GST and Shipping: The Two Things Australian Stores Get Wrong
Shakewell ·
Two things account for most of the money quietly leaking out of Australian online stores, and neither of them is the platform. They are tax configuration and freight configuration, and both fail in the same way: the order completes, the customer is happy, nothing errors, and the margin is wrong.
Because nothing breaks, nobody looks.
GST is a property of the product, not the store
The 10% rate is simple. What is not simple is that it does not apply to everything.
Most basic food is GST-free. So are many health products, some medical aids, and certain educational materials. The rate depends on what a product is, which means tax cannot be a store-level setting. It has to be modelled as an attribute that travels with each item in the catalogue.
This is the single most common configuration error we find on Australian stores, and it has two failure modes:
- Charging GST on GST-free lines. You are over-collecting, which is a customer-facing problem and a compliance one.
- A catalogue with no tax class discipline. New products inherit whatever the default is, so the error grows every time someone adds a SKU.
The fix is not clever. It is assigning tax classes properly at the product level and making “which tax class” a required field in whatever process creates products, so the discipline survives the person who set it up. If product data lives in a PIM, that is where the rule belongs.
The mixed basket
Where it gets genuinely fiddly is a basket containing both taxable and GST-free items, because the shipping charge has to be apportioned across them rather than treated as a single taxable line.
Both Shopify and Adobe Commerce can do this. Neither does it correctly on default settings. Build a test order with one taxable and one GST-free product, check the tax line against what it should be, and do it before launch rather than after an accountant asks.
Freight is where Australian stores actually lose money
A flat national shipping rate is the default almost everywhere and it is a poor fit for this country specifically.
Carrier costs vary enormously by destination. Remote and regional surcharges on a single parcel can exceed the entire shipping charge collected on that order. And because the order completes normally, nothing flags it. The loss appears as gradually thinner margin, attributed to everything except the shipping table.
We have seen this run for more than a year before anyone traced it, and the business had assumed it was a product-cost problem.
What to do instead
Get your actual numbers first. Run the last three months of orders against current carrier rates by destination. This is usually a short query and occasionally a very uncomfortable one. Do this before touching configuration, because it tells you the size of the problem and whether it is worth solving.
Then build zones that reflect reality. Metropolitan, regional and remote at minimum. Rates that mirror what carriers actually charge you rather than a national average that is wrong at both ends.
Keep the rules somewhere a person can change them. Carriers adjust surcharges. If updating a rate requires a developer and a deploy, the table will drift out of date, and a stale shipping table is the same problem you started with.
Model free shipping against your destination mix, not your average order value. A threshold that works for a Sydney-heavy customer base can be expensive nationally.
Two more things specific to selling here
BNPL economics. Afterpay and Zip convert well and their merchant fees are considerably higher than card. That is often worth paying. It is only worth paying deliberately, with the share of orders using them modelled into your margin rather than discovered later.
Selling into New Zealand. If you already ship across the Tasman, New Zealand GST is 15% and applies to nearly everything, with none of the food carve-outs that complicate the Australian catalogue. Simpler tax, harder freight, because rural delivery surcharges and the inter-island split make an Australian shipping table lose money there in a different way. We covered that decision in selling into both markets from one store.
The hour that is worth spending
If you do one thing after reading this, make it the freight query: last three months of orders, actual carrier cost by destination, against what you charged.
It takes about an hour, it needs no development work, and it either tells you everything is fine or it finds money you did not know you were losing. Both are useful answers, and it is a considerably better use of an hour than another conversation about replatforming.
Common questions
Is GST charged on all products sold online in Australia?
No, and this is the detail that breaks catalogue tax logic. Most basic food is GST-free, as are many health products, certain medical aids and some educational items. The rate depends on what a product is, not on who is buying or where it ships, which means tax has to be modelled as a product attribute rather than a store setting. A catalogue that applies 10% to everything is over-charging on some lines and will be wrong in a way customers notice.
Do we charge GST on shipping?
Generally the shipping charge follows the goods. If the items are taxable, the freight on them is taxable too. A mixed basket containing both GST-free and taxable goods is where it gets awkward, because the shipping charge has to be apportioned rather than treated as one line. Both Shopify and Adobe Commerce can do this, and neither does it correctly by default, so it is worth testing with a real mixed order before launch.
Why is a flat national shipping rate a problem in Australia?
Because carrier costs vary enormously by destination and a flat rate absorbs that variance silently. Remote and regional deliveries carry surcharges that can exceed the entire shipping charge you collected, and because the order still completes successfully nothing alerts anyone. The loss shows up as thinner margin rather than as an error, which is why it commonly runs for a year or more before someone traces it.
Should we offer free shipping in Australia?
Only with a threshold you have actually modelled against your real destination mix, not against the average order value. Free shipping over a flat amount is fine when most orders go to metropolitan addresses and is expensive when a meaningful share go regional. Run your last few months of orders against current carrier rates before setting the number, because the threshold that works for a Sydney-heavy customer base is not the one that works nationally.