If you import goods into Australia for use in your business, and you are registered for GST, you may be entitled to claim GST credits on the costs.
This is because GST is charged on most imports of a certain minimum value (which is currently set at $1,000).
Here’s how it works.
Imports and the GST
The GST on imports is collected by the Department of Home Affairs before the goods are released from customs.
Some imports will be GST-free though. This includes catalogues, calendars and other printed materials, as well as some donated goods, prizes, and samples. Low-value goods (under the $1,000 limit) are also GST-free, except in the case of tobacco or alcohol or for bulk orders of items.
There are some instances however where low-value goods could attract GST – such as for components imported for assembly into goods in Australia.
Overseas services and the GST
GST is also charged on certain services from overseas providers. This includes social media ads, Google AdWords, Amazon charges and others.
However, this doesn’t apply for businesses registered for GST in Australia, as long as they advise the supplier of this and provide their ABN.
So if for example you were to advertise on Facebook, and in the process you provided your ABN and stated you are registered for GST, Facebook should not add any GST to the cost. On the other hand if you omit or forget to provide this information, and/or you get charged GST, you should be able to claim it back later.
Claiming GST credits on overseas purchases
To claim GST credits on items from overseas, you must keep a copy of the backup documentation.
You should also check the paperwork for the actual GST amount so you can record it correctly in your bookkeeping system.
This is a very important step. Some businesses have been known to miss out on substantial GST credits because the owners were unaware that imports or overseas services can be subject to GST.
In some cases, business owners can enter into a deferred GST scheme for imports, which allows the goods to be released before the GST has been paid. Certain criteria must be met to enter the scheme.
Businesses can apply for deferred GST on imports at the ATO or through their accountant or BAS Agent.
Getting help with GST
GST can be very complex! Some items are subject to 10% GST, some are not, and some transactions sit outside goods and services altogether (such as payroll).
Setting up the wrong codes in your system at the beginning can lead to years of accumulating or compounding errors that you may not even be aware of. This is why it’s so important to ensure you record the correct GST on all purchases, and this applies to imports as much as to locally acquired goods and services.
A qualified and professional bookkeeping and BAS specialist can take a lot of the time and stress out of reporting GST, by ensuring your system is set up correctly from the outset and that all GST is recorded and reported correctly.
To find out more about our year-round bookkeeping, BAS and payroll services for Australian businesses, and how you could benefit by partnering with us, contact us.