Goods and Services Tax (GST), Customs Duty, and importing commercial goods to Australia are all important considerations for eCommerce founders who are looking to import goods for their business.
When importing commercial goods into Australia, GST is typically applied to the value of the goods at the point of sale. The GST rate is 10% of the value of the goods and is usually included in the price paid by the customer. Businesses that are registered for GST are known as "taxable entities" and are required to charge GST on the goods and services they provide, including imported goods. They are also required to pay GST on the goods and services they purchase from other businesses.
Customs Duty is a tariff imposed on imported goods and it's calculated based on the value of the goods, their classification, and the country of origin. The rate of Customs Duty varies depending on the specific goods being imported, and it's important to check with the Department of Home Affairs or a Customs Broker for more information on the applicable rate.
Customs Duty
All goods imported into Australia are generally subject to duty, Goods and Services Tax (GST), and any other taxes that may be applicable based on the classification of the goods. The Australian Border Force (ABF), which is part of the Department of Home Affairs, is in charge of customs.
The ABF requires the goods' owner (either the actual owner or someone in control of the goods) to file an Import Declaration.
- If you are importing for business purposes, this is usually handled by a freight forwarder or customs broker, who will use the customs Integrated Cargo Systems (ICS) to track imported goods and inform you of the applicable duty and GST payable on the imported costs.
- if you're importing by post, Australia Post will (generally) notify you if and when customs is due.
How are customs duties calculated?
Customs duty is heavily influenced by the type of goods as well as other factors such as exemptions, concessions, and the existence of Free Trade Agreements. Prior to the release of goods, freight forwarders will use the ICS to calculate the amount of customs (and other taxes) due and will issue a payment notice.
A 5% duty will be levied on the majority of products imported into Australia based on:
- Conversion of your purchase into Australian dollars (using the exchange rate on the date of export);
- the import duty is 5% of the value of your goods converted to Australian dollars;
- and 10% GST is generally applied (at the same time by forwarders/brokers) to the value of the goods in Australian dollars, plus freight, insurances, and the import duty
For example, a startup founder is importing a batch of mobile phone accessories worth $10,000 from China, the GST would be $1,000 (10% of $10,000) and the Customs Duty would be 5% of $10,000 = $500. The founder would need to pay $1,500 in total for GST and Customs Duty on this batch of imported goods.
GST Free Status for Low-value imported goods.
In Australia, certain goods and services are considered GST-free, which means that they do not attract GST and the business is not entitled to claim input tax credits for GST paid on purchases related to GST-free items. One of the GST-free threshold is the "Low-value imported goods" threshold, which is currently set at $1,000. This means that goods imported into Australia with a customs value of AUD 1,000 or less, regardless of the country of origin, are GST-free.
For example, if a startup founder is importing a batch of mobile phone cases worth $950, the GST would not be applied and the founder wouldn't need to pay GST on this batch of imported goods because the value of the goods is under $1,000.
As a founder, it is essential to understand how GST, Customs Duty, and importing commercial goods works, and the impact it may have on your business. If you have any questions or need assistance navigating the process, consulting with a Customs Broker or an experienced import/export advisor is highly recommended.