Common GST errors – importing or exporting goods and services
If you run an enterprise that imports or exports goods or services in Australia then there are a few things you should know about your goods and services tax (GST) obligations. Our compliance activities tell us that the majority of errors are made by small to medium businesses.
In this publication we outline how to avoid the following common errors:
incorrectly accounting for the on-sale of imported goods
GST liability for installing and assembling imported goods
incorrectly classifying exports
incorrectly classifying supplies of services as not connected with Australia
incorrect reporting non-resident refunds
non-residents and non-deductible expenses
how to make a voluntary disclosure if you find you have made an error.
On-sale of imported goods
GST is payable on most goods imported into Australia. If the goods are subject to GST on importation you are required to pay GST to the ACBPS before the goods are released, unless you are part of the deferred GST scheme.
We have identified taxpayers that have not accounted for the on-sale of imported goods on their business activity statement (BAS). When imported goods are on-sold, you are required to report the sale and account for the GST even if you have paid GST on the importation. This includes goods imported under the low value imported goods threshold. The on-sale is to be reported on your BAS and GST is payable, unless the supply is GST-free or input taxed.
If you are registered for GST and import the goods for a creditable business purpose, you can claim an input tax credit for the taxable importation. The full amount of the taxable importation is required to be reported at either label G10(capital acquisitions) or G11 (non-capital acquisitions) on your BAS.
Installing and assembling imported goods
Usually the importer of goods is responsible for the GST associated with their importation or subsequent on-sale. In some situations, however, someone who doesn’t import the goods may be liable for GST. If you install or assemble goods that have been imported into Australia you will have a liability to account for GST even if you are not the importer. These supplies are taxable and must be included on your BAS.
Incorrectly classifying exports
It is important to understand how goods are exported out of Australia and the International Commercial (Inco) delivery terms applicable. Taxpayers may believe themselves to be the exporter, however, when the terms of delivery are analysed, this is not the case. A change to your Inco delivery terms (for example, delivered duty paid to ex-works) in an agreement can alter your circumstances. This could potentially lead to you no longer being considered the exporter and GST becoming payable on the supply.
Incorrectly classifying supplies of services as not connected with Australia
If a service is physically performed in Australia, then this is a supply connected with Australia and so will be subject to Australian GST law. This would be the case even if the supplier is a non-resident or the recipient of the supply is outside Australia. Non-residents physically performing services in Australia would be required to register and account for GST (just like resident service providers) where they exceed the A$75000 registration threshold. In cases where the supply is to a recipient that is outside of Australia, these supplies are generally GST-free.
If you are a non-resident registered for GST in Australia, you may be able to claim input tax credits for GST paid on acquisitions for your business. However, you must remember that when you register for GST you are required to report and pay GST on supplies which are connected with Australia.
Non-residents commonly register to claim input tax credits but fail to account for GST on taxable supplies they make which are connected with Australia where the value of the supplies exceeds the registration threshold of A$75 000.
Non-residents and non-deductible expenses
If you are a non-resident business registered for GST in Australia, you should be aware that registered businesses are not entitled to claim input tax credits on certain purchases. Under the GST law you cannot claim an input tax credit for expenses that are non-deductible for income tax purposes. Examples of non-deductible expenses include purchases that are of a private nature, entertainment provided to employees, and entertainment expenses.
If you are a registered for fringe benefits tax this may alter whether you can claim input tax credits for certain non-deductible expenses provided to employees.
After reviewing your international cross border transactions you may discover mistakes in your reported GST amounts. If this occurs, we encourage you to make a voluntary disclosure. Reduced penalties will apply if you voluntarily disclose errors before we conduct any compliance activity.