GST (Goods and Services Tax) applies to most goods imported into Australia, making them taxable importations.
Businesses, organizations, and private individuals must pay GST on taxable importations, regardless of their GST registration status.
If you are a GST-registered business or organization involved in importing goods as part of your activities, you can claim a GST credit for the GST paid on those goods.
In this article
- GST Collection for Taxable Importations
- Exempt Importations: Goods Not Subject to GST
- Tax Considerations For Taxable Supplies and Low-Value Imported Goods
- Claiming Input Tax Credits on Taxable Importations
- Ensuring Evidence of GST Payment on Importation
GST Collection for Taxable Importations
The Department of Home Affairs is responsible for collecting GST on taxable importations, which amounts to 10% of the total value of the imported goods.
The value of taxable importation is calculated by adding the following components:
- Customs Value of Goods: The assessed value of the imported goods as determined by customs authorities.
- Customs Duty: Any applicable duty imposed on the goods.
- Transportation Costs: The amount paid or payable for transporting the goods to their destination in Australia.
- Insurance Cost: The cost of insuring the goods during transportation.
- Wine Tax: If applicable, any wine tax payable on the imported goods.
In most cases, GST must be paid before the Department of Home Affairs releases the goods.
If you are not registered under the deferred GST scheme, you are required to make the GST payment simultaneously, at the same place, and in the same manner as you would for customs duty (or as if customs duty applies to the goods).
Deferring GST Payment for Imported Goods
If you are an importer and have GST registration, you have the potential to defer the payment of GST by enrolling in the deferred GST scheme.
This scheme offers you the advantage of postponing the GST payment on taxable importations until you file your first activity statement after the goods have been imported. However, to qualify for participation in the scheme, you must meet specific eligibility criteria.
Criteria for Participating in the DGST Scheme
- You must have a valid ABN to qualify.
- If you are not already registered for GST, you can register for both GST and an ABN using a single application form.
- You are required to lodge your Business Activity Statements (BAS) online and make electronic payments.
- If you currently lodge BAS quarterly, you must transition to monthly GST reporting before applying for the DGST scheme.
- The imported goods or excise-equivalent goods should be intended for home consumption.
- If you are part of a GST group, the nominated representative of the group should be registered for the DGST scheme.
When changing from quarterly to monthly BAS lodgment, the change will only take effect at the start of the next quarter. Consequently, you will not be eligible to defer GST on your imports until the beginning of the subsequent quarter.
You might not be eligible to participate in the DGST scheme under the following circumstances:
- If your tax return, BAS lodgments, and payments are not up to date, it may impact your eligibility for the scheme.
- The members of branches and joint ventures; if they are not eligible, it may affect your participation in the DGST scheme.
- If you are part of a GST group, the eligibility of both the GST group’s members and the GST Group Representative may affect your ability to participate in the scheme.
- If you or anyone relevant to the DGST scheme application has been convicted or penalized for specific offences in the past three years, it may render you ineligible for participation.
Assessing GST, LCT, and WET on Imported Goods
For taxable importations made on or after 1 July 2012, Home Affairs initiates the assessment of GST, luxury car tax (LCT), or wine equalisation tax (WET) payable upon receiving the declaration and providing a declaration advice.
These documents collectively constitute the assessment notice for the importation.
Activity Statement Assessments
Once you submit activity statements for tax periods beginning on or after 1 July 2012, they are regarded as assessments. You have a period of review during which you can make amendments to these assessments.
Deferred GST on Importation
If you choose to defer the payment of GST on importation to the next monthly activity statement, the deferred GST amount is not included in the net amount on that specific statement.
Instead, the deferred GST amount forms part of the overall assessment made for the importation of the goods.
Period of Review
The period of review begins when Home Affairs makes the assessment on importation, not from the assessment for the period in which the deferred GST amount becomes payable.
Exempt Importations: Goods Not Subject to GST
These goods fall under the following categories:
- Items that would have been GST free or input taxed if sold within Australia, such as essential food items, specific medical aids and appliances, cars designated for use by individuals with disabilities, and precious metals.
- Goods eligible for specific customs duty concessions.
Certain imported goods are eligible for customs duty concessions and are exempt from Goods and Services Tax (GST) under specific circumstances, as determined by relevant by-laws. The following items fall into this category:
- Calendars, catalogues, overseas travel literature, overseas price lists, or any other similar overseas printed materials.
- Goods owned by foreign governments, intended for official use by that government, and not intended for commercial purposes.
- Goods intended for use by or for sale to individuals who are subject to a Status of Forces Agreement between the Australian government and another country.
- Goods imported by passengers, ship or aircraft crew, goods belonging to individuals arriving in Australia on international flights, goods purchased from inwards duty-free shops, goods brought or sent to Australia by members of the Defence Force stationed outside the country, goods imported by members of the New Zealand, Canada, or United Kingdom forces, as well as passengers’ personal effects, furniture, or household goods.
- Goods returned to Australia after being repaired or replaced free of charge under warranty or supplied as part of a product safety recall.
- Goods imported for repair or alteration and subsequently exported.
- Goods imported by holders of a Tradex order under the Tradex Scheme Act 1999.
- Certain donated or bequeathed goods from entities or organizations outside Australia to established organizations within Australia.
- Goods acquired through a will or intestacy and not intended for sale.
- Trophies won outside Australia, decorations, medallions, or certificates awarded outside Australia, and trophies or prizes sent by donors residing outside Australia for presentation or competition within Australia.
- Goods, excluding tobacco, alcohol, and bulk orders, with a value less than an amount prescribed by by-law (currently at or below $1,000).
- Samples of negligible value, as prescribed by by-law.
Tax Considerations For Taxable Supplies and Low-Value Imported Goods
Goods to be imported into Australia with a customs value equal to or below $1,000 can be classified as non-taxable importations (see item 26) when sold.
However, it’s crucial to consider that the supply of low-value goods into Australia may still be treated as a taxable supply if it is determined to be connected with Australia.
Taxable Supplies and Trial Period for Imported Goods
Supplies of imported goods will be considered connected with Australia if any of the following conditions apply:
- You, as the supplier, are the one importing the goods.
- You install or assemble the imported goods within Australia.
- Your agreement to sell the goods takes place after the goods have been imported.
- You have purchased the goods you are selling from the importer, and you further sell those goods within Australia.
As per the trial period rule, when a supplier provides goods for import into Australia during a trial period, the supply is considered to be connected with Australia if the agreement to sell the goods takes place after the goods have been imported.
In other words, if the supplier and the customer finalize the sales agreement after the goods have arrived in Australia during the trial period, the supply of those goods is deemed to be connected with the Australian market.
For example, a supplier offers a product to customer, Mr.A, during a 30-day trial period. During this period, Mr.A is not obligated to purchase the product, and if the product is returned before the end of the trial period, no payment is required.
At the end of the 30-day trial period, if the product have not been returned, the customer’s purchase is considered to have occurred after the goods were imported. Consequently, the supplier is connected with Australia, and makes a taxable supply if all other elements of the taxable supply rules are met.
Importing Low-Value Goods: Your Role and Responsibilities
You are the importer of low-value goods if both of the following apply to you:
- You have caused the goods to be brought to Australia for your own purposes.
- You, or your agent, have completed the customs formalities or would be responsible for the customs formalities.
Typically, if you place an order for goods through a website, phone, or in-store from an Australian retailer, you will be considered the importer of those goods. You accept the retailer’s terms and conditions, making you responsible for any customs formalities, and the goods are sent from overseas to you in Australia.
Using Goods for Your Own Purposes
Using goods for your own purposes includes scenarios such as:
- Selling, Leasing, or Hiring the Goods
- Using the Goods as Trading Stock
- Using the Goods in Accordance with Their Design or Nature
Customs Formalities for International Post Shipments
For goods sent to Australia via international post, the addressee mentioned on the low-value goods will generally be the entity authorized by Home Affairs to receive the goods.
This addressee will be responsible for completing the customs formalities.
Low-value goods sent to Australia through air or sea cargo arrangements are usually released to the ultimate consignee.
Determining the Ultimate Consignee
Typically, freight forwarders or logistics companies are not considered the ultimate consignee. Instead, the ultimate consignee is usually the purchaser, unless the seller specifically designates themselves as the ultimate consignee.
In such cases, the ultimate consignee will be the entity responsible for handling the customs formalities.
Claiming Input Tax Credits on Taxable Importations
To be eligible for claiming a GST credit, all of the following conditions must be met:
- You must have made a taxable importation of goods.
- Your business or organization should be registered for Goods and Services Tax (GST).
- The goods you import must be intended for a creditable purpose, which typically includes business-related activities.
Process of Claiming Input Tax Credits
You can claim GST credits on the imported goods by including them in the activity statement relevant to the tax period in which you pay the assessed GST on the import of those goods.
This means you can claim the credit on the same activity statement in which you report and pay the GST amount for the imported goods.
Ensuring Evidence of GST Payment on Importation
In order to claim a GST credit, it is essential to have the necessary documentation proving that the goods have indeed been imported, and the GST payment has been made or deferred at the time the goods were brought into the country for home consumption.
To initiate the process of bringing goods into Australia for home consumption, you must complete an import declaration and submit it to the appropriate government authority, known as Home Affairs.
Once the customs duty and GST have been paid, Home Affairs releases the goods for use in Australia.
If you use an intermediary, such as a licensed customs broker, to handle the customs formalities, they can either provide you with the required documents received from Home Affairs or agree to keep the documents on your behalf and make them available as needed.
It is of utmost importance that you refrain from attempting to claim a GST credit if you do not possess the relevant documentation or lack immediate access to it. The possession of proper documentation is an essential prerequisite for successfully claiming GST credits on imported goods.
Documentation for Claiming Input Tax Credits on Imported Goods
To claim GST credits on imported goods, you need to provide acceptable documentation proving that you have imported the goods and they have been entered for home consumption.
Home Affairs requires the use of import declarations for goods being entered for home consumption, and there are two types of import declarations that apply for claiming GST credits:
1. Import Declaration: N10
This document provides comprehensive details of values and charges for the imported goods when they are initially entered for home consumption. It includes information about deferred GST and the total payable amount.
2. Import Declaration (out of warehouse): N30
This document is relevant when the imported goods are cleared out of a customs licensed warehouse for home consumption. It also contains essential details regarding values, charges, deferred GST, and the total payable amount.
Home Affairs issues an official receipt for the payments received, which includes specific information about the total payable GST.
As an importer, you or your customs broker/agent must keep the relevant import declaration. Ensure that the status of the declaration is marked as ‘finalized.’ Also, remember to keep the corresponding official receipt from Home Affairs, as it contains essential details of the total amount paid.
Having these proper and up-to-date documents is crucial for successfully claiming GST credits on imported goods.
This article is for general information only. It does not make recommendations nor does it provide advice to address your personal circumstances. To make an informed decision, always contact a registered tax professional.