Trading with overseas suppliers is a great way to grow your business, but unexpected import costs can quickly eat into your profits. For Australian businesses bringing in goods, materials, or products from overseas, import taxes are one of the biggest regular expenses.
A big part of this cost is the Goods and Services Tax (GST) charged on air and ocean freight when it arrives in Australia. Many importers think paying GST at the border is just an unavoidable cost that must be paid right away. Making mistakes with tax calculations, getting product valuations wrong, or missing out on Australian Taxation Office (ATO) schemes often means businesses pay far more cash upfront than they really need to.
Understanding GST on Imported Goods in Australia
The Australian tax system charges a standard 10% tax on most goods brought into the country for business or personal use. When you import goods for your business, this tax is not just based on the invoice price you paid for your supplier. Instead, it is worked out using the Value of the Taxable Importation (VTI).
Formula: Value of the Taxable Importation (VTI) = Customs Value + Customs Duty + International Transport & Insurance Costs
Because tax is calculated on this total sum, your shipping costs, insurance premiums, and customs duties directly increase the amount of GST you must pay.
GST Payable: GST Payable = 10% x VTI
Import Valuation Components Summary
- Supplier Invoice Value: Base Customs Value in AUD
- Customs Duty: Depends on the product tariff code classification
- International Freight: Cost to transport goods to Australia
- Marine Insurance: Cost to cover goods during transit
Small Imports vs Commercial Shipments
Australian tax rules treat small personal orders and larger commercial shipments differently:
- Shipments worth $1,000 AUD or less: You usually do not have to pay customs duty. However, 10% GST still applies to low-value imported goods sold to Australian buyers. This is usually collected at the time of purchase by online stores or marketplaces.
- Shipments worth over $1,000 AUD: You must fill out official customs paperwork (an Import Declaration). Customs duty and GST must be calculated and paid before your goods are released, unless you use an approved tax deferral scheme.
How Much Is GST on Imported Goods in Australia?
To see how much GST you will owe, let us look at a practical example. Imagine an Australian company imports machinery parts with the following costs:
- Supplier Invoice Value: $20,000 AUD
- Customs Duty (set at 5%): $1,000 AUD
- International Freight (Sea Freight): $2,500 AUD
- Marine Insurance: $500 AUD
To find the taxable amount, add all international supply chain costs to the original purchase price:
1. Customs Value: $20,000 AUD
2) Customs Duty (5%): $1,000 AUD
3. International Transport & Insurance: $2,500 + $500 = $3,000 AUD
4) Value of Taxable Importation (VTI): $20,000 + $1,000 + $3,000 = $24,000 AUD
5. GST Payable (10% of VTI): 10% x $24,000 = $2,400 AUD
In this example, paying $2,400 AUD in tax shows how freight and insurance costs raise your total tax bill well above the original $20,000 AUD purchase price.
Common Reasons You Might Be Paying Too Much Tax
When handling international freight, simple mistakes can quickly inflate your import bill:
1. Using the Wrong Tariff Codes
Customs duty rates range from 0% to 5% across thousands of product codes. If your goods are listed under a higher duty code by mistake, you pay more customs of duty. This automatically increases your VTI and makes your GST bill higher too.
2. Including Local Australian Delivery in the Tax Calculation
Import GST should only apply to transport and insurance costs up to the Australian port or airport where the goods land. If your supplier lists international freight and local truck delivery to your door as one combined cost, you might end up paying import tax on local transport by mistake.
3. Missing Out on Free Trade Agreements (FTAs)
Australia has trade agreements with many countries like China, Singapore, the United States, Japan, and European nations. If you do not show a valid Certificate of Origin when your cargo arrives, you lose your duty discounts, raising your final bill.
4. Tying Up Cash at the Customs Border
Paying GST upfront before your goods are released locks up valuable working capital. Even though you can claim this tax back on your next Business Activity Statement (BAS), holding back your cash for 30 to 90 days can hurt your daily cash flow.
What Is Deferred GST on Imports, and Who Can Use It?
The Deferred GST (DGST) Scheme is an Australian Taxation Office setup designed to help eligible businesses keep hold of their money longer.
Under standard import rules, customs officers collect GST before letting cargo leave the port or airport. The Deferred GST scheme lets you delay this payment. Instead of paying GST at the border, approved businesses move the payment to their next monthly Business Activity Statement (BAS).
- Standard Import Process: Cargo Arrives -> Pay GST at Border -> Cargo Released -> Claim Back on Quarterly BAS
- Deferred GST Scheme Process: Cargo Arrives -> Immediate Cargo Release -> Report & Offset GST on Monthly BAS
By reporting the GST owed at Label 7A and claiming an equal credit back at Label 1B on the same monthly BAS, your business balances the cost on paper without spending actual cash at the border.
Who Can Apply for Deferred GST?
To join the Deferred GST scheme, your business must meet these ATO rules:
- Have a valid Australian Business Number (ABN) and be registered for GST.
- File your Business Activity Statement (BAS) monthly (if you file quarterly, you will need to switch to monthly).
- Pay your taxes electronically and keep your ATO record up to date without overdue debts or late forms.
- Have no court penalties for tax or fair trading offences in the last three years.
How to Set Up Deferred GST Step-by-Step
Setting up GST deferral involves a few simple steps with the ATO and your freight team:
- Step 1: Switch your BAS reporting cycle monthly with the ATO.
- Step 2: Apply the Deferred GST Scheme online via the ATO.
- Step 3: Tell your customs broker to link your approval to future shipments.
- Step 4: Complete your monthly BAS using pre-filled Label 7A and Label 1B entries.
Detailed Steps:
1. Switch to Monthly BAS Reporting: If your company currently files BAS every quarter, ask your accountant or tax agent to switch your account to monthly reporting. This change usually starts at the beginning of the next quarter.
2) Submit Your ATO Application: Apply for the Deferred GST Scheme using Online Services for Business or through your tax agent. The ATO checks your records and usually approves applications within 28 days.
3. Connect Approval to Your Customs Broker: Once approved, inform your freight forwarder or customs broker. They will update your shipping profile so that future imports automatically bypass upfront border GST payments.
4) Complete Your Monthly BAS: The ATO will automatically pre-fill your deferred GST amounts at Label 7A on your monthly BAS. If you bought the goods for business use, you claim the exact same amount back at Label 1B, keeping your out-of-pocket cash cost at zero.
How to Cut Down Import Costs and Simplify Logistics
Managing import costs effectively takes more than just deferring tax; it requires clear freight processes:
- Check Your Shipping Terms (Incoterms): Make sure your supplier invoices clearly separate international freight from local Australian delivery, preventing extra tax charges.
- Review Product Codes Annually: Double-check your product tariff codes every year to make sure you pay the lowest legal duty rate and use trade discounts.
- Combine Smaller Cargo Shipments: Combining small shipments into full container loads drops overall transport costs, which directly lowers your taxable import total.
Work with Experienced Freight Forwarders: Teaming up with a good logistics team ensures your paperwork is correct, saving you from expensive delays and unexpected charges at the port.
Frequently Asked Questions
How much is GST on imported goods in Australia?
In Australia, GST on imported goods is 10% of the Value of Taxable Importation (VTI). The VTI value includes the goods’ customs value, any applicable customs duties, and the cost of international transportation and insurance necessary to bring the goods to Australia.
How do I pay GST on imported goods in Australia?
For commercial goods valued over $1,000 AUD, GST is usually paid directly to customs upon arrival using an Import Declaration. You can pay using a credit card, bank transfer, or through your customs broker before your cargo is released at the port.
What is deferred GST on imports, and who can use it?
Deferred GST allows approved importers to delay paying import GST at the border and report it on their monthly Business Activity Statement (BAS) instead. Deferred GST on imports is available to all GST registered businesses that are responsible and submit monthly BAS statements for their tax needs.
Are shipments under $1,000 AUD exempt from import GST?
Although shipments valued under $1,000 AUD are generally not subject to customs duties and require fewer forms to be submitted to customs, they are not exempt from GST. If the foreign supplier is GST registered, an Australian marketplace, or a mail order service, GST of 10% will apply to the value of taxable imports.
Does the Deferred GST Scheme cover customs duties too?
No, the Deferred GST Scheme does not apply to customs duties. All import duties, processing fees, and port costs should be paid before the goods are cleared at the port of entry.
How do freight charges affect my import GST total?
International shipping costs and marine insurance are added directly to the purchase price of your goods to work out the total taxable value. Because GST is 10% of this total sum, higher freight costs mean you pay a higher GST bill.
Better Freight Management for Your Business Cash Flow
Unmanaged import duties, wrong tax calculations, and upfront border payments take money directly out of your business cash flow. By checking your shipping invoices, using tariff discounts, and applying for the ATO Deferred GST Scheme, you can keep your landed costs low and hold onto your cash.
At AGC Global, we make international shipping easy for Australian businesses. Our team offers air freight, sea freight, customs clearance, and logistics advice to ensure your shipments clear the border without delays or wasted money.
Want to optimize your import logistics and protect your cash flow?
Speak with the freight and supply chain specialists at AGC Global Australia today to review your import setup and streamline your shipping.