GST & Exporting
Nov 07, 2015
Nov 07, 2015
If you're in exporting business in Australia, understanding how GST works for exports is important. This basically means that you comply with your Business Activity Statement (BAS) requirements.
Exports of goods and services from Australia are generally GST-free. So for a GST registered exporting business in Australia, this means that the business does not have to include GST in the price of its exports. When lodging the BAS, the business can still claim GST credits for the GST included in the price of purchases that it used to make its exports.
However, there're special rules that you need to be aware of. If you do not either receive a payment or issue an invoice for the goods that you exported, then you will be charged for GST. If you have installment payment options for your customers, you need to make sure that you receive the final payment or issue the final invoice within 60 days. Extensions for this 60-day period is available upon application for each individual supplier.
There're different rules to determine if a supply of a service is GST free. In general, if a service is provided for the consumption outside Australia, meaning that the recipient of the service is outside Australia and the use of the service is outside Australia.
GST registration is compulsory for your business if your GST turnover from sales that are connected with Australia and made in the course of your business is A$75000 or more. This means that you will need to include your export sales in your GST turnover as these export sales are "connected with Australia", even though they are GST-free.
Real world business example:
Billy is small business owner who recently started a online business selling fitness training plans. Billy sells directly through his website. He is not currently registered for GST. Majority of Billy's sales are to customers in Australia. We created a strong business plan with focused marketing strategies for Billy to expand his business to a few other countries. Now his business is rapidly growing with customers buying his training plans from overseas. With his last promotion through Facebook targeted advertising, his sales have now increased to a total of $150,000 for the last 12 months. Now, his customer base is 60% Australian based and 40% overseas.
Billy's sales to customers in Australia are to be included in his GST turnover. What about his sales to overseas customers? That needs to be included in his GST turnover because these sales are "connected with Australia", even though these are GST-free exports. What does this mean to Billy's business?
Billy's total GST turnover equals to his total sales $150000. So he must register his business for GST. Based on the nature of his business, he has to lodge quarterly Business Activity Statements (BAS). Whilst he must include GST in his sales to customers in Australia, his sales to overseas customers are GST-free. He can claim GST credits for business purchases that include GST.