CAMPING - BUYING ADVICE
It’s tempting to buy overseas and directly import gear you need for outback travel, but you may enter unknown territory when you import goods into Australia, particularly if your business is doing the importing.
At OTA we fell foul of bungled import processes when we tried to bring in a new type of battery pack for testing. We were out of pocket by nearly $600 in import agency fees, customs clearance charges and GST payment, with no sign of the product turning up at our office.
When things went wrong we were the plaything of several entities: the Chinese manufacturer; the freight forwarder in China; the air-freight company; the freight forwarder’s Australian office; Australian Customs and the local delivery company. It was impossible to trace our consignment, despite con-notes and tracking numbers.
We’ve written the experience off as a very bad idea and would never repeat the process.
The common misconception is that goods under AU$1000 in value are GST-exempt, but’s not the case. As of 1 July 2018, there is no longer a GST threshold. Prior to that date, private importers did not pay GST on imports valued at less than AU$1000. However, this is no longer the case and GST applies to most imports, regardless of value.
The changed GST legislation shifts the tax burden from the consumer to overseas sellers. After 1 July 2018, overseas businesses had to register for GST, charge GST on imported goods valued at AU$1000 or less that were sold to consumers in Australia and pay that GST. This applies mainly to clothing, cosmetics, books and electronic appliances.
While this requirement applies only to consumers and doesn’t include businesses, it’s a global trend. The Australian government is not alone in its quest to collect tax revenue from overseas ecommerce businesses. Other countries have followed the EU’s original lead.
Historically, businesses and individuals have been taxed in their country of origin. For example, a Chinese supplier paid tax only in China, while an Australian importer paid taxes in Australia, including GST, but with the rise of global cross-border ecommerce, this rapidly changing.
Note that this practice is applicable only when foreign companies sell to Australian consumers. Australian businesses importing goods from suppliers in other countries are still responsible for their own GST declaration and payment.
If you’re importing goods from any overseas supplier who hasn’t registered to pay Australian GST, you’ll need to pay the Australian Goods and Services Tax (GST) of 10 percent on top of the taxable importation value of the goods.
The GST amount is calculated from the value of the taxable importation, which includes the following: product value; import duties (calculated from the CVAL – customs value – of the goods); import shipping costs to Australia (but not domestic transportation) and shipping insurance
GST Calculation Example
Here is a typical GST calculation:
- Product value = AU$10,000
- Import duty rate = 5 percent (AU$500)
- Shipping cost (CIF) = AU$1000
- Shipping insurance = AU$100
Total GST (10 percent) = 10 x (10,000 + 500 + 1000 + 100) = AU$1160
Reducing the GST amount
The only legal ways to lower the GST amount are by having the seller reduce the actual price, or by opting for sea freight rather than air.
It’s tempting to ask the overseas supplier to ‘under-declare’ the taxable import value, by asking the supplier or freight forwarder to specify a value that’s lower than the paid amount. Both routes are illegal and the Australian Taxation Office is well aware of these practices.
As an Australian importer, it’s crucial that you calculate the total value of the taxable importation. Chinaimportal recommends that you submit your calculation directly a freight forwarder, rather than the supplier. That way, the forwarder should specify the correct value on the commercial invoice.
Further, Chinaimportal recommends that you work only with freight forwarders that have their own offices in Australia, as such companies know how to properly declare the CVAL and GST calculation. (We did this, but it still went wrong.)
GST is payable once the goods are cleared through customs in Australia.
You don’t need to be registered for GST unless your company is importing the goods and has a GST turnover (gross income minus GST) of AU$75,000 (or more) in the previous 12 months. However, GST will be payable, regardless of whether you are GST registered or not.
Of course, import businesses that are not GST registered cannot claim GST credits, which can greatly reduce the overall tax bill. As such, regular goods Importers can benefit by registering for GST.
To obtain GST credits the goods must be cleared for customs by submitting the Import Declaration: N10 or Import Declaration (out of warehouse): N30.
While you can manage the GST declaration yourself, Chinaimportal recommends that you let the freight forwarder take care of this process. Also, you must pay the GST before the goods are released. You cannot use a GST credit to offset the GST payment itself.
There are some products and categories that are tax exempt, including: calendars, catalogs, overseas travel literature, overseas price lists or other overseas printed matter and goods returned to Australia after repair or replacement, free of charge, under warranty or supplied as part of a product safety recall.
For the above information we’re indebted to Fredrik Gronkvist, of Chinaimportal, a specialist import advice company.