When running a business, there are several taxes that you may be legally responsible for paying. It is important to understand what tax you must pay to ensure that you comply with all of your obligations. If your startup is importing goods into Australia, you may need to pay a number of fees, including customs duty and goods and services tax (GST). This article will explain import duties and taxes and when your startup may have to pay them.
What Are Import Duties and Taxes?
Anyone who imports goods into Australia will generally pay import duties and taxes. If you import goods, the two most common costs your startup may be liable to pay are customs duty and GST unless an exemption or concession applies.
Customs duty and GST are separate costs that the government calculates and charges independently from the other. Your startup may be liable to pay only customs duty or only GST or may be responsible for paying both.
When Do I Have to Pay Import Duties and Taxes?
In most cases, any goods you import into Australia are liable for import duties and taxes unless an exemption applies. If your startup is importing goods with a value over the low value goods threshold (currently AUD$1,000), you will need to lodge an Import Declaration.
Import Declaration
An Import Declaration is a declaration by you (the owner of the goods) or your agent (licensed customs broker). It contains details about the goods you are importing. You will need to provide information about:
- your startup;
- the goods you are importing;
- their value; and
- how you are transporting them, among others.
The form you must complete will depend on how you import the goods into Australia. There is a different form for goods that arrive by sea or air as opposed to goods that arrive into Australia by post.
Exceptions to Import Duties
If your startup imports goods with a value below the low goods threshold of $1,000, you will be exempt from paying import duty on these goods. You will need to complete a Self Assessed Clearance declaration (SAC declaration) to clear these goods through the Australian Customs and Border Protection (CBP). You must complete the SAC electronically. Any goods you import into Australia by post do not require a SAC declaration.
Importantly, this applies to all goods except for:
- tobacco;
- tobacco products; or
- alcoholic beverages.
If your startup is importing goods that fall into any of these categories, you will generally need to pay customs duty, regardless of the value of the import.
Further, goods you originally acquired in Australia, exported and then reimported with unchanged ownership are a non-taxable importation. This process only applies where the importer:
- is the manufacturer of the goods;
- has previously acquired the goods and the supply through which the importer acquired the goods was a taxable supply; or
- has previously imported the goods and the previous importation was a taxable importation.
Goods and Services Tax
You will generally need to pay goods and services tax (GST) on most imports into Australia, even in situations where you do not need to pay customs duty. If your imports are less than $1,000, you may not need to pay tax and, therefore, GST. This depends on several other circumstances, including who your startup ultimately sells the goods to. However, if you are required to pay tax on the import, you will be liable to pay GST regardless of whether your startup is registered for GST. If your startup is registered for GST, you may be able to claim GST credits for the GST that you pay on the imported goods.
GST is payable on imported goods unless a specified duty concession or exemption covers the goods.
Goods that are imported and would have been treated as GST-free if produced in Australia are not subject to GST. Examples include:
- basic food;
- certain medical aids and appliances; and
- cars for use by disabled people.
How Does the Government Calculate Import Duties and Taxes?
Import duty is a percentage of the total price you paid for the imported goods. The percentage that will apply depends on the nature of the goods and the category of the product you are importing. However, the range is up to 10%.
You would usually calculate import duty based on a tariff classification or a code given to certain classes of goods. While you can calculate duties using the various duties calculators online, it is important to note that these are only estimations.
The amount of GST you need to pay will be 10% of the value of the goods you imported which is subject to tax. The government calculates this value by adding together:
- the customs value of the goods;
- the customs duty payable (if any);
- amount paid or payable to transport the goods to Australia and to insure the goods for that transport; and
- other additional amounts that apply only in certain circumstances (for example, whether the goods are being held in the process of delivering them or if wine tax is payable).
How and When Do I Pay Import Duties and Taxes?
You must pay the relevant taxes and duties for your goods to clear customs and be released to you. Without paying your taxes beforehand, the goods will be held.
For GST, the amount you need to pay is assessed when the Department of Home Affairs receives the declaration and provides their declaration advice. You will then receive it in the form of an assessment notice.
If your startup imports goods and you are registered for GST, there are situations in which you can defer the payment of GST until you lodge your activity statement. To be eligible for this deferral, your startup must meet several criteria.
The LegalVision Startup Manual provides guidance on a number of common challenges faced by startup founders including structuring, raising capital, building a team, dealing with customers and suppliers, and protecting intellectual property.
The guide includes 10 case studies featuring Australia’s top VC fund partners and leading Australian startups.
Key Takeaways
When your startup imports goods into Australia, you should consider your responsibility to pay customs duty and GST. You need to pay customs duty and GST to the government based on the value of your startup’s import. Whether you need to pay customs duty or GST is a matter that is specific to your startup’s circumstances, including the:
- specifics of your business;
- type of goods that you are importing; and
- value of the goods.
You should obtain specific advice on what duties and taxes your startup is liable for and ensure you comply with your obligations. There are licensed brokers who can assist you with confirming the duties and taxes you must pay and can assist in facilitating the payment process.
If you have any questions or want to know more about your startup’s specific obligations when importing goods, our experienced taxation lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
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