Law App uses five tax categories to classify every transaction for GST purposes. Choosing the right one ensures your BAS is accurate and your reports reconcile correctly. This article explains what each code means and gives common law firm examples so you always know which one to use.
Tax categories in Law App map directly to the GST treatment options on your BAS. If you are unsure about the correct treatment for a specific transaction, check with your accountant — the categories below reflect standard ATO guidance for Australian law firms.
The Five Tax Categories
| Code | Name | GST Rate | Appears on BAS? |
|---|---|---|---|
| S | Standard rate — GST | 10% | Yes — G1 / 1A / 1B |
| Z | Zero rated goods or services | 0% | Yes — G1 |
| E | Exempt from Tax | N/A | Yes — G1 |
| G | Export item, VAT/GST not charged | 0% | Yes — G1 |
| O | Services outside scope of tax | N/A | No |
S — Standard Rate GST (10%)
Use S for any taxable supply or purchase where GST of 10% applies. This is the most common code for day-to-day law firm transactions.
Income examples:
- Professional fees charged to clients
- Conveyancing fees
- Debt collection fees
- Agency fees
Expense examples:
- Office rent (commercial premises)
- Software subscriptions (Law App, practice management tools, Microsoft 365)
- Stationery and office supplies
- Telephone and internet
- Accounting and bookkeeping fees
- Cleaning services
- Photocopier lease and maintenance
- Marketing and advertising
- Staff training courses (most)
- Postage — where charged with GST
Z — Zero Rated Goods or Services
Use Z for GST-free supplies and purchases — transactions that are part of your business activity and do appear on your BAS, but carry no GST. In Australia, the term “zero rated” is most commonly associated with GST-free supplies under the GST Act.
This is a heavily used code in law firms because many disbursements and search fees are GST-free.
Common law firm examples:
- Court filing fees (QCAT, Supreme Court, Federal Court, etc.)
- Land title search fees (e.g. Titles Queensland, PEXA)
- ASIC searches and company searches
- InfoTrack searches where no GST is charged
- Stamp duty / transfer duty
- Council rates and water rates on trust-held properties
- Basic food items if purchased for the office (e.g. milk, bread, fruit)
- Health services (if your firm pays for employee health-related costs)
- Some insurance premiums (life insurance, health insurance components)
- Interest income (where applicable)
Filing fees and search fees are the most common Z-coded disbursements in a law firm. Always check the supplier’s tax invoice — if there is no GST shown on the invoice, the transaction is GST-free and should be coded Z, not S.
E — Exempt from Tax
Use E for supplies that are specifically exempt from GST under legislation — distinct from simply being GST-free. In practice, the line between E and Z can feel blurry, and different firms handle this slightly differently. The key is to be consistent.
Common law firm examples:
- Residential rent payments (if the firm pays rent on residential property)
- Certain financial services (bank fees on some transaction types)
- Some government charges where the ATO has confirmed GST-exempt status
- Donations made by the firm to registered charities
- Salary and wages (not a supply — but coded E if you need a tax category)
Some firms use Z for all GST-free items and reserve E for a narrower set of truly exempt supplies. Either approach is acceptable as long as it is applied consistently and your BAS totals are correct. If you are unsure, ask your accountant which approach they prefer.
G — Export Item, VAT/GST Not Charged
Use G for supplies made to overseas clients or parties where Australian GST does not apply because the supply is exported. This is uncommon in most Australian law firms but does arise.
Law firm examples:
- Legal fees charged to an overseas client for Australian legal work (where the export rules apply)
- Advice provided to an overseas company with no Australian presence
- International wire transfer fees where no GST is charged
If your firm does not have overseas clients, you will rarely if ever use this code.
O — Outside Scope of Tax
Use O for transactions that are not a supply or acquisition in the GST sense at all. These do not appear on your BAS and have no GST implications. This is the correct code for equity movements, personal transactions, and anything that sits outside the business’s GST activity.
Common law firm examples:
- Drawings — a principal or director taking personal funds out of the business account
- Capital contributions — a principal putting personal funds into the business account
- Loan repayments — repaying a principal loan or director loan
- Inter-account transfers — moving money between the firm’s own bank accounts
- Trust account movements — receipts and payments through the trust account (these are not the firm’s income or expenses)
- Superannuation payments (the super component itself, not the admin fee)
- PAYG withholding payments to the ATO
- Income tax payments (for entities that pay company or trust tax)
- Dividends paid to shareholders
When a principal draws money from the business — or deposits personal funds into the business account — always use O. Drawings are an equity movement, not a business income or expense, and they have no GST. Using S or Z by mistake will distort your BAS.
Quick Reference — Common Transactions
| Transaction | Code | Reason |
|---|---|---|
| Professional fees to client | S | Taxable supply at 10% |
| Court filing fee disbursement | Z | GST-free government charge |
| Land title search | Z | GST-free government charge |
| ASIC company search | Z | GST-free government charge |
| Stamp duty / transfer duty | Z | GST-free government charge |
| Office milk and basic food | Z | GST-free food item |
| Bank fees (transaction fees) | E | Input-taxed financial supply |
| Principal drawings | O | Equity movement, not a supply |
| Capital contribution from principal | O | Equity movement, not a supply |
| PAYG withholding to ATO | O | Outside scope of GST |
| Superannuation payment | O | Outside scope of GST |
| Inter-account bank transfer | O | Not a supply or acquisition |
| Fees charged to overseas client (exported legal services) | G | Export — GST not charged |
Where Tax Categories Are Set in Law App
Tax categories can be applied at several points in Law App:
- Chart of Accounts — each GL account has a default tax category, so transactions posted to that account inherit the right code automatically
- Supplier invoices and debtor invoices — line items carry the tax category from the GL account, which you can override if needed
- Receipts and payments — same as invoices; the GL account drives the default
- Settings > Accounts Setup > Tax Categories — this is where the five codes are maintained (admin access required)
Setting the correct default tax category on each GL account is the best way to reduce manual coding — the right code flows through automatically to most transactions.
Need Help?
If you are unsure about the correct tax category for a transaction, contact our support team at support@lawsupport.com.au or call 07 3040 3036. For questions about the GST treatment of a specific type of transaction, your accountant or BAS agent is the best person to confirm the correct approach.
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