Import/export tax implications every business owner should know
If you or your business imports or exports goods and services, then you will want to know the ins and outs of how Australian tax applies. Stay in the know with the answers to these common import and export tax questions
Do I need to pay income tax on exports?
If you export goods or services and you’re an Australian resident entity, your export income is generally subject to income tax. This is because your assessable income includes your world-wide income.
However, if you derive income from another country and pay tax in that country, you may be entitled to a foreign income tax offset against your Australian income tax.
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When is foreign income exempt from Australian tax?
Foreign income your company earns may be exempt from Australian tax if it derives income by carrying on business at or through a permanent establishment in the other country. The source of income is generally the place where the:
- contract is entered into, in the case of goods
- services are performed, in the case of services.
If you’re exporting goods by selling them to a foreign resident entity on a free on board (FOB) basis in Australia, the place of contract is likely to be in Australia. If you export to a country that has a tax treaty with Australia, the treaty may have special rules to help you determine the source of the income. You can find more information and a list of Australia’s established tax treaties at What are tax treaties?
What is excise and wine equalisation tax (WET)?
Some goods may have specific rules attached to them, such as excise or wine equalisation tax (WET). Excise is a commodity-based tax on alcohol, tobacco and fuel and petroleum products. If you import these goods you generally pay an equivalent customs duty to the Department of Home Affairs. Imports are called ‘excise equivalent goods’.
If you make wine, import wine into Australia or sell it by wholesale, you'll generally have to account for wine equalisation tax (WET). WET is a once-off tax of 29% on the wholesale value of wine, and applies when you sell or deal with wine. It is only payable if you are registered or required to be registered for GST. Transactions may be exempt from WET when:
- the transaction happens 'under quote' (the buyer quotes their ABN to the seller in the approved form) which typically happens when there is an earlier wholesale transaction, such as between a producer and distributor, before the wine reaches the retailer.
- the wine is GST-free – for example, it's being exported and WET has not already been paid on the wine.
When are goods and services subject to GST?
When importing or exporting goods and services you may be subject to GST. GST is a broad-based tax of 10% on most goods, services and other items sold or consumed in Australia and also on most imports of goods. Generally, once you are registered for GST you will include GST in the price of supplies to your customers and claim credits for the GST included in the price of your business purchases.
Imported goods worth over A$1,000 generally has GST collected by the Department of Home Affairs when you, as the importer, collect your goods at the border unless you are registered under the deferred GST scheme. When GST on a taxable importation is applied at the border it is payable by businesses, organisations and private individuals - whether they are registered for GST or not. However, a GST-registered business may be able to claim a GST-credit for any GST paid on imported goods.
What is the deferred GST scheme?
The deferred GST scheme allows you to defer the payment of GST on taxable importations until the first activity statement you lodge after the goods are imported. To participate in the scheme you must:
- have an ABN
- be registered for GST
- lodge your activity statements online
- lodge your activity statements monthly
- make your activity statement payments electronically.
You may not be eligible for the deferred GST scheme if:
- you or any of your related entities are not up to date with your tax returns or payments
- you or anyone relevant to the application has, in the past three years, been convicted or penalised by a court for specific offences.
For taxable imports, an assessment of GST, luxury car tax (LCT) or wine equalisation tax (WET) payable is made when a declaration has been received by the Department of Home Affairs and they have provided a declaration advice. Together these documents form the assessment notice.
How is GST applied on low value imported goods?
As of 1 July 2018, GST generally applies to supplies of low value imported goods (worth less than A$1,000). This law is designed so that non-resident businesses:
- will not charge GST on a sale when GST will be charged at the border, because an item is worth over A$1,000, a tobacco product, or an alcoholic beverage
- will not need to charge GST on a sale if it is clear that multiple goods will be shipped to Australia in one consignment worth over A$1,000 – GST will be charged at the border instead
- will not need to charge GST on a sale of low value imported goods to Australian GST-registered business if they provide their Australian business number (ABN) and confirmation that they are GST-registered.
Does GST apply to imported services and digital products?
GST also applies to sales of imported services and digital products made to Australian consumers when overseas businesses meet the A$75,000 registration threshold.
How does GST apply to exports?
Exports of goods from Australia are generally GST-free if they are exported from Australia before or within 60 days of the first of the following two events:
- the supplier receives any payment for the goods
- the supplier issues an invoice for the goods.
In the case of exporting goods paid for in instalments, the payment referred to is the final instalment and the invoice referred to is the invoice for the final instalment. In some cases you can apply to the ATO to extend the 60-day period.
Other exports, such as services, various rights, financial supplies and other professional services can have specific rules to determine when they are GST-free or if they are excluded from being treated as GST-free. The ATO also recommends that you review the rules on importing and exporting from the Department of Home Affairs and the Department of Agriculture and Water Resources.
Make sure to stay aware of your status as an exporter. A change of international commercial (Inco) delivery terms could mean you’re no longer being considered as an exporter and GST may become payable on the supply.
After reviewing your international cross border transactions you may discover mistakes in your reported GST amounts. If this occurs, the ATO encourages you to make a voluntary disclosure. More information is available at Make a voluntary disclosure.
How do GST-free sales to travellers departing Australia work?
Duty-free shops are able to sell GST-free goods to travellers leaving Australia. Generally, GST-free goods sold to outbound travellers must be placed in a sealed bag. You can also use the sealed bag method to sell wine without wine equalisation tax (WET). GST-free goods sold or delivered to travellers after they have passed through the border clearance area don't need to be placed in a sealed bag. You can find out more at GST-free sales to travellers departing Australia.
To find out more, visit the ATO website.