Goods and Services Tax (GST) is payable on imported goods unless the type of goods imported is covered by a specific exemption.

GST on a taxable importation is payable by businesses, organisations and private individuals, whether they are registered for GST or not. However, Businesses that are GST-registered and import goods as part of their activities, are able to claim the GST credit for any GST paid on imported goods when lodging their Activity Statements.

The GST payable is 10% of the Value of the Taxable Importation (VoTI). The VoTI is the sum of:

the Customs Value (CV) of the imported goods;
the amount payable for the international transport of the goods to the place of consignment in Australia and to insure the goods for that transport, to the extent that the amounts are not already included in the Customs Value (essentially, the international transport and insurance include all costs to get the goods to Australia that are not already included in the price of the imported goods);
any customs duty payable in respect of the importation of the goods;
any Wine Equalisation Tax (WET) payable, if applicable.

The Department of Home Affairs collects and manages the GST on taxable importations. At the end of each month, they advise the ATO of the total amount of GST paid or deferred by each importer. The GST Act 1999 states that the business importing the goods from another country shall pay the GST on imports at the same time as Customs Duty is paid. Therefore, the value of the GST on Taxable Importation is listed as a separate line in the Customs clearance invoice with the Customs Duty and other clearance costs.

An example of a Customs Agent Invoice

Record GST on Imports in Xero

Xero introduces a specific Tax Rate called GST on Imports to record the value of GST on Imported Goods. As an example, we will use the charges in the sample invoice above.

Create the Custom Agent as a new (Supplier) Contact
Click on [New] > Bill
Note: if your Business uses Hubdoc (or another Receipt Management System), the purchase can also be processed from there.

è The New Bill screen opens
Break down the purchase transaction into 3 lines:
- All import charges not subject to GST > Post them to a Direct Cost account called Custom Duty & Import Charges and make sure the Tax Rate is set to: BAS Excluded
- All import charges subject to GST > Post them to the same Direct Cost account but change the Tax Rate to: GST on Expenses
- GST on Imports > post the total value of the GST on Imports directly to the GST account and change the Tax Rate to: GST on Imports
Make sure the total of the payable invoice in Xero matches the total invoice issued by the Customs Agent
Click on [Approve]

Reporting on GST on Imports

The value of GST on Imported goods should be the only type of transaction posted directly to the GST account and using the GST on Imports Tax Rate. Furthermore, the GST on Imports tax rate should exclusively be used with the GST account.

When posting transactions using the GST on Imports Tax Rate, these transactions will be listed in the GST Reconciliation report. GST on Imports and transactions posted to the Australian Taxation Office to clear the GST liabilities paid in Activity Statements should be the only two types of transactions listed in the GST reconciliation report.

An example of a GST Reconciliation Report that includes GST on Imports transactions

Any transaction for GST on Imports posted to the GST account that have not been assigned to the GST on Imports Tax Rate will not be included in the Activity Statement report, therefore the GST claim will be missed. Therefore, before lodging an Activity Statement you should check that all transactions posted to the GST account for GST on imports have had the correct Tax Rate assigned.

Finally, when using the GST on Imports Tax Rate Xero will automatically add the Grossed Amount of the GST on Imports to the G11 Field on the Activity Statement. Therefore, when processing the purchase transactions of imported goods, these should be recorded using the BAS Excluded Tax Rate, not GST Free Expenses.