What You Need to Know about GST Deferral on Imports

Importers should be aware of the deferral of Goods and Services Tax (GST) in Australia. The deferred GST scheme enforced by the Australia Taxation Office (ATO), enables qualified businesses to postpone paying GST on taxable imports until their subsequent Business Activity Statement (BAS) filing. This article will examine what this means for importers and the key factors to take into account to qualify and get approved for deferred GST.

What goods are included and excluded under the deferred GST scheme?

The deferral of GST on imported goods applies to all importations made for domestic use (“domestic use” means that the goods are brought into Australian commerce), either at the time of importation or from a licensed warehouse. The scheme also applies to amended import declarations that include GST.

Excluded from the Deferred GST scheme are goods from the following categories:

  • Imported products used for domestic consumption that were brought in under the TRADEX scheme;
  • Low-value imports that were cleared using self-assessed clearance (SAC) declarations
  • Goods temporarily imported under Section 162 or Section 162A of the Customs Act.

How does an importer become eligible for deferred GST on imports?

To be eligible for the Deferred GST scheme, importers must meet specific criteria as outlined by the ATO. It includes the following provisions:

  1. Being registered for GST: Importers must be registered for GST in Australia and hold a valid Australian Business Number (ABN).
  2. Having a deferred GST account: Importers must have a deferred GST account with the ATO. This account is separate from their standard GST account and is used solely for the deferred GST scheme.
  3. Meeting reporting requirements: Importers must comply with their reporting obligations and lodge their BAS on time. This includes accurately reporting and paying the deferred GST liability in the designated field on the BAS.
  4. Clean records: Importers must not owe the ATO any money or have any unfiled tax returns. Additionally, they shouldn’t be subject to any administrative sanctions under any Act that is overseen by the Commissioner.

What are the main factors for compliance with the deferred GST scheme?

To ensure compliance with the deferred GST scheme, importers must fulfill their reporting obligations and accurately report the deferred GST liability through the ATO’s systems. 

  1. Accurate Record-Keeping: Importers should maintain accurate records of their taxable imports, including invoices, customs documentation, and any other relevant supporting documents.
  2. BAS Reporting: Importers must report and pay the deferred GST liability in the designated field on their BAS. It is essential to ensure the correct reporting of deferred GST amounts to avoid penalties or interest charges.
  3. Timely BAS Lodgment: Importers must lodge their BAS on time, meeting the ATO’s specified lodgment due dates. Failure to lodge on time can result in penalties and impact the eligibility for future participation in the scheme.

What is the importance of the Integrated Cargo System (ICS)?

When importing goods and requesting deferred GST, importers must use the Integrated Cargo System (ICS). The ICS is an electronic system that facilitates the smooth flow of information in international trade. Importers can access the ICS using a digital certificate. Here’s how the ICS can help importers who are seeking for deferred GST:

  1. Reporting GST Liability: When importers send in their import declaration via the ICS, they must include details about the products they are bringing in, such as their value and classification. Importers must also state whether they qualify for the deferred GST scheme and make a note of it on their import declaration within the ICS. This indicator informs the ATO that the importer intends to defer GST payment.
  2. Verification: The ATO compares the information in the import declaration to the importer’s eligibility for GST deferral. The verification procedure makes sure that only qualified importers are given the deferral.
  3. Payment Deferral: If the importer is eligible, the ICS system defers the payment of GST at the time of importation. Instead of paying GST immediately, the importer is allowed to settle their GST liability through their subsequent Business Activity Statement (BAS) lodgment.
  4. Consolidated BAS Reporting: Importers participating in the deferral scheme will include the deferred GST amount as part of their GST liability when they submit their BAS. The ICS does not directly handle the BAS reporting process, as it is primarily focused on customs and border control activities. The BAS reporting is managed separately through the ATO’s reporting system.

Through the Deferred GST scheme, importers have the option to postpone paying GST on taxable imports until their subsequent BAS filing. It offers importers benefits such as improved cash flow, streamlined administrative processes, and potential tax benefits. To successfully participate in the scheme, importers must meet the eligibility requirements, follow reporting requirements, and maintain accurate records. Understanding and utilising the Deferred GST scheme can help import businesses in Australia with their financial management and overall success.
More information on the deferred GST scheme is available here. In addition to assisting you in fulfilling your compliance obligations, McHugh & Eastwood can offer advice on the deferred GST procedure.

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