As of 1 October 2016:
- some transactions between overseas businesses and Australian businesses are not subject to GST
- GST-registered importers have a new option to calculate transport, insurance and ancillary costs.
Find out about:
- Non-resident businesses
- Australian businesses
- GST-registered importers
- Legislation and supporting material
Non-resident businesses
We have made changes so that non-resident businesses don't have to engage in Australia’s GST system unnecessarily. This will reduce their overall compliance costs.
We have:
- amended the test for ‘carrying on an enterprise in Australia’
- limited the cases where a non-resident entity must pay GST on supplies of things done in Australia
- made sure there is no GST liability for certain supplies made between non-residents
- extended the GST-free (zero rate) rules for certain supplies made to non-residents
- moved liability, in some circumstances, from overseas businesses to the Australian-based business recipients that are already registered for GST.
The test for running an enterprise in Australia
Generally, a non-resident's enterprise must register for GST if:
- it is based in Australia for more than 183 days in a 12-month period, and
- has a GST turnover of A$75,000 or more.
If you are an affected non-resident entity, you need to review your enterprise arrangements in Australia to work out if you need to be involved in Australia’s GST system.
This could result in some entities registering for GST and others cancelling their GST registration.
See also:
- The law companion guide – LCG 2016/1 GST and carrying on an enterprise in the indirect tax zone (Australia)
We would like to work closely with affected taxpayers to support to meet their GST obligations. If you have any questions, email AustraliaGST@ato.gov.au
Supplies ‘not connected with Australia’
Generally, for non-resident suppliers who do not run an enterprise in Australia, the following transactions are no longer connected with Australia and therefore will not be subject to GST:
- supplies of intangibles (such as services and digital products) which are performed in Australia are not connected if the recipient is an Australian-based business recipient or a non-resident acquiring the intangibles for their overseas enterprise
- a transfer of ownership of leased goods which are located in Australia, where the transfer takes places between non-residents that do not have an enterprise in Australia
- a supply of goods where the supplier installs or assembles the goods in Australia, but does not import the goods into Australia.
Services or digital products sold to Australian-based business recipients
For services or digital products where the supply is done in Australia (for example, services you perform in Australia), GST does not apply to your sales if all of the following apply:
- you are a non-resident
- you do not make the sale through an enterprise you carry on in Australia
- you make the sale to an Australian-based business recipient that is
- registered for GST
- not buying the item for private use
- carrying on an enterprise in Australia.
As these sales are not connected with Australia, you are not required to charge GST on them. If these types of sales are the only sales you make, you are not required to be registered for GST.
Impacts for Australian-based business recipients if you incorrectly charge GST
If you incorrectly charge GST on these sales, you may disadvantage your customers. This is because your GST-registered customer may need to pay GST on their purchase under the reverse charge rules.
The law is designed to shift any net GST payable for these sales from the supplier to the customer.
The reverse charge applies if the customer would not be entitled to a full GST credit if GST had been charged on the sale. For example, if they are purchasing the item to make input taxed supplies, like financial supplies. Input taxed supplies are equivalent to ‘exempt' supplies in other jurisdictions.
If so, your customer will need to pay GST in their activity statement lodged with the ATO (they may claim a partial GST credit for the purchase at the same time, to the extent they are entitled to do so).
If you incorrectly charge GST on these sales, your customer will still need to pay GST through our reverse charge rules, if they apply. This can result in your customer paying GST on the sales twice.
As a result, your customers that are Australian-based business recipients will expect that you do not charge GST on sales that are not subject to GST.
If you have incorrectly charged GST on these sales, your customer may seek a refund from you. If you have already paid GST to the ATO on these sales, you can only obtain a refund from the ATO if you have reimbursed your customer.
Example: sales by a non-resident business
Berry Life Insurance Co runs a life insurance business in Australia. It is registered for GST. Berry Life Insurance Co purchases services to assist with processing insurance claims, including information technology services, from a supplier in India, Indian Grape Co.
Indian Grape Co is a non-resident that does not have an Australian presence for GST (it does not carry on an enterprise in Australia). The services it supplies are performed in Australia, as it subcontracts the work out to a local provider.
Even though the services it sells are performed in Australia, GST does not apply to the sales, because:
- Indian Grape Co is a non-resident who is not making the sales through an enterprise it carries on in Australia
- Berry Life Insurance Co is an Australian-based business recipient, because it
- is registered for GST
- carries on an enterprise in Australia
- is not purchasing the services for private use.
Indian Grape Co is not required to charge GST on these sales as they are not connected with Australia. If these are the only types of sales Indian Grape Co makes, it does not need to be registered for GST.
Berry Life Insurance Co determines it has to pay GST on its purchase of Indian Grape Co's services through the reverse charge – this is because these purchases relate to the input taxed sales it makes in its life insurance business.
Berry Life Insurance Co has to pay GST through the reverse charge, regardless of whether Indian Grape Co has correctly treated its sales as not being subject to GST.
End of exampleNon-resident business turnover for GST
GST-free supplies are only included in a non-resident’s GST turnover if the supply is made through an enterprise they carry on in Australia.
Non-resident businesses with an Australian resident agent
Non-resident businesses and their resident agents can agree the resident agent is liable for GST for supplies made through the agent. Both the non-resident supplier and the agent must specifically agree to this in writing.
If there is an agreement in writing between the non-resident supplier and the resident agent, notice must be given to the recipient of the supply if they are an Australian-based business. The notice must be given by the resident agent unless the agreement in writing provides that the non-resident supplier should issue the notice.
The notice must be in the following form, either:
- a tax invoice for the supply
- a document that shows the
- non-resident supplier’s, or their agent’s, identity and ABN
- price of the supply
- amount of GST included in the price
- date the document is issued, and a brief description of what is supplied.
If there is no agreement in writing between the non-resident supplier and the resident agent, the recipient of the supply may need to account for any GST, see reverse charging below.
See also:
- For a list of approved forms, see List of approved forms – GST
Reverse charge for supplies
Generally, business-to-business intangible supplies done in Australia by non-residents will not be connected with Australia. However, the recipient of the supply may be liable to pay the GST. This is the case if the recipient is an Australian-based, GST-registered business and acquires it not wholly for a creditable purpose. You acquire for a creditable purpose if you acquire for the purpose of your enterprise and the acquisition does not relate to making input-taxed sales. This is known as reverse charging.
See also:
Australian businesses
More supplies of services by Australian businesses to non-resident businesses will now be GST-free. This reduces the need for a non-resident business to interact with the Australian GST system to claim input tax credits.
Examples of supplies that may now be GST-free include:
- when an Australian business makes a supply of training services to an overseas company, but provides those services to one of the company’s employees in Australia
- when an Australian business supplies repair services to an overseas company, but the supply is provided to an entity in Australia in order to fulfil the overseas company’s obligations under a warranty.
GST-registered importers
If you are a GST-registered importer, to calculate the value of the taxable importation for GST purposes, you are no longer required to identify the exact amount paid for:
- international transport
- insurance
- loading or handling
- service costs for the transport.
You may opt to use an uplift factor, which is currently 10% of the customs value of the imported goods.
The Department of Home Affairs has issued an Australian Customs Notice that further explains this process.
See also:
Legislation and supporting material
- GST cross-border transactions between businesses – legislation and supporting material
- Tax on retail sales of goods and services into Australia
- GST on imported services and digital products
- GST on low value imported goods