Navigating the ever-changing terrain of the Australian tax landscape is daunting, but when it comes to GST or Goods and Services Tax, your expert tax consultants in Perth can make it a breeze. The GST is a significant facet of the Australian taxation system, impacting both domestic and offshore transactions. This blog aims to highlight the intricacies of GST for Australian taxpayers dealing with offshore purchases and sales.
Section 1: What is GST?
The Goods and Services Tax (GST) is a broad-based tax of 10% on most goods, services, and other items sold or consumed in Australia. This tax affects businesses and individuals who indulge in purchasing or selling goods, both within and outside Australia. Understanding GST is pivotal for every business entity and individual, especially when dealing with offshore transactions. Seeking GST services in Perth from reputed tax law advisory firms can ensure your understanding of and compliance with the system.
When looking at the decision of when to charge GST it is worth remembering that not all sales will attract GST. For example, GST does not apply to basic food, medicine, childcare and council rates.
Section 2: Who is Liable to Pay GST?
In Australia, businesses registered for GST will include GST in their sales to their customers and can claim credits for the GST included in the price of their business purchases. This system implies that, effectively, GST is paid by the end consumer of the goods or services.
If you’re an Australian business and engage in offshore sales or purchases, you must consider GST. For offshore sales, Australian businesses must charge GST even if the purchaser is not a business and must also charge GST even if they are not an Australian resident.
For offshore purchases, Australian businesses may need to pay GST if the goods are imported into Australia, even if the purchase is from an overseas supplier. This is often done through the importer and is commonly referred to as the deferred GST scheme. Expert tax consultants in Perth can help ensure your business complies with these regulations.
Importantly, you might need to pay GST to the ATO even if you are not operating a business. The scope of people liable to pay GST extends beyond those operating a business to include people, including individuals, who are involved in an “adventure” or “trade”. So this could consist of the passive leasing of an investment property or just a one-off transaction with a commercial focus.
Section 3: When Should GST Registration Occur?
Businesses should register for goods and services tax if their forecast annual GST turnover is $75,000 or more ($150,000 or more for non-profit organisations). Registration is also necessary for those supplying low-value imported goods to consumers in Australia through an electronic platform, such as eBay, if the goods are worth $1,000 or less, and the platform operator is registered (or required to be registered) for GST.
Understanding these thresholds is vital. A local GST services Perth advisory can assist in determining whether your business needs to be registered and can guide you through the process if necessary.
Section 4: Which Persons Can Claim GST as an Input Tax Credit?
Businesses registered for GST can claim GST credits, or input tax credits, for any GST included in the price of their business purchases or imports. However, some purchases and importations are not eligible for GST credits. The claim should match the proportion the purchase is used in carrying on the business, and evidence to support the claim is required. Tax law advisory firms in Perth can guide you on accurately claiming these credits.
Importantly the ability to claim a GST input tax credit is also connected to the supply the credit is ultimately trying to produce.
For example
- A medical practice incurs a cost of $1,100 including GST fixing their water system. As the medical practice makes GST free supplies the GST credit can be claimed.
- A residential landlord incurs a cost of $1,100 including GST fixing their water system. As the landlord makes input taxed supplies the GST cannot be claimed.
Section 5: When is a Transaction Classified as an Export for GST Purposes?
For GST purposes, a supply of goods is classified as an export if the supplier exports them from Australia, and the export occurs within 60 days of the first payment date or the invoice date. Furthermore, supplies of services and digital products to consumers outside Australia are GST-free. It’s important to seek professional advice from experienced GST services in Perth to determine whether your transactions are classified as exports for GST purposes.
The 60-day period can be extended by applying to the ATO directly.
If the export is an export of services the recipient of the services must be located offshore and the use of the services must also be offshore.
For example
- A Perth tax advisor gives tax advice to a non-resident about a property investment in Northbridge. As the services are connected to Australia they are not an export: even though the recipient of the services is offshore.
- A Perth business accountant gives business advice to a UK resident about investing into a property syndicate in South Africa. As the recipient of the advice and the use of the services is outside Australia the sale of services is GST-free as an export.
Section 6: When is a Transaction Liable for GST on Importation?
Goods imported into Australia are generally liable for GST. From July 1, 2018, GST also applies to the sale of low-value goods (valued at $1,000 or less) to consumers in Australia by overseas businesses. These businesses will be required to register for, collect, and remit GST for low-value goods if they meet the $75,000 registration threshold.
However, certain goods are exempt from GST on importation, like certain medical aids and appliances. Expert GST services in Perth can help decipher which goods are exempt from GST.
Section 7: How do you pay GST?
If you need to pay GST you will have to prepare a Business Activity Statement with the ATO. Importantly the preparation of GST will require the disclosure of GST exports and also acknowledge that some of the services acquired from overseas do not have GST (but they might have withholding tax applicable).
If your imports have incurred GST under the deferred GST scheme your GST paid through the importer will appear on your BAS. So getting your BAS lodged promptly will be important to ensure the GST refund is processed.
Conclusion
Navigating the GST system when dealing with offshore purchases and sales can be complex. However, understanding the basics, such as who’s liable, when to register, and when a transaction is an export or import, can go a long way. Partnering with expert tax consultants in Perth and seeking professional tax law advisory services can ensure your dealings remain compliant with Australia’s Goods and Services Tax.
At Westcourt, our deep international experience and network with GGI Global gives us a competitive edge in understanding the global tax impact of a transaction.
