As we outlined in our blog post – How do I import goods into Australia – importing goods into Australia can be a complex activity. There are many exceptions and exemptions.
Small and medium size businesses can make errors especially around the reporting of GST. By understanding your obligations, the details of the process and setting up sound procedures, you can minimise these errors and report accurate records to the ATO.
Not to mention, save your business time and money at the same time.
Abdera accounting services want to make it easy for your business to claim any GST you are entitled to and ensure you pay the correct GST if needed.
What is GST?
GST is Australia’s goods and services tax. It is currently calculated at 10% of the price for most goods. There are a few exemptions including some basic foods, some medical technology such as aides and appliances, and some telecommunication supplies.
If you are importing medical technology into Australia, we have strict laws and regulations to sell and import therapeutic goods in the country. Our blog post What is a TGA sponsor? will help you navigate the rules.
If your business is registered for GST, you are required by the Australian Taxation Office to prepare a Business Activity Statement (BAS). The BAS reports the amount of GST you have collected (and charged your customers) on each sale and the GST you have paid on your expenses.
Your business will either pay the difference between the GST collected and paid or receive a refund in circumstances where the GST paid on expenses is greater than the GST collected on sales.
Let’s recap what and when you need to pay GST on imports
GST on the on-sale of imported goods
GST is payable on most goods imported into Australia.
If your goods are subject to GST on importation, you are required to pay GST on the total shipment of product to the Department of Home Affairs before the goods can be released.
If your business is part of the deferred GST scheme this does not apply.
When your business makes a sale of these imported goods in Australia, you are required to charge GST on the sale, as well as report the sale and account for the GST on the importation.
These errors may result in a fine from the ATO or your business could be owed money.
Confused? Talk to an Abdera for a free consultation
Due to its complexity, especially for international companies doing business in Australia, GST errors may result in a fine from the ATO or your business could be owed money.
Here are some of the most common GST errors, we have found businesses make when reporting on their BAS.
Error Number 1 – Not reporting the sale of imported goods
A number of small and medium size businesses are not reporting the sale in Australia of the goods that have been imported into Australia on their BAS.
The on-sale is to be reported on your BAS and GST payable, even if the supply is GST-free or input taxed.
Error Number 2 – Not charging GST on sales of warehoused goods
Goods that are imported and then warehoused in Australia for later sale to Australian consumers are considered connected with Australia and subject to GST, unless they are sales of goods classified as GST-free.
Where goods are on sold and are taxable supplies, the GST is required to be charged on top of the sale price and paid to the Australian Tax Office.
A GST shortfall occurs when GST is not charged by the non-resident supplier to the consumer when they are required to be registered for GST.
Even in the case of a non-resident business importing goods into Australia and warehoused by an Australian third-party logistics provider for sale at a later date, these goods are subject to GST.
How it works – The goods are sold through the non-resident business’ website, electronic distribution platforms or third parties to an Australian resident. The goods are then delivered to an Australian address from the third-party warehouse in Australia.
When the goods are sold to the Australian resident, provisions for charging GST need to be made at the time of the sale. The non-resident business then collects the GST amount on each sale.
Through the monthly or quarterly BAS, the non-resident business must report the total sales and GST amounts collected to the ATO.
Error Number 3 – Not claiming the upfront GST you paid on importation
As mentioned above, when you import your goods into Australia, you are required to pay the total GST upfront on eligible goods at the border.
If you are registered for GST, you can claim this GST your business has paid, when your next BAS is reported.
This is applicable whether you are an Australian business or a non-resident business, but you must be registered for GST.
Error Number 4 – Not claiming the GST on transport costs and other costs
When goods are transported from your warehouse to the consumer, the cost of the freight or courier charges are subject to and include GST. This GST can be claimed by your business. Subsequently, you need to report the GST on these freight costs on your BAS.
There are a number of other expenses that your business may incur when warehousing the goods on your behalf and most of these expenses will include GST. Typical expenses that may incur GST include warehouse storage, insurance and lawyer, accountant and consultant fees.
You will be able to claim the GST component on your BAS.
TIP: An easy way to find out if GST has been charged is to check the invoices you received for these expenses. The invoice should include the words ‘TAX INVOICE’ at the top, as well as include the business ABN number. Within the description of the goods you purchased will be a separate line outlining the amount of GST charged. This is the amount you can claim.
If you think your business has made an error or not claiming the correct GST on your BAS, talk to an Abdera accountant today. We can clear up your confusion and set up some easy processes to ensure your GST reporting is sound and free of errors. It may even highlight some money your business is entitled to!
Contact us here or call our offices on +61 2 8916 6259 and let’s get this sorted out now.
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