Importing goods can be an expensive business. So if you can defer the cost of GST on the home consumables you import, it can help balance the books. There are strict entry and compliance requirements, but if you can keep on top of them, the GST Deferral Scheme can help with cash flow.
What Does GST Deferral Mean?
A Goods and Services Tax (GST) of 10% is payable on most goods imported into Australia. Whether the individual or business importing the goods is registered for GST or not, the tax is payable at the time the goods are collected. However, GST-registered businesses who are importing goods for the purpose of running their business activity, can apply for a GST credit on the goods.
An individual or business applies for the GST Deferral Scheme by completing an application on the Australian Taxation Office (ATO) website. After approval to join the scheme has been received, importers of goods for ‘home consumption’ can quote their Australian Business Number (ABN) to Customs for the payment of GST to be deferred. The term ‘home consumption’ means the goods must enter into the commerce of Australia. Goods that are imported temporarily under the Customs Act are excluded.
Approval to defer the GST means an importer will pay the customs duty and other charges on the release of the goods. Customs keeps records of all GST on imports in Australia as well as deferred GST liabilities. Customs notifies the ATO at the end of each month what the total deferred GST liability is for each importer.
The ATO then includes the amount of deferred GST on to the Business Activity Statement (BAS) before it is released to the importing organisation or individual. The importer must lodge their BAS with the ATO within 21 days of the end of the month. They can claim an input tax credit because the goods are considered part of carrying on an enterprise.
Importers cannot elect to defer the GST on some shipments and not others. Once approved to the scheme, GST is deferred on all lines of entry. Importers must use one of the ATO’s electronic systems to lodge their activity statement online.
Importers who use a customs broker can request a copy of their GST Deferral Report by asking their broker/s.
Which Government Department is Responsible for the Deferral Scheme?
The GST Deferral Scheme is operated by the ATO and is assisted by the Department of Home Affairs (Customs). The ATO provides a scheme for deferring the GST on imported goods but the customs duty cannot be deferred and must be paid to collect the goods.
Which Goods are Included in the GST Deferral Scheme?
Goods being imported into Australia for the purpose of running a business can have the GST deferred.
Not all goods are covered under the scheme including:
- Goods imported under the TRADEX scheme
- Low-value imports cleared on informal clearance documents
- Goods imported temporarily under Customs Act s162 or S162A
- Wine Equalisation Tax and the Luxury Car Tax are not included in the scheme, only GST.
What Can Make an Owner Ineligible for the Scheme?
The ATO may remove an importer from the Deferred GST Scheme if they:
- Don’t pay their ATO obligations by the due date
- Don’t lodge their BAS by the due date
- Are subject to administrative penalties under any Act administered by the Commission
Customs will retain the goods until the GST is paid and then the owner can register for the Scheme again. An importer can request to rejoin the Scheme if they satisfy the admission rules and they obtain a bank guarantee for any future liability of GST on imported goods.
Deferred GST in Relation to Imports Eligibility
Importers aren’t automatically eligible to participate in the Scheme. An application may not be approved if in the past three years, the individual or business owner has been convicted or penalised by a court for any offence related to fair trading, customs, taxation, inaccurate description of goods, trade practices or fraud.
As with anything tax-related, we recommend getting specific advice for your business from an accountant who specialises in this field. You can also call the Deferred GST Scheme Hotline on 1300 130 915.
Need help sourcing and importing products from China? Call Vara Allied on (08) 6115 0118, or contact us online.