One of the most significant financial benefits of working within the National Disability Insurance Scheme is the ability to provide services “GST-free.” For a sole trader, this keeps your rates competitive and ensures the participant’s funding goes further.
However, GST-free status is not an automatic right for every disability-related service. The Australian Taxation Office (ATO) has strict criteria under Section 38-38 of the GST Act. If you fail to meet even one of these conditions, you may be inadvertently accruing a debt to the ATO for GST you should have collected.
This guide explains the four mandatory conditions for GST-free NDIS supplies. To ensure your billing matches these rules, refer to our guide on [top 5 NDIS invoicing mistakes].
The Four Mandatory ATO Conditions
For your service to be exempt from GST, you must meet all four of the following requirements simultaneously. If any condition is missing, the supply is taxable, and you must add 10% GST to your invoice (if you are registered for GST).
1. The Participant Has an Active NDIS Plan
The person receiving the support must have a current, NDIS-approved plan in effect. If their plan has expired or has been suspended, the GST exemption no longer applies.
2. The Support is “Reasonable and Necessary”
The service you provide must be specified in the participant’s plan as a reasonable and necessary support. While you don’t always need to see the full plan, you must be confident that the service fits the participant’s goals. For those with a Plan Manager or NDIA-managed funds, an approved service booking usually confirms this.+1
3. There is a Written Agreement
This is the most common area of failure for sole traders. The ATO requires a written agreement between you and the participant (or their representative). This document must:
- Identify the participant.
- State that the support is a “reasonable and necessary support” as per their NDIS plan.
- Be in place before the service is delivered.
For a detailed breakdown of what this document should look like, see our article on [NDIS service agreements for sole traders].
4. The Service is a “Legislated” Disability Support
The support must be a type listed in the A New Tax System (Goods and Services Tax) (GST-free Supply—National Disability Insurance Scheme Supports) Determination 2021. Most core supports (daily activities, transport) and capacity-building supports (therapy, training) are covered. However, general “lifestyle” services or items not directly related to a disability may not qualify.
GST Registration and Your Turnover
A common point of confusion for sole traders is whether they need to register for GST at all.
- The $75,000 Threshold: You must register for GST if your annual business turnover is $75,000 or more.
- GST-Free Income: Crucially, income from GST-free NDIS services still counts toward this $75,000 threshold.
If you earn $80,000 purely from GST-free NDIS support, you must register for GST and lodge Business Activity Statements (BAS), even though the amount of GST you collect from participants will be $0. The benefit of registering is that it allows you to claim back the GST you pay on business expenses, such as technology, stationery, and vehicle running costs.
Invoicing for GST-Free Services
When you are providing a GST-free service, your invoice must reflect this clearly. You should not simply leave the GST field blank. A compliant tax invoice should:
- State that the supply is “GST-free.”
- Itemise any mixed supplies (e.g., if you sell a piece of equipment that does include GST alongside a service that doesn’t).
Using a [sole trader accounting app] simplifies this by allowing you to set a default “GST-free” tax code for your NDIS clients, ensuring your BAS reporting remains accurate without manual calculations.
Next Step
Claiming GST exemptions correctly is a matter of documentation rather than guesswork. By ensuring your service agreements are signed and your invoices are correctly coded, you protect your business from future ATO audits. If you have been charging GST and now realise the service should have been exempt, your first step should be to issue a credit note and correct your next BAS.
FAQ
Do I need to be an NDIS Registered Provider to claim GST exemptions?
No. Both registered and unregistered providers can provide GST-free services, provided they meet the four ATO conditions—most importantly, having a written agreement and providing a support that is “reasonable and necessary.”
What happens if I forget to get a written agreement?
Technically, without a written agreement, the service does not meet the requirements for Section 38-38 of the GST Act. The ATO may view these services as taxable supplies, meaning you could be liable for the 10% GST out of your own pocket.
Are all NDIS services GST-free?
No. Most are, but there are exceptions. For example, some “lifestyle” or general household goods might carry GST. Always check the NDIS Support Catalogue and the 2021 GST Determination if you are unsure about a specific line item.
Can I claim GST back on my expenses if my income is GST-free?
Yes, provided you are registered for GST. This is a significant advantage for sole traders; you don’t charge GST on your services, but you can still claim “Input Tax Credits” for the GST you pay on your own business costs.
Can a Plan Manager refuse an invoice that includes GST?
If a service is legally GST-free, a Plan Manager may ask you to correct the invoice. If the service should have GST but the 10% addition takes the price over the NDIS Price Limit, the NDIS may only pay up to the cap, leaving you short-changed.