If you're in importing business in Australia, understanding how GST applies to imported goods is important. This basically means that you comply with your Business Activity Statement (BAS) requirements.
Most goods imported into Australia are taxable importations for which the GST is payable before the goods are released by Customs. GST is payable on taxable importations by businesses, organisations and individuals irrespective of GST registration.
If you're an importer who's currently not registered for GST, you pay 10% GST on the value of taxable importation to the Australian Customs and Border Protection Service (ACBPS) at the same time, at the same place and in the same manner, that you would pay Customs Duty before your goods are released by ACBPS.
However, if you're a GST registered business, you may be able to defer the payment of GST by registering in the deferred GST scheme. This scheme allows you to defer the payment of GST on taxable importations until the first activity statement you lodge after the goods are imported. You will have to meet certain criteria to be eligible to participate in the scheme.
The above mentioned value of taxable importation is not just price you paid to your overseas supplier. It is the sum of;
- the customs value of the goods
- any customs duty payable
- the amount paid or payable to transport the goods to their place of consignment in Australia
- the insurance cost for that transport
- any wine tax payable.
Real world business example:
Vivid Decor (VD) is small business owner who imports items of decorations to Australia. VD sells directly through its website. The business is registered for GST.
VD imports Christmas decorations on 8 August. The customs value of the decorations is $30,000, the customs duty payable for the goods is $1,000 and the transport and insurance costs are $3,000. Therefore, the value of the importation is $34,000. So when VD imports Christmas decorations, it pays Customs GST of 10% of the value of the importation which is $3,400 (10% x 34,000). VD then sells Christmas decorations online and its sales were $55,000 plus $5,500 GST. The GST-inclusive price of the Christmas decorations purchased in August is now $60,500.
VD offsets the $3,400 GST it paid when the Christmas decorations were imported against the $5,500 GST payable on the sale to its customers. VD pays the difference $2,100 to Australian Tax office.