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taxes

Import tax, customs duties and GST on imports in Australia

By QuickBooks Australia

Published on April 30, 20247 min read

Australian import tax might seem like a tricky business. Which items are taxable? Which — if any — are exempt? Does import tax include customs duty, goods and services tax (GST), or both? Who ends up paying tax, the vendor or the importer?

If you’ve ever had any of these questions then you’re certainly not alone. That’s why we’re here to help. In this guide, we’re going to run through the different types of income tax, who they apply to, and how to ensure you stay in the good books of the Australian Border Force (ABF) and the Australian Tax Office (ATO) going forward.

Import tax and customs duty

All imported goods over the value of $1,000 are subject to customs duty at the border (which is calculated by the ABF), plus GST at 10% (barring certain exceptions), and any other special extra taxes. But what sort of extra taxes are we referring to?

Well, for example, wine is subject to the Wine Equalisation Tax (WET). And, if you’re importing a car over the value of $76,950 (or $89,332 if it’s a fuel-efficient vehicle), then you’re required to pay the 33% Luxury Car Tax (LCT).

The amount of customs duty that you need to pay depends on a variety of factors, such as the types of goods that you’re importing and whether or not Australia has a free trade agreement with the country of origin (as it does with China).

How customs duty works

When you’re looking to import goods into the country, the first step is to send an electronic import declaration to the ABF’s integrated cargo system (ICS).

Once you’ve done this, they’ll work out how much import tax you owe. It’s important that you pay the necessary amount of important tax as soon as possible — your goods won’t go through customs until you do.

What about low-value goods?

If the customs value of your goods is under $1,000, then you don’t have to pay GST or customs duty at the border. Customs value refers to the cost of the goods themselves, as well as any freight or insurance costs once the goods are in Australia.

So if you paid $300 to get your items shipped over to Australia and another $200 on insurance, this wouldn’t be included in your items’ customs value. However, if you then spent a further $100 on getting your goods from the border to your office, this would be included in the overall customs value.

The ABF will look at the exchange rate on the day that your goods were shipped, as opposed to the day that they arrived in the country. So, let’s say that you’re importing goods from Taiwan. On the day that they left the port, the total cost of your goods was $980. However, when they arrive in Australia, exchange rate fluctuations mean that they’re now worth $1,000.

In this case, you’d still be exempt from GST and customs duty — after all, you can’t be expected to know that the exchange rate would change so drastically.

You’re only eligible to pay customs duty and GST at the border if:

Cost of goods (when they leave the country of origin) + freight and insurance costs (within Australia) = $1,000+

This requirement is due to the low-value goods import tax.

Introduction to the low-value goods import tax

Back in July 2018, the Australian Government introduced a new form of import tax for overseas vendors — requiring that they pay GST on all low-value goods that are imported into the country.

Previously, overseas vendors could offer cut-rate prices as they didn’t have to pay GST, unlike their Australian counterparts. This — coupled with the fact that overseas vendors also often have far lower operating costs — meant that Australian small businesses had been struggling to compete.

With overseas vendors selling their goods at such low prices, there was only one thing Australian businesses could do: start reducing the quality of their products. Needless to say, this led to a race to the bottom.

The government, recognising the need to promote small businesses (after all, they’re responsible for 35% of Australia’s total GDP), introduced the low-value goods import tax to give Australian small businesses a level playing field. However, that’s not to say that the government has always been in agreement — the law has been many years in the making.

Gerry Harvey, boss of Harvey Norman, had been lobbying for this tax to be introduced since 2015. His influence has been so strong that many are in fact calling this the ‘Gerry Harvey tax’. So why didn’t the government budge up until now?

Well for starters, it’s taken a while to work out the various nuances: tax law is far from simple. And there was strong opposition: major retailers like Amazon and eBay were incredibly vocal, stating that it ‘imposes an administrative burden on sellers’, which creates ‘an inherent disincentive for them to comply’ — they even went as far as saying, ‘It will create, rather than remove, distortions in pricing due to its lack of efficient mechanisms’.

Despite such hefty opponents, the government remained firm and went ahead with introducing the tax.

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How does the low-value goods import tax work?

Okay, it’s all well and good to look at the reasons why this tax was introduced, but how does it actually work?

The low-value import tax or import duty only applies to overseas vendors who:

Sell to Australian consumers
Have an Australian annual turnover of $75,000 or more
Import low-value goods

If you’re an overseas business that meets all of these criteria, there are two ways you can choose to register for GST: either under the existing full GST registration system, or by opting for the simplified GST system for non-residents.

The good news is that you will only need to register once — even if you supply more than one type of good or service.

If you’d prefer to register under the full GST registration, you’ll also be entitled to an Australian Business Number (ABN) and will therefore be able to claim input tax credits.

Once you’re registered, you’ll need to pay GST to the Australian Taxation Office (ATO) on a quarterly basis.

To understand more about your tax obligations in Australia, it’s always worth speaking to an Australian accounting professional.

In addition to this, accounting software can help simplify the process: automatically tracking and calculating your outstanding GST on an ongoing basis.

What if my business buys goods from overseas vendors?

If you’re an Australian business that’s already registered for GST and you regularly import goods from overseas vendors as part of your operations, don’t worry — your vendors will have to pay the GST for your imported goods, not you.

This means that you avoid paying GST twice: when you import your goods and when you lodge your quarterly business activity statement (BAS). Remember that businesses include GST in the price of anything they sell to consumers, but they then have to pay the government the GST that they make from their sales.

However, there are a couple of key steps you should be aware of if you regularly important from overseas. When making a sale, your overseas vendor should prompt you to provide your ABN to confirm that your purchases are business-related (business-related expenses are GST-exempt).

Once supplied, the vendor should then put the transaction through as a normal business sale, ensuring that you’re not charged GST.

Types of goods that are exempt

But wait, there’s more good news. As it happens, not all goods are subject to GST. For example, certain foodstuffs, medical products, and drugs are exempt. If you’re unsure, then you’re best off checking with the Australian Border Force (ABF).

Does this law affect my Australian outlet, website, or call centre?

If the goods you sell are already subject to GST, then you don’t need to do anything.

The new GST legislation was introduced to ensure that Australian businesses aren’t disadvantaged compared to their overseas competitors.

Now that the law has come into effect, the online retailers you may be competing with (like eBay and Amazon) face the same duty rates as your business.

In other words, 10% of the total customs value of the goods that they sell are subject to GST.

Has the low-value goods import tax been a success?

It’s safe to say that the introduction of this tax has been a great success. In fact, in the first 9 months alone the ATO collected $250 million in GST.

This is even more surprising when you take into account that this exceeded their forecasts by a mammoth $180 million.

Import tax: Australia’s rules to remember

The amount of import tax that you pay generally rests on one thing: the value of your goods.

If they cost under $1,000 then the whole process should be a breeze — and importing such goods won’t cost you an arm and a leg.

However, if you regularly import goods over the value of $1,000, then we strongly recommend speaking to a licensed customs broker and getting their advice. After all, it’s never a wise idea to fall foul of the ABF.

We hope that you’ve found this guide useful and that you can now import goods into Australia with confidence.

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