GST-inclusive prices: why subtracting 15% does not work
Follow both directions of a GST calculation and spot an incorrect price conversion.
The phrase “15% GST” describes a percentage of the price before GST. Once GST has been added, the total is a larger number. That change of base is the reason adding and removing GST are not opposite percentage buttons.
Start with an exclusive price
Take an illustrative standard-rated price of $200 before GST. Fifteen per cent of $200 is $30, so the inclusive total is $230. The calculation is $200 × 1.15. Keep the original $200 visible so you know which amount the percentage refers to.
Reverse the calculation correctly
Start instead with the inclusive $230. Divide by 1.15 to recover the $200 exclusive price. Subtract that base from $230 to obtain the $30 GST component. Multiplying the inclusive amount by 3/23 gives the same GST component.
| Inclusive total | Exclusive base | Included GST |
|---|---|---|
| $115.00 | $100.00 | $15.00 |
| $230.00 | $200.00 | $30.00 |
| $575.00 | $500.00 | $75.00 |
Understand the common mistake
Subtracting 15% of $230 removes $34.50 and leaves $195.50. That cannot be the original $200 price. A quick reverse check catches the mistake: adding 15% to $195.50 does not return $230.
Keep rounding consistent
If you work with several invoice lines, line-by-line rounding can differ from rounding the combined base once. Keep the underlying values and the chosen rounding approach consistent. The calculator displays cents, but a displayed rounded amount should not be repeatedly recycled into later calculations if you need to reconcile an invoice precisely.
Check that this is the right tax treatment
The arithmetic assumes the standard rate applies. It does not tell you whether you need to register, whether a supply is exempt or zero-rated, or whether special treatment applies. Settle that classification before using a percentage to price a transaction.
For a simple check, put the inclusive total into “Remove included GST”, then put the returned base into “Add GST”. Small displayed rounding differences aside, you should return to the same total. This is a useful verification step before copying figures into a quote.
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Questions or corrections?
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