Ways to avoid incurring Australia's GST penalty

By DENHAM MARTIN*

We export a substantial amount of goods to Australia. The value of these exports will easily exceed the Australian GST registration threshold of $A50,000. We have received conflicting advice whether, given our level of exports, we must register for GST in Australia. Can you please clarify the position? Also, several of our Australian customers are advising that they must deduct 48.5 per cent from the amount owed to us. What can we do about this?

SC. Auckland.

You have correctly identified that the Australian GST registration threshold is $A50,000 (unless you are a non-profit body, for which the threshold is $A100,000).

However, different types of supply are excluded from the calculation.

The most important for your purposes is the exclusion of supplies that are not "connected with Australia."

A supply of goods made to Australia will be "connected with Australia" only if the supplier either imports those goods into Australia or installs or assembles the goods there. We have assumed you are not assembling or installing goods in Australia. Therefore, if you are not the "importer" (into Australia) of the goods you export there, then, provided you make no other supplies to or within Australia, you will not be required to register for its GST.

The word "importer" is not defined for GST purposes. Information released by both the Australian Tax Office and Customs suggests that those organisations view an "importer" to be the person that clears goods through Customs (by lodging the requisite documents and paying applicable duties and taxes).

If an agent is employed to clear goods through Customs, then it will generally be the person acquiring that agent's services who would be considered to be the importer.

Therefore, you must determine whether you are an importer of goods into Australia. Typically, this will be determined by the terms upon which you are selling goods there. For example, goods sold on an FOB basis with no further involvement ex-wharf on your part will generally not be included in calculating your GST turnover threshold. Conversely, goods sold on a delivered duty paid (DDP) basis will generally be included in that calculation.

Ultimately, the most important question for you to ask is likely to be whether you, either directly or through your agent, are arranging for the goods you export to be cleared through Customs in Australia. Assuming that you have not supplied your Australian customers with an Australian Business Number (ABN), or taken any other relevant action, then your Australian customers are correct in advising you that they must deduct 48.5 per cent from the amount owing to you. This deduction is made in accordance with the Australian Pay As You Go system, which states that a recipient in a business-to-business transaction must deduct and pay to the Tax Office 48.5 per cent if the supplier has not provided its ABN to the buyer.

However, you are required to register for an ABN only if you are carrying on an enterprise in Australia. If you are not, then you are entitled to advise your Australian customers of that fact, releasing them from the obligation to deduct the 48.5 per cent. A form with such advice can be obtained at Tax - reform forms.

* Denham Martin is the principal of Denham Martin & Associates, lawyers specialising in taxation and related matters.