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The Australian VAT System: Your Comprehensive Guide

December 28, 2022

Goods and Services Tax (GST) is the local term for VAT in Australia. 

 

In July of 2000, the Australian government instituted a tax on goods and services known as the Goods and Services Tax (GST). It works similarly to the value-added tax (VAT) system used in the European Union in that each new sale triggers a new computation and new payments to the government.

 

At present, the Value Added Tax (VAT) in Australia is set at 10.00%.

 

The value-added tax (VAT) is a kind of tax levied on most purchases and remitted to the Australian government by businesses.

 

Taxes on goods and services sold inside Australia are subject to a maximum 10% value-added tax, making it one of the lowest VAT rates worldwide.

 

New Zealand, Luxembourg, and Mexico all have value-added tax rates in the 13-16% range that are comparable to the US.

 

Digital items and services brought into Australia by Australian customers are subject to GST. This policy guarantees that digital goods and other imported services provided by foreign businesses to Australian customers are subject to the GST. Non-resident providers are obliged to register, collect, and pay the Goods and Services Tax (GST) on digital items and services they supply to Australian customers.

 

The manner in which Australia's GST laws apply to all cross-border supplies involving non-resident firms ensures that non-resident enterprises do not needlessly participate in Australia's GST system. This includes removing the GST obligation for some sales made between non-residents and extending the GST-free rules to certain supply made to non-residents.

 

By giving digital currency supply the same GST status as money, double taxation of digital currencies may be avoided.

 

Items and services tax (GST) is charged on some deliveries of low-value goods (those priced at AUD 1,000 or less) bought by customers and brought into Australia.

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When Should You Register for VAT?

Products, services, and even land and buildings sold overseas that have any connection to Australia are subject to the Goods and Services Tax. Here are a few examples:

  • software and electronic books to buyers in Australia

  • exporting services to consumers in Australia, including professional consulting services

  • low-value items brought into Australia having an initial agreed-upon price of A$1,000 or less have a customs value of A$1,000 or less (except for tobacco products or alcoholic beverages)

  • other imported goods made available to sell in Australia

  • Real estate in Australia includes both residential and commercial properties

Non-Resident Companies

Foreign enterprises offering 'connected with Australia' products or services may be required by law to register for GST.

 

This includes the continuous need to submit periodic tax returns and pay the Australian tax authority any GST owed. 

 

You are required to register for GST in Australia if both of the following conditions are met:
 

  • You operate a business or an enterprise.

  • Your company's GST revenue from Australian-related sales is equal to or higher than the registration turnover threshold of A$75,000 (or A$150,000 if you're a nonprofit firm) 

 

Typical circumstances necessitating Australian GST registration include:

  • Where merchandise is delivered inside Australia;

  • If the international merchant imports, installs, or assembles items in Australia;

  • Export of Australian commodities;

  • provision of real estate, including lease rental; and

  • The provision of services, such as consultancy and sporting and entertainment events.

Turnover comprises the sum of the following:

  • imported digital services and goods for Australian customers

  • low-quality imports for consumers

 

Your GST turnover includes your entire business revenue from Australian sales, minus the following (not your profit):

  • sales of imported services and digital products or low-priced imports to registered Australian enterprises.

  • transactions unrelated to Australia

  • GST that have been included in sales

  • sales that are not taxed since they are not for payment.

  • sales unrelated to the business you operate.

  • input-taxed sales you make

 

If all of these transactions occur on an online marketplace or electronic distribution platform, you may not be required to register for GST.

You achieve the threshold for GST if either:

  • Your 'current GST turnover' (turnover for the current month and the 11 months before) is at least $75,000 ($150,000 for non-profits).

  • Your 'projected GST turnover' (total turnover for the current month and the following eleven months) is expected to exceed $75,000 ($150,000 for non-profits).

Voluntary Registration

 

If your GST revenue is less than A$75,000 (or A$150,000 for non-profit organizations), you may voluntarily register for GST.

 

If you want to register, you must maintain your registration for at least one year.

What are the Australian VAT or GST Rates?

The Federal Government imposes a ten percent Goods and Services Tax (GST) and distributes the proceeds to state governments. The Products and Services Tax (GST) is a value-added tax (VAT) that is applied at each stage of the manufacturing and marketing chain and applies to the vast majority of goods and services, with registered suppliers receiving GST credits on inputs obtained to create taxable deliveries.

 

Food, with a few notable exceptions; exports; the vast majority of health, medical, and educational products; and a few other items are "GST-free" (the equivalent of "zero-rated" in other VAT jurisdictions) and so exempt from GST. 

 

A registered provider of a supply exempt from GST may reclaim applicable input tax credits, notwithstanding the fact that the supply is not taxable.

 

Residential rentals, the second or subsequent provision of residential premises, the majority of financial supplies, and some other goods are "input-taxed" (free in other VAT jurisdictions) and not subject to GST. However, the provider cannot recover applicable input tax credits, with the exception of financial suppliers, who may claim a reduced input tax credit of 75% of the GST on the purchase of specified services.

 

Health insurance is exempt from GST. Insurance is subject to an input tax. Insurance is subject to taxation. Reverse charges may apply to services or rights provided from offshore if the receiver is registered or obliged to register and utilizes the supply exclusively or partially for a non-creditable supply.

When to File for VAT or GST Returns

When filing your income tax return for the year, you must also lodge and pay your Annual GST Return or Annual GST Information Report.

 

There may be new deadlines to consider if you work with a tax professional.

How Do Gst Credits Work?

GST credits are a sum of money that your firm may be eligible to claim from the ATO.

 

If you are registered for GST, you may claim back the GST that was included in the price of an item you purchased for your company and that was included in the purchase price.

Backdating Your GST Registration

The GST registration process includes a request for retroactive registration. Backdating a GST registration is only allowed for a maximum of four years for tax periods beginning on or after 1 July 2012. Therefore, barring any instances of fraud or evasion:

 

Your GST registration cannot be retroactive for more than four years.

After that time, registration will be mandatory.

Non-Resident Companies Registration

As a non-resident, you may need to provide further documentation than a local person.

There are two types of business registrations that you may need to complete depending on the nature of your operations.

  • Standard Goods and Services Tax Registration - This applies to companies that

    • maintain an ABN

    • assemble materials related to Australia

    • send out tax statements

    • are interested in claiming GST credits

  • Simplified process of GST registration - This applies when

    • Simplified process of GST registration - This applies when

    • you provide Australians with digital services and goods outside of the country

    • imports low-value goods (goods with a value of A$1,000 or less).

How to Register

GST registration requires an Australian Business Number (ABN), since the ABN is part of the GST system. Your ABN will also serve as your GST number. It is mandatory to get an Australian Business Number before registering for ordinary GST (ABN). An ABN may be obtained at the same time a company name is registered, or at a later date. 

 

If you are a non-Australian resident yet do business in Australia, you must use the services of a tax agent who is based in Australia. The agent is in charge of liaising between the firm and Australian tax authorities. Having a local bank account in Australia is also necessary for receiving tax credits or other types of refunds from the country's tax authorities.

 

Before we begin the registration process, it is essential that you gather the following documents:

 

•       Company registration certificate and Articles of association

•       Directors ID (passport copy)

•       Company Bank Letter (or bank statement)

•       For amazon sellers: screenshot of amazon store page showing business address or seller central business address page.

 

It usually takes about 4-12 weeks for tax authorities to complete a VAT registration. The tax authorities may have additional questions during the VAT registration process.

 

If you need help with GST registration, please contact us. With years of experience and expertise, we can make the process much smoother saving you time and unnecessary effort.

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