GST on imported goods

Good day,

I have a question related to GST on imported goods...I am based in Australia, business is registered here. I am planning to sell things that will be shipped from USA (dropshipping at least in the beginning). We have GST 10% in AU payable on most goods. We have 1000$ - Australia’s GST free threshold for imports. So I am kind of confused do I need to pay GST,because my parsels will not cost more than 1000 $ each,but hope there will be many of them... They will be sent to different names(customers). Do I need to charge customers with GST then? I am lost a bit...If anyone can help me with such info I will be very grateful...

Ms_X:

Good day,

I have a question related to GST on imported goods...I am based in Australia, business is registered here. I am planning to sell things that will be shipped from USA (dropshipping at least in the beginning). We have GST 10% in AU payable on most goods. We have 1000$ - Australia’s GST free threshold for imports. So I am kind of confused do I need to pay GST,because my parsels will not cost more than 1000 $ each,but hope there will be many of them... They will be sent to different names(customers). Do I need to charge customers with GST then? I am lost a bit...If anyone can help me with such info I will be very grateful...

First and foremost, you cannot charge GST unless your business is registered for it. Registration is mandatory if your annual turnover is >$75K, and optional if below that. It doesn't make sense to register if you don't need to, because to do so makes you an unpaid tax collector and will cause you to increase your prices or take a 10% drop in your profit margins.

Ideally, you should be speaking to your accountant about this (if you don't have one, and your turnover is over $75k you probably need one 'else you'll be spending all your time with tax/legal compliance and your core business will suffer.

If your turnover is less than $75k then you are best to simply pass any GST charges (if/when applicable) over to your customers (without adding your own GST, and with no option to claim credits). ..

Once registered as a GST business you don't get any choice as to whether your collect/charge GST or not... it is assumed that all sales within Aust are GST inclusive, and it will further be assumed that you have added/collected the GST, and you will get have to pass the full 10% back to the ATO (even if you never collected it in the 1st place). It is up to you to make sure you don't bear this full cost by claiming back the difference in input credits.

Sound confusing? It's Not really - but as I say, if turnover is under $75k stay clear of GST.. it will cost you.
If your turnover is over 75k you need an accountant.. his/her fees will be offset by the many tax savings thay can provide, and they are also tax deductable.

Cheers
Rod

RodG:

If your turnover is less than $75k then you are best to simply pass any GST charges (if/when applicable) over to your customers (without adding your own GST, and with no option to claim credits). ..

Hi Rod,
Thank you very much for your answer. I have read before about GST and this $75K turnover on ATO website. I understood your point...I am just starting so I will assume for now that my turnover is less than 75K. Therefor I am not going to charge any GST.

I just wanted to ask about what you wrote above about passing any GST charges (if/when applicable) over to the customers...How does it happen?how do I write it on my web site? and is it legal to sell in AU without GST incl even if my turnover is less than 75K?I will just need to write my price and nothing else?Sorry for so many questions, I really need to clarify it for myself :-)I do not have an accountant at the moment but I will definitely find one:-)

cheers

Two parts to this. If you are dropshipping into Australia.

1. At this time your customer will not be charged gst if the total value of the order is less than $1000.00
   They will be charged by customs (not you) if the value is $1000.00 or more.
   This is totally separate to what you charge your customer.
   Stay tuned on this as there is lots of controversy about it.

2. As you are as Aussie business < $75k you will probably not register for gst and will not be charging gst to your customer.
   You will need to make this clear on your website documentation as some of your customers may be businesses that need to know if there is gst charged that they can claim back themselves.

nb: I assume that you are selling mainly to end consumers.
(If you are selling mainly to businesses be aware that lots of larger organisations will only deal with you if you are registered for gst)

Thanks a lot, gilby.

I am always staying alert in regards of this 1000$ tax free imports:-)It is a bit controvercial lately, i agree. I am going to sell to end customers, i think my main customers will be ordinary consumers,not businesses. So I guess I am gonna just write it somewhere that am not charging GST then...ok, it is pretty simple for now...thanks again:-)Will be happy if you share other practical experiences regarding GST and so on that people may face in the beginning:-)

A bit out of GST issue: which accounting software do u use: (myob,quickbooks)? Do u manually put the data in the system or is there addon available?

Ms_X:

I just wanted to ask about what you wrote above about passing any GST charges (if/when applicable) over to the customers...How does it happen?

This probably isn't going to be applicable with most drop shipping, so with this assumption it isn't worth the discussion.

Ms_X:

how do I write it on my web site?

No need to mention your GST status on your website, and as long as the prices you advertise are the prices your Australian customers have to pay then you are meeting the legal requirements IOW, you cannot advertise a pre GST price and then charge a GST inclusive price.

Ms_X:

and is it legal to sell in AU without GST incl even if my turnover is less than 75K?

Heck yeah... Most Ebay, Zencart and other online merchants couldn't exist otherwise.

Ms_X:

I will just need to write my price and nothing else

Correct.

For more information I strongly advise that you familiarise yourself with the ATO website http://ato.gov.au/businesses/pathway.asp?pc=001/003/039 .. They provide a LOT of good userful and practical information for new businesses, there may seem to be a lot that you need to know (and there is), but it can be very costly if you don't familiarise yourself with these small business essentials, and because everything you need to know is so readily available it isn't possible to claim 'ignorance' as an excuse for any breaches.

In addition to GST requirements, you should also familise yourself with other business requirments, such as whether you need an ABN or not (You can have an ABN without regitering for GST).. Basically an ABN makes it easier for you to deal with other businesses (many of which won't buy from you unless you have an ABN).

More info can be found here:
http://ato.gov.au/businesses/content.asp?doc=/content/69534.htm&pc=001/003/039/001/008&mnu=&mfp=&st=&cy=1

I know that the "taxman" has a bad reputation, but when it comes to helping small businesses, they (Australian ATO) really are quite outstanding (wow, did I really just write that?).
Anyway, they'll give you much better advise, and a lot more support than anyone here can (or will be willing to spent the time).

Cheers
Rod

gilby:

you will probably not register for gst and will not be charging gst to your customer.
You will need to make this clear on your website documentation

Not so. There is no need to declare this information on the website.

gilby:

as some of your customers may be businesses that need to know if there is gst charged that they can claim back themselves.

The onus is on the business to determine whether GST has been charged or not, and this is based on the tax invoice (or lack of) of the sale/service, and not on any external reference, such as a webpage, email, or any other form of information exchange. The Tax Invoice is all that matters.

It is fine for the ATO to assume 10% is charged on almost everything, but it is risky for a merchant to do so.

gilby:

nb: I assume that you are selling mainly to end consumers.
(If you are selling mainly to businesses be aware that lots of larger organisations will only deal with you if you are registered for gst)

Yoiks, You are thinking of the ABN... many businesses do require this, but the GST status is another matter.

Cheers
Rod

Ms_X:

A bit out of GST issue: which accounting software do u use: (myob,quickbooks)? Do u manually put the data in the system or is there addon available?

For several years we were using E-Record (from the ATO).. It wasn't the most powerful or even the best accounting software I've ever used, but it was easy to use, and because it integrated nicely with the BAS reporting software I could be reasonably sure that all my record keeping, etc would be ATO compliant, and if there WAS any errors I could always blame it on their software rather than something of my own choosing.

Having just recently visited the ATO website as a result of this discussion I noted that 2010-2011 is going to be the last time they are going to provide this software though.. I didn't notice if they were recommending or offering a replacement.

I don't have any BAS/GST obligations these days, so my current accounting software is KMyMoney (linux). Its free, does all I need and a little bit more.

Cheers
Rod

Thanks a lot to you Rod:yes: All the information that you shared really helped me a lot. I appretiate your help very much. I will go to the ATO website,get myself ready and then hopefully finely start my online journey:smile:

Cheers,
Ms_X