GST answers
GST Free Income or BAS Excluded in Xero
GST Free Income is the rate for a sale that carries no GST, which is what a health service meeting the ATO conditions is, and it stays on the activity statement at G1 total sales. BAS Excluded is for a line with no sale behind it, such as a transfer between the practice's own accounts. Coding treatment income BAS Excluded understates total sales.
Key facts
- What makes health income GST free
- A listed health service, performed by a recognised health professional in that listed service, and generally accepted in that profession as necessary for the appropriate treatment of the recipient of the supply2
- Where the templates put clinical revenue
- Every per funder clinical services account in the allied health canonical template posts at GST Free Income, from private patients through Medicare, DVA, health fund benefits, the three NDIS management types, WorkCover and CTP8
- The revenue accounts that carry GST on Income
- Reports, assessments and medico legal; supervision, training and workshops; products and equipment sales; employee assistance and corporate contracts; and other income such as room rental and admin fees8
- Where BAS Excluded sits in the same chart
- On the settlement accounts that hold a funder payment between the approval date and the bank line, and on the liability account that holds money taken before the service is delivered8
- The rate belongs to the row
- Each revenue row and each deposit component in the templates carries its own tax type, so a line does not take a rate from the invoice or the deposit it sits in8
- When a report is GST free
- A medical report a medical practitioner supplies is GST free only where a Medicare benefit is payable for the report, or the report is an ordinary and natural part of the performance of the GST free medical service3
- Who the recipient of the supply is
- The recipient of the supply is whoever engages the health practitioner to provide the service, which in many cases is the patient and in some cases is another business5
- When a product the patient takes home is GST free
- A medical aid or appliance is GST free where it is listed in schedule 3 to the GST Act or the GST regulations, is specifically designed for people with an illness or disability, and is not widely used by people without one6
- What an NDIS support has to satisfy
- A plan in effect, reasonable and necessary supports specified in the statement of supports, a written agreement, and a supply covered by one of the tables in the determination4
Two of the three rates are sales, one is not
The question is usually asked as a choice between two codes, and it is really a choice between three. GST on Income and GST Free Income are both sales: the money is revenue, the line is reported, and the only difference is whether GST rides on top. BAS Excluded says something else entirely, that there is no sale here to report.
That is why the two are not interchangeable even when the GST payable comes out identical. A practice that codes all of its treatment income BAS Excluded pays the same GST as one that codes it GST Free Income. Its activity statement, though, says it sold nothing.
So the useful version of the question is not which code is safer. It is what the line in front of you actually is.
What each rate does on the activity statement
Two labels carry the difference on a Simpler BAS, the method under the GST turnover threshold: G1 total sales and 1A GST on sales. A taxable line lands at G1 and adds to 1A. A GST free line lands at G1 only. A BAS Excluded line lands nowhere. The full reporting method adds G3, which Simpler BAS omits.
- GST on Income: the sale is reported at G1, and one eleventh of a tax inclusive amount is remitted at 1A.
- GST Free Income: the sale is reported at G1, and nothing is remitted on it.
- BAS Excluded: the line is left off the statement, because it is not a supply the practice made.
Xero Central describes the same split, adding that a BAS Excluded transaction still shows in the GST Audit report. Its body does not load to a plain fetch, so it is cited unverified and the audit report behaviour stays in the open questions.
The rate belongs to the line, not the transaction
Most of the confusion comes from looking for one rate that covers a whole transaction. The canonical templates set a tax type on every revenue row and every deposit component separately, so one invoice can carry two rates and a funder deposit can carry two more.
They also carry a bottom row, the practice default, for a line whose funding source did not resolve. All three put that row at the same account and rate, and the product treats a line reaching it as a question rather than an answer.
Read that card narrowly. It says what the templates post when a funding source is unresolved, not that an unclassified line is GST free, which is why the template's own note sends the line to a person.
Which health income is GST free
For health services that are not medical services, which is where most allied health work sits, the ATO states three conditions, and all three have to hold.
- It is a listed health service. The list names twenty one, psychology, physiotherapy, occupational therapy, speech pathology, podiatry and social work among them.
- The service is performed by a recognised health professional in that listed service, or in certain circumstances by their assistant.
- The service is generally accepted in that listed health profession as being necessary for the appropriate treatment of the recipient of the supply.
The ATO adds that the service has to be one of the listed services rather than similar to one, and that the recipient of the supply is not automatically the patient. Who pays is not who engaged the practice: a Medicare rebate, a fund benefit and a plan manager payment are somebody paying on the patient's behalf, and the recipient of the supply is whoever engages the practitioner.
NDIS supports run on their own test. A supply to a participant is GST free where the participant has a plan in effect, the supply is of reasonable and necessary supports specified in the statement of supports, there is a written agreement, and the supply is covered by one of the tables in the determination.
The health income that is taxable
A practice that codes everything GST free has the opposite problem. In the allied health canonical template five of the eighteen revenue accounts carry GST on Income, and each of them exists because a common item fails the treatment test rather than because someone chose to tax it.
- Reports and assessments, unless a Medicare benefit is payable for the report or it is an ordinary and natural part of the GST free service, which is the test the ATO sets for a medical report.
- Supervision of another practitioner and training or workshops, which the templates read as services to a colleague or an audience rather than treatment. Supervision itself is not settled; see the open questions.
- Products the patient takes home, as opposed to goods used on them during the consultation, with an item level override where a product is a Schedule 3 medical aid.
- Work an employer bought, such as an employee assistance contract, where the employer rather than the patient is the recipient of the supply.
- Other income, such as renting a room to another practitioner or charging an administration fee.
Coding those lines GST free is the expensive direction. GST is underpaid, the shortfall can be assessed with penalties and interest, and going back to the payer for it once the invoice has gone out is rarely an option.
What is actually BAS Excluded in a health practice
The BAS Excluded rows in a practice ledger are the ones where no service was sold. Wages, superannuation, a payment to the ATO, a transfer between the practice's own bank accounts. In the allied health canonical template the same rate sits on the settlement accounts holding a funder payment between approval and the bank line, and on the liability account holding money taken before a session happens.
| Account | Xero tax rate | What lands there |
|---|---|---|
| 400 Clinical services, private patients | GST Free Income | A private patient consult |
| 401 Clinical services, Medicare | GST Free Income | A bulk billed session Services Australia paid |
| 405 Clinical services, NDIS plan-managed | GST Free Income | A therapy support billed to a plan manager |
| 409 Employee assistance and corporate contracts | GST on Income | Sessions an employer bought under a contract |
| 420 Reports, assessments and medico-legal | GST on Income | A report an insurer or a school asked for |
| 421 Supervision, training and workshops | GST on Income | Supervising another practitioner, or running a workshop |
| 422 Products and equipment sales | GST on Income | A theraband the patient takes home |
| 100 Medicare clearing | BAS Excluded | A Medicare payment run, held until the bank line lands |
| 245 Customer deposits and credits held | BAS Excluded | A booking deposit taken before the session happens |
Read down the middle column and the pattern is plain. The rate follows what the row is, not who the funder was or what document it arrived on: treatment, something else the practice sold, or money moving without a sale.
A funder deposit has two legs, and two rates
This is where the two rates meet in the same week's work. A Medicare or NDIA deposit is not a sale. The sale happened when the session was delivered and invoiced, and it was reported then. What lands in the bank weeks later settles invoices already earned.
So the deposit is two legs. The revenue leg is the session itself, posted to its funder revenue account at the rate that treatment carries. The settlement leg moves the money from the account holding it into the bank, and that movement sits at BAS Excluded in every canonical template, because moving a settlement is not a second sale.
What each wrong rate costs
The mistakes are not symmetrical. One costs cash every quarter, one distorts the picture without changing the GST, and one leaves the practice behind on GST it has already spent.
- Treatment coded GST on Income: the practice remits one eleventh of revenue that carried no GST, every quarter, until someone notices. Getting it back needs an amended activity statement.
- Treatment coded BAS Excluded: total sales at G1 are understated, and the turnover test is measured on the wrong number.
- Reports, products or supervision coded GST Free Income: GST is underpaid, and recovering it from the payer after the invoice has gone out depends on an agreement most practices do not have.
- A settlement movement coded as income: sales are double counted at G1 for the whole quarter.
If the practice is not registered for GST
A practice under the registration threshold reports no GST labels, so the two codes have nothing to differ on there. It may still lodge an instalment activity statement for PAYG withholding, which most practices with employees do, and those labels are unaffected by either code. The question still gets asked, because both codes sit in the drop down and something has to be picked.
The two readings are worth knowing. One keeps sales at GST Free Income, so the profit and loss and the GST reports read the same way they will on the day the practice registers. The other uses BAS Excluded on the argument that a business outside the system reports nothing. This page does not settle it, and it is one for the practice's BAS agent, along with whether the turnover test is close.
What Ledger Map does with it
Ledger Map holds one standing map for the practice, approved before anything syncs. Each invoice line resolves through it on its own: the funding source picks the revenue account, a service category with a row of its own picks a different account and rate, and an unresolved line becomes a question with the options laid out.
Nothing on this page is a treatment Ledger Map chose. The accounts, the rates and the reasons come from the canonical template the practice starts from, and a BAS agent can change any row before it goes live. On the settlement side, each funder deposit posts as one balanced document set and leaves one exact match in the bank feed, with both legs on the rates the template gave them.
See how it works for the approval step, the GST answers index for the item level questions, or set up a clearing account for the Xero side of the settlement leg.
Questions
What is the difference between BAS Excluded and GST Free in Xero?
GST Free Income is a sale that carries no GST, so the line is reported at G1 total sales on the activity statement. BAS Excluded is for a line with no sale behind it, such as wages, a payment to the ATO or a transfer between the practice's own accounts, and it is left off the statement entirely. The GST payable can be the same either way, and total sales are not.
Which health income lines take GST Free Income?
Treatment that meets the ATO conditions: a listed health service, performed by a recognised health professional in that service, generally accepted in that profession as necessary for the appropriate treatment of the recipient of the supply. In the allied health canonical template that covers every per funder clinical services account, whether the payer is the patient, Medicare, a health fund, an insurer or the NDIS.
What is the difference between GST free expenses and BAS excluded?
On the purchase side the same logic applies in reverse. GST Free Expenses is a purchase inside the GST system that carried no GST, such as basic food or a health service, and it is reported in the purchases labels with no GST to claim. BAS Excluded is a payment that is not a purchase at all, such as wages, superannuation or an ATO payment, and it stays off the statement.
Are wages BAS excluded in Xero?
Wages are not a purchase of goods or services, so they carry no GST and are not reported on the activity statement as a purchase. They are reported instead through the pay as you go withholding labels. The same reasoning covers superannuation, owner drawings and payments to the ATO.
Should a practice that is not registered for GST use GST Free Income?
Neither reading reaches a GST label the practice does not report, so both survive. One keeps sales at GST Free Income so the reports read the same way after registration; the other uses BAS Excluded on the basis that a business outside the system reports nothing. Worth settling with the practice's BAS agent, particularly if turnover is near the threshold.
Sources
Open questions
- ato.gov.au refuses automated fetches. The six ATO pages cited here were read in full on 3 Sep 2026 from copies captured through a signed in browser session, and each carries its own last updated date, June 2024 for five of them and October 2025 for medical aids and appliances.
- Both Xero Central articles returned an empty body to a fetch on 3 Sep 2026, because the site renders its articles in the browser. They are cited unverified, no key fact rests on them, and every rate name printed here is read from the canonical templates, which carry the Xero code.
- What each rate does at G1 and 1A is stated here from the research corpus behind the canonical templates, which took it from Xero Central. The ATO reporting methods page was read on 4 Sep 2026 through search result extracts rather than fetched, because ato.gov.au refuses automated fetches, so a BAS agent is the check on the label mapping.
- Whether a BAS Excluded line still appears in the Xero GST Audit report is reported by Xero Central rather than confirmed here, so it stays out of the key facts.
- The ATO states the report test for a medical report a medical practitioner supplies. The canonical templates apply the same test to allied health reports and assessments, and that extension was not confirmed against a primary source read here.
- Whether a particular product a patient takes home is a Schedule 3 medical aid, and so GST free rather than taxable, is an item level question. The templates default the products account to GST on Income and carry an item override for the Schedule 3 items a practice actually sells.
- Whether a practice that is not registered for GST should use GST Free Income or BAS Excluded on its sales was not settled by a primary source read here. Both readings are given and neither is presented as the answer.
- Whether supervision of another practitioner is taxable is not settled by the research behind the canonical templates: one Australian accounting source treats it as taxable and an ATO interpretative decision points the other way on one fact pattern. The templates post it at GST on Income and this page reports that as what the template does.
- The account codes here are the allied health canonical chart. A practice on a different chart may carry accounts these templates do not, and the rate on those is a question for its own BAS agent.
- Whether GST charged in error on a health line can be recovered from a funder after the fact depends on the practice's agreement with that funder, and was not researched here.
- The practitioner threads behind the shape of the question were read as search result listings rather than as thread pages, so no poster is quoted and no thread is cited.
- GST reporting methods
Australian Taxation Office. Retrieved 4 Sep 2026. Source updated 15 Apr 2021.
primary
- Other health services, GST and health
Australian Taxation Office. Retrieved 3 Sep 2026. Source updated 12 Jun 2024.
primary
- Medical services, GST and health
Australian Taxation Office. Retrieved 3 Sep 2026. Source updated 12 Jun 2024.
primary
- National Disability Insurance Scheme, GST and health
Australian Taxation Office. Retrieved 3 Sep 2026. Source updated 13 Jun 2024.
primary
- Recipient of the supply, GST and health
Australian Taxation Office. Retrieved 3 Sep 2026. Source updated 12 Jun 2024.
primary
- Medical aids and appliances, GST and health
Australian Taxation Office. Retrieved 3 Sep 2026. Source updated 8 Oct 2025.
primary
- Appropriate treatment, GST and health
Australian Taxation Office. Retrieved 3 Sep 2026. Source updated 12 Jun 2024.
primary
Review
Last reviewed 3 Sep 2026 by Shane
General information for Australian allied health practices, not tax advice. Confirm a treatment with your BAS agent or accountant before you post it.
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