 GST
Base: $575 - $75 = $500
Verification Methods
✅ Always Verify Your Calculations:
Method 1: Forward calculation
Take your calculated base amount and add GST back. Should equal original total.
$500 × 1.10 = $550 ✅
Method 2: Percentage check
GST ÷ Base should equal the GST rate.
$50 ÷ $500 = 0.10 (10%) ✅
Method 3: Ratio check
Total ÷ Base should equal 1.10 (AUS) or 1.15 (NZ).
$550 ÷ $500 = 1.10 ✅
When to Use Reverse GST Calculation
- BAS/GST returns: Calculate total GST collected and claimable
- Invoicing analysis: Break down customer invoices
- Expense tracking: Determine true cost before GST
- Profit calculations: Analyze margins excluding GST
- Budgeting: Plan expenses on pre-GST basis
- Quote comparisons: Compare GST-inclusive vs exclusive quotes
- Financial reporting: Separate GST from revenue/expenses
- Audits: Verify GST components for compliance