Importing from China, Vietnam or India to Australia? Most likely, you’ll need to pay a Goods and Services Tax (GST) of 10% on top of the taxable importation value.
In this article, I explain what every Australian importer must know about GST, including:
- GST rates on imported goods
- GST calculation examples
- How to (legally) reduce the payable GST
- How to correctly declare GST
- GST credits when importing goods
- GST exemptions and thresholds on imported goods
- GST for private importers
- GST registration for overseas companies
What is the GST rate when importing from China, Vietnam or other countries in Asia?
The GST rate for imported goods in Australia is 10%. Unlike for import duties (which may differ depending on the manufacturing country), the GST rate is the same regardless of the country of origin.
How do I calculate how much GST I need to pay?
The GST is calculated from the value of the ‘taxable importation’, which includes the following:
- Product value
- Import duties (Calculated from CVAL)
- Shipping to Australia (but not domestic transportation)
- Shipping insurance
GST Calculation Example
- Product value = AU$10,000
- Import duty rate = 5% (AU$500)
- Shipping cost (CIF) = AU$1,000
- Shipping insurance = AU$100
Total GST (10%) = 10% x (10,000 + 500 + 1000 + 100) = AU$1,160
How I reduce the GST I need to pay?
The only way to legally reduce the GST is by reducing the overall taxable importation value. Below follows a few examples of how the payable GST can be reduced:
- Negotiate a lower unit price from your supplier (reducing product value)
- Reduce the ordered quantity of goods (reducing product value)
- Book sea freight instead of air freight (reducing shipping cost)
- Coordinate multiple LCL shipments into one FCL shipment (reducing shipping cost)
Some Importers under declare the taxable import value, by asking their supplier or freight forwarder to specify a value that’s lower than the paid amount. Such practices are of course illegal.
If the Australian Taxation Office will audit your company at some point in the future, they will quickly uncover any attempts to understate the product value and shipping cost, by comparing the declared numbers to the actual wire transfer records.
How do I know that the supplier or forwarder declared to correct value?
Don’t expect your average Chinese or Vietnamese factory rep to have a clue how GST is calculated in Australia. They aren’t international taxation professionals, and should not be treated as such.
As an Australian importer, it’s crucial that you calculate the total value of the taxable importation, as demonstrated in this article.
Submit your calculation directly your freight forwarder, rather than your supplier. As long as you run the numbers, your forwarder should specify the correct value on the commercial invoice.
Further, I recommend that you only work with freight forwarders that have their own offices in Australia, as such companies know how to properly declare the CVAL and GST calculation.
When do I pay GST as an importer?
GST is payable once the goods are cleared through customs in Australia. As such, you don’t need to pre-pay the GST to a supplier or freight forwarder. Your freight forwarder can also help you manage this process.
Do importers need to get GST registered?
You only need to register for GST if your company has a GST turnover (gross income minus GST) of AU$75,000 (or more) in the last 12 months.
As such, you don’t necessarily need to get GST registered before you reach a turnover of AUD 75,000. But, that doesn’t mean that you don’t need to pay GST on imported goods.
GST (10%) is payable on all commercial importers, regardless of whether you are GST registered or not.
However, import businesses that are not GST registered cannot claim GST credits, which can greatly reduce your overall tax bill. As such, Importers can benefit by registering for GST.
Note that you can still register for GST, even if your business has not yet reached the AUD 75,000 threshold.
Can I claim GST credits when importing goods?
Yes, you can claim GST credits (which can reduce the overall tax) if your company is GST registered. Further, the goods must be cleared for customs by submitting the Import Declaration: N10 or Import Declaration (out of warehouse): N30.
While you can manage the GST declaration yourself, I recommend that you let your freight forwarder take care of this process.
Further, notice that you must still pay the GST of 10% before the goods are released. You cannot use a GST credit to offset the GST payment itself.
Can importers receive a GST refund?
You can claim GST credits. However, you cannot apply for a GST refund.
Are any imported products exempt from GST?
Yes, there are various products and categories that are tax exempt. The following are relevant to importers:
Item 4 – calendars, catalogs, overseas travel literature, overseas price lists or other overseas printed matter
Item 18 – goods returned to Australia after repair or replacement, free of charge under warranty or supplied as part of a product safety recall
As explained above, replacement products are GST exempt when importing from other countries to Australia. This is the only GST exemption of some relevance for commercial importers.
Do private importers need to pay GST?
Yes, as of July 1st, 2018, the 10% GST applies to all imports, regardless of value. Previously, imports valued below AU$1,000 were exempt from GST.
Clearly, this placed Australian businesses import from Asia at a major disadvantage compared to Chinese companies B2C selling internationally through Aliexpress, Wish and DGgate.
What is the GST threshold on imported goods?
From 1 July 2018, there is no longer a GST threshold. Previously, private importers did not pay GST on imports valued less than AU$1,000. However, this is no longer the case and GST applies to all imports, regardless of value.
Who pays Australia GST for cross-border (B2C) shipments?
Another interesting aspect of the new GST legislation is the shift of tax burden from the consumer, to overseas sellers:
From 1 July 2018, overseas businesses may need to register for GST, charge GST on imported goods valued at A$1,000 or less sold to consumers in Australia, and pay the GST collected to us. This applies to items like clothing, cosmetics, books and electronic appliances.
While this only applies to consumers, which doesn’t include businesses, it’s truly groundbreaking and part of a global trend.
Historically, businesses and individuals have been taxed in their country of origin. For example, a Chinese supplier only paid tax in China, while an Australian importer paid taxes in Australia – including GST.
With the rise of global cross-border ecommerce, this rapidly changing.
The Australian government is not alone in its quest to collect tax revenue from overseas ecommerce businesses. This started in the European Union a few years ago, with Japan and the United States likely to follow.
This is good news for businesses importing goods into Australia, as it levels the playing field.
As said, this is only applicable when foreign companies sell to Australian consumers. Australian businesses importing goods from suppliers in other countries are still responsible for their own GST declaration and payment.
How can overseas businesses register for GST in Australia?
The first step of the process is getting an AUSid. Once you have this security credential, you can use the simplified GST registration system on the Australian Taxation Office website.