Step 3 of 5 · Across the border
GST on imports and overseas sales
It depends which way the goods travel. An Australian GST-registered shop that drop ships goods from overseas to its customers here has to account for GST on those sales of low value imported goods, while goods it exports are GST-free if they leave Australia within 60 days of it receiving any payment or issuing an invoice, whichever comes first.
General information. This is general information about GST, not tax advice. The official place to check is the Australian Taxation Office, whose pages are linked at the foot of this page; a registered tax agent can advise on a particular business.
Three ways an order can cross the border
| The order | What the ATO says |
|---|---|
| Drop shipped from overseas to a customer in Australia | An Australian GST-registered supplier accounts for GST on its sales of low value imported goods. |
| Stock bought from an overseas supplier | A GST-registered Australian business importing low value goods shouldn’t be charged GST; one that isn’t registered will pay it. |
| Sent from Australia to a customer overseas | GST-free if exported within 60 days of payment or invoice, whichever is first. |
What counts as low value
The line is a customs value of A$1,000, and the ATO defines that value simply: “The customs value is the price the goods are sold for, minus freight and insurance from the place of export.” GST on low value imported goods has applied since 1 July 2018.
Goods in a consignment worth A$1,000 or less, alcohol and tobacco aside, don’t have GST added at the border. Under customs law they are still non-taxable importations, and the GST is collected instead by the merchant, the operator of an electronic distribution platform, or a redeliverer. Above the line, when a consignment is worth more than A$1,000, the importer pays the GST, customs duty and clearance charges at the border. The ATO also describes an exception for several low value goods “shipped to Australia as one consignment with a total customs value over A$1,000”: where it applies, they are taxed at the border. Alcohol and tobacco carry other taxes and duties at the border.
The ATO’s own example
A clothing business in Italy, registered for GST, sells a pair of jeans to a customer in Australia for A$350, which includes A$50 for shipping and insurance. The customs value is A$300, so the jeans are a low value good, and the seller charges GST on the whole A$350 it charges for the delivered jeans, then pays that GST to the ATO. So in the ATO’s example, the A$50 for shipping and insurance is left out of the customs value but included in the A$350 price that GST is charged on.
Drop shipping from overseas
The ATO’s definition: “Drop shipping refers to sales of goods located overseas at the time of sale and sent directly to your customers in Australia from an overseas source, such as manufacturers, wholesalers, or warehouses.” For a shop that sells this way and is registered for GST here, the rule is short: it has to account for GST on its sales of low value imported goods.
A shop based overseas that sells straight to Australian buyers meets the same line from the other side. The ATO says a non-resident business selling goods into Australia with a customs value of A$1,000 or less has to collect GST from its customer and send it to the ATO. Drop shipping also has a consumer law side, about telling customers where the stock is coming from, which the delivery guide covers.
Buying stock from overseas
When a shop is the buyer, the questions flip. For an overseas supplier not to charge GST on low value goods, the ATO says the Australian business needs to give its ABN and state that it is registered for GST. The business then works out whether GST is payable under the reverse charge rules, and if it applies, the GST payable is 10% of the amount paid, with any GST credits the business is entitled to claimed back.
- Charged GST anyway? The ATO’s first step is to seek a refund from the supplier, giving the ABN and stating the business is registered.
- Buying for yourself? Don’t give an ABN or say you’re registered for goods for personal use; if you do, you pay the GST under the reverse charge. Penalties can apply for giving a supplier false information, such as quoting an ABN when not registered.
- No tax invoice? Overseas businesses in the simplified GST system get an ATO Reference Number, not an ABN, and without an ABN a supplier can’t issue a valid tax invoice. Without one, a GST credit may not be available.
- Over A$1,000? GST is charged at the border, even if the supplier charged it on the sale by mistake, and a GST credit may be available for the taxable importation.
Selling to customers overseas
Exported goods are GST-free if they leave Australia within 60 days of the first of two events: the supplier receiving any payment for the goods, or the supplier issuing an invoice for them. For goods paid by instalments, the payment or invoice that counts is the one for the final instalment, and a supplier can apply to the ATO to extend the 60 days. GST-free doesn’t mean losing credits: a business can still claim GST credits for the GST in the price of purchases it uses to make GST-free sales.
When a shop has to register at all
All of this assumes a registered business. The ATO says a business must register for GST when its GST turnover is $75,000 or more, and must do so within 21 days of being required to. A business reaches that threshold if its GST turnover for the current month and the previous 11 months totals $75,000 or more, or if its projected GST turnover for the current month and the next 11 months is likely to be $75,000 or more. A new business that expects to reach the threshold in its first year must also register.
With the tax side settled, the parcel is on its way. Delivery times and late orders is the next stop, and card surcharges the one before.