When importing your goods through a freight forwarder, you typically have to pay Goods and Services Tax (GST) at the time the goods enter the country. GST must be paid upfront before your goods are released from customs and sent to your door.
However, businesses in Australia can take advantage of the government’s deferred goods and services tax (DGST) scheme, allowing you to defer paying GST on all taxable imports into the country.
If you’re looking to understand more about how GST deferrals will benefit your cash flow when importing into Australia, and what benefits you can take advantage of through the DGST scheme, you’ve come to the right place. Below, you’ll find information on the scheme and how to register for it.
Deferred GST refers to deferring the GST payments you pay on your cargo when you import goods from overseas.
Typically, your goods will not be released from customs until your GST is paid to them. This can have a significant negative impact on your cash flow. Importers can typically claim credit for the GST paid at some later date. However, when the cargo arrives at customs, you must have the funds straight away to pay the GST at time of import.
If you’re registered for the Australian Tax Office’s DGST scheme, you are able to defer GST payment until the due date of your next monthly Business Activity Statement (BAS).
You’ll be able to offset your GST owing against GST paid on the sale of the goods.
The result of deferring that GST is that you can start selling your goods to customers immediately without being required to pay the GST when the goods arrive in Australia. If you participate in the scheme, you’ll have your GST amounts deferred until the first BAS is lodged after the goods are imported.
At the end of each month, customs will notify the Australian Tax Office (ATO) what the total deferred GST liability is for each importer. The ATO has a useful table on their website you can refer to when calculating your deferred GST.
That amount of deferred GST will then be included on your BAS before it’s released to you. You then must lodge your BAS with the ATO within 21 days of the end of the month. You can claim an input tax credit as your goods are considered part of ‘carrying on an enterprise’.
Not every business in Australia is eligible to sign up for the DGST scheme. To be eligible for the scheme, you must satisfy the following criteria:
Have an Australian Business Number (ABN). Applying for an ABN is easy on the Australian Business Register. You can apply for an ABN after registering your business name.
You will be ineligible to join the scheme if you do not pay your tax return and make your tax payments on time. You may be removed from the scheme if you do not pay your monthly BAS on time.
You may also be ineligible to join the scheme if you’ve been convicted of an offence or penalised by a court for certain offences in the past three years. These include convictions or penalties in relation to tax, customs, fair trading, trade practices, inaccurately describing goods or committing fraud against a government organisation.
The main benefits of being registered for deferred GST are:
Cash flow is probably at the forefront of your mind if you are importing goods into Australia.
Monthly BAS statements are completed within 21 days from the end of the month. This means you will have the opportunity to sell your products with GST to your customers, and then offset the collected GST against the owing GST, overall reducing your GST payments.
By deferring the GST, you can gain access to your goods from customs straight away and then immediately start selling them to your customers. You can claim a GST credit and then pay it later.
Once you register for DGST, this is lodged with customs and you won’t have to pay GST on arrival of your goods.
You can then settle other payments quicker (such as port charges and sea freight charges – see our blog on the costs of shipping), so your goods can be released as soon as possible.
Once you sign up to DGST, you cannot choose to defer the GST on some shipments and then not defer GST on others. Once you’re approved on the scheme, your GST will be deferred on all your shipments (which is great for your cash flow).