Chartered Accountant Timothy Quinn leads Tax & Accounting at Lawpath. 16+ years in tax advisory, specialising in startup growth and expansion. Passionate about supporting entrepreneurial clients with early-stage investment incentives, restructuring, international exit strategy planning, and more.
Importing goods into Australia is essential for many local businesses, but it does come with the headache of navigating import taxes. The Goods and Services (GST) tax is one of the key considerations. Without proper knowledge, importers risk unexpected costs, compliance issues, and missed opportunities to optimise their tax obligations.
In this article, we will walk you through GST on imported goods to Australia. We’ll cover the fundamental principles of import taxation and provide you with practical steps for claiming GST credits and leveraging the GST deferral scheme. Let’s get started.
Table of Contents
What is GST on imports?
First off, let’s understand exactly what GST on imports implies. GST on imports is a 10% tax applied to most goods brought into Australia. It ensures that imported goods are taxed similarly to domestically produced items, maintaining fair competition between local and international suppliers.
Unlike customs duties, which vary based on product type and origin, GST is calculated uniformly across taxable importations.
As an importer, you must pay GST at the border unless you are part of the deferred GST scheme. In the latter case, you can make payments through your Business Activity Statement (BAS) instead.
How GST applies to imported goods in Australia
In this section, we will cover when you need to pay GST on imports, who pays it, and how to calculate the amount you owe.
When is GST payable on imports?
GST becomes payable when goods cross the Australian border and are cleared through customs. The Australian Border Force (ABF) collects GST alongside customs duties during the importation process. You’ll typically pay this tax before goods make it across the border.
The taxable value includes the customs value of goods, international transport costs, insurance, and any applicable duties. For example, if you import goods worth AUD 5,000 with AUD 250 in customs duties and AUD 300 in transport costs, GST will be calculated on the total value of AUD 5,550.
Who pays GST on imported goods?
Responsibility for paying GST lies with importers — whether businesses or individuals — who bring goods into Australia. Businesses registered for GST can claim input tax credits for GST paid on imports used in taxable activities. However, private individuals importing goods for personal use cannot claim such credits (more on this in the next section).
Importers must register for GST if their annual turnover exceeds AUD 75,000 (AUD 150,000 for non-profits). That said, even smaller businesses may benefit from registration if they frequently import goods for resale or business purposes.
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How is GST calculated on imports?
GST is calculated as 10% of the taxable importation value. The formula is:
GST = (Customs Value + Transport Costs + Insurance + Customs Duty) × 0.10
Suppose you are importing a shipment of electronics into Australia for your business. The shipment includes laptops with a customs value of AUD 10,000. Additional costs include AUD 500 in international transport fees and AUD 200 for insurance. Customs duties on the shipment amount to AUD 1,000.
In this case:
- Customs Value: AUD 5,000
- Transport Costs: AUD 300
- Insurance: AUD 200
- Customs Duty: AUD 250
Total taxable value = AUD 5,750
GST payable = AUD 575
How to claim GST credits on imports
The blanket tax can represent significant costs for businesses. To alleviate this expense, you may be able to claim GST credits on imports. Let’s look at the eligibility requirements and how you can proceed with the claim.
Eligibility for claiming GST credits
If your business is registered for GST, you can claim credits for imported goods used in taxable business activities. To qualify:
- You must use the goods solely or partly for creditable purposes.
- You must be registered as the “owner” of the goods on customs declarations.
- The goods must not be used exclusively for private purposes or exempt activities.
Steps to claim GST credits
Claiming GST credits helps GST-registered businesses recover the GST paid at the border. Follow these steps if you qualify.
1. Ensure your business is registered for GST
Remember that only businesses registered for GST can claim GST credits. Registration is mandatory if your business has an annual turnover of AUD 75,000 or more (AUD 150,000 for non-profits). However, you may still benefit from registering even with a lower turnover.
You can register for GST in one of the following ways:
- Online through the Australian Business Register (ABR)
- With the help of your tax agent
- Through the ATO’s Business Portal
Make sure to confirm your GST registration status regularly to ensure you remain eligible to claim credits.
2. Retain all necessary documentation
Record-keeping is essential for claiming GST credits. You’ll need the following documents.
- Tax invoices: For purchases over AUD 82.50 (including GST), you must have a valid tax invoice to claim GST credits. This invoice should include:
- The supplier’s name, address, and Australian Business Number (ABN)
- Date of issue
- Description and quantity of goods
- Price and GST amount clearly stated
- Customs documentation: Keep customs import declarations and evidence of GST paid at the border (e.g., receipts from the ABF).
- Proof of payment: Maintain bank statements or payment confirmations showing you have paid for the imported goods and associated GST.
Keep all relevant documents for at least five years, as the Australian Taxation Office (ATO) may request them during audits.
3. Calculate input tax credits
Check your customs documents for the GST amount paid. If this amount is not explicitly stated, calculate it by dividing the total price (including GST) by 11. For example, if the total is AUD 1,100, the GST component is AUD 100.
If the imported goods are used partly for private purposes, only claim the GST credit proportionate to the business use. For example, if 70% of the goods are used for business, claim 70% of the GST paid.
Note that if you use the cash accounting method and have only partially paid for the goods, you can only claim GST credits on the amount paid to date.
4. Report credits in your BAS
When completing your BAS, report your GST credits in the section for “GST on purchases” or “GST credits.” This includes GST paid on imported goods as well as domestic purchases and other business expenses.
For this step, many businesses use accounting software that integrates BAS reporting, which helps ensure accurate reporting and reduces errors.
5. Submit your BAS by the due date
You can lodge BAS monthly, quarterly, or annually, depending on your business size and ATO requirements. Lodgement is available online via the ATO Business Portal, through your registered tax or BAS agent, or by mail.
Make sure to submit your BAS on time to avoid penalties and interest charges. The ATO provides due dates on their website and in your BAS notices.
GST deferral scheme for imports
In addition to claiming GST credits, you can defer the GST on imported goods.
What is the GST deferral scheme?
The deferred GST scheme allows eligible businesses to defer payment of GST on taxable imports until they lodge their BAS. Instead of paying upfront at customs clearance, you report and pay deferred amounts through your monthly BAS submissions.
This scheme benefits cash flow management by postponing immediate tax payments while maintaining compliance with ATO regulations.
Who is eligible for GST deferral?
To be eligible, your business must:
- Be registered for monthly BAS reporting
- Comply with ATO obligations
- Actively participate in taxable business activities involving imported goods
You will need to apply to the ATO and demonstrate adherence to these requirements before approval.
How to apply for the GST deferral scheme
To apply:
- Register your business with the ATO.
- Lodge an application form specifying your eligibility and reasons for deferral.
- Provide supporting documentation such as ABN details and financial statements.
- Await approval from the ATO before incorporating deferred amounts into your BAS reporting.
Exemptions and special rules for GST on imports
Certain types of goods may be exempt from GST upon importation or fall under special rule categories. It’s important to be aware of these differentiated treatments for compliance and to optimise your payments.
GST exemptions for certain goods
Certain goods are exempt from GST upon importation:
- Medical supplies such as prosthetics and hearing aids
- Educational materials used in schools or universities
- Goods returning unaltered after overseas repair or testing
Exemptions depend on specific criteria outlined by Australian legislation, so it’s crucial to check these regularly.
GST on low-value imported goods
Low-value goods (under AUD 1,000) are exempt from customs duties. However, they still attract GST when they are sold in Australia.
Online marketplaces facilitating sales between overseas suppliers and Australian consumers are responsible for collecting this tax at checkout.
Special rules for international businesses
Overseas suppliers selling directly to Australian consumers must register with the ATO if their annual turnover exceeds AUD 75,000 in sales connected with Australia. These suppliers collect and remit GST under Australia’s indirect tax zone regulations.
Penalties and compliance for GST on imports
Non-compliance with GST obligations on imports can lead to significant penalties imposed by the ATO and the ABF. These penalties range from monetary fines to legal action, including prosecution in severe cases.
Ensuring compliance is critical to avoid disruptions in your import operations, financial losses, and damage to your business reputation.
Common compliance mistakes
Incorrect calculation of taxable values
Many importers miscalculate the value of taxable imports by excluding components such as international transport costs, insurance, or customs duties. The GST is calculated on the total value of the taxable importation, which includes:
- The customs value of the goods
- Any customs duty payable
- Transport costs to the place of consignment in Australia
- Insurance costs for the transport
- Any applicable wine tax
Failure to include all these elements can result in underpayment of GST, triggering penalties and interest charges.
Failure to report deferred GST amounts in BAS
If you are approved for the GST deferral scheme, you must report deferred GST amounts in your BAS. Omitting or incorrectly reporting these amounts can lead to compliance breaches.
The ATO pre-populates BAS forms with deferred GST liabilities, and failure to reconcile these amounts properly can result in penalties.
Misclassification of imported goods
Some importers incorrectly classify goods as GST-exempt or non-taxable, such as medical supplies or educational materials, without meeting the strict criteria. This misclassification leads to non-payment of GST where it is actually due, attracting fines and back payments.
Incorrect reporting of imported goods sales
Businesses must charge GST on the sale of imported goods within Australia and report these sales correctly. Failure to do so can result in double taxation or missed GST liabilities.
Poor record-keeping
Inadequate documentation, such as missing tax invoices, customs declarations, or proof of GST payment, can prevent businesses from substantiating their GST claims during audits, leading to disallowed credits and penalties.
Potential penalties for non-compliance
The ATO and the ABF may impose a range of penalties if you do not comply with import taxes.
- Monetary fines: The ATO can impose fines for late payment, underpayment, or failure to lodge BAS on time. Penalties can be substantial, especially for repeated offences.
- Interest charges: Interest accrues on unpaid GST amounts from the due date until payment is made.
- Legal action: In cases of deliberate evasion or fraud, the ATO may pursue prosecution, which can result in heavy fines and even imprisonment.
- Goods confiscation: The ABF has the authority to detain or confiscate goods if GST or customs duties are unpaid or if there is evidence of non-compliance.
- Suspension from GST Deferral Scheme: Non-compliance can lead to removal from the GST deferral scheme, requiring immediate payment of GST on future imports.
How to ensure compliance
While penalties sound stressful, you can prevent them by ensuring full compliance with ATO and ABF regulations.
Classify imported goods correctly
Verify the GST status of imported goods carefully, using ATO rulings and customs tariff classifications. When in doubt, seek expert advice to avoid costly misclassifications.
Maintain accurate records
Keep detailed and organised records of invoices, customs declarations, transport and insurance costs, and proof of GST payments. This documentation is essential for substantiating GST credits and responding to ATO audits.
Use reliable accounting software
Employ accounting systems that integrate import GST calculations and BAS reporting to minimise errors.
Consult tax professionals
Professional advice from tax agents or customs brokers can help navigate complex GST rules and keep your business compliant.
Lodge BAS and make payments on time
Lodge your BAS on time and ensure all GST amounts, including deferred GST, are accurately reported and paid. Late lodgment or payment attracts penalties and interest.
Regularly review ATO guidelines on international transactions
The ATO frequently updates its guidance on GST and imports. Staying informed about changes in legislation, deferral schemes, and exemptions helps avoid inadvertent non-compliance.
FAQ
Is there a threshold for GST on imported goods?
No! While low-value goods under AUD 1,000 are exempt from customs duties, they still attract a 10% GST charge.
What happens if I don’t pay GST on imported goods?
Failure to pay may result in penalties from the ATO or delays in customs clearance until outstanding amounts are settled.
Properly managing GST on imports
Understanding how GST applies to imports can save your business time, money, and stress while ensuring compliance with Australian regulations. Whether you’re calculating taxable values or applying for deferral schemes, proper planning is key to optimising your import operations.
For tailored advice or assistance on business tax compliance, consult Lawpath. We are here to help!
