Despite being one of the most attractive export markets in Asia Pacific, Australia isn’t always the simplest place to conduct business. In terms of cross-border trade, the country ranked 91st out of 190 countries on the planet Bank’s Ease of Doing Business report for 2017 – well below other regional powerhouses like Singapore, Hong Kong, and Japan. To succeed in Australia, goods-based businesses need a solid understanding of how its numerous customs and trading rules affect them.
“The best option for the majority of Australian businesses, particularly Australian SME, is to make use of a logistics provider that can handle the heavier complexities in the customs clearance process for him or her,” says Ben Somerville, DHL Express’ Senior Manager of Customs & Regulatory Affairs for Oceania. “With some effort though, anyone can learn enough of the basics to look at their cross-border operations one stage further.” Allow me to share five quick lessons to get any organization started:
1. GST (as well as deferral)
Most Australian businesses will face the 10% Products and services Tax, or GST, on the products they sell and also the goods they import. Any GST that the business pays can be claimed back as a refund from Australian Tax Office (ATO). Certain importers, however, can simply not pay back the tax instead of being forced to claim it back, under what the ATO identifies as “GST deferral”. However, your business should be registered not merely for GST payment, but also for monthly Business Activity Statements (BAS) to become eligible for deferrals.
“You don’t reduce any costs by deferring your GST, but you will simplify and streamline your cash-flow,” advises Somerville. “That may prove worthwhile for businesses to exchange up to monthly BAS reporting, specifically those that have tied to the harder common quarterly schedule until now.”
Duty is 5% and applies to goods value while GST is 10% and pertains to amount goods value, freight, insurance, and duty
SMEs need to ensure they know the difference between duties and also the GST.
2. Changes to the LVT (Low Value Threshold)
Up to now, Australia had the very best Low-Value Threshold (LVT) for imported goods on the globe, exempting most pieces of $1000 and below from GST. That’s set to improve from 1 July 2018, since the Government looks to scrap the LVT for all those B2C (read: e-commerce) imports. B2B imports and B2C companies with under AU$75,000 in turnover shouldn’t be affected by modifications.
“Now how the legislation has become passed through Parliament, Australian businesses should start be prepared for modifications sooner rather than later,” counsels Somerville. “Work together with your overseas suppliers on subscribing to a Vendor Registration plate (VRN) using the ATO, familiarize yourselves with the way to remit GST after charging it, and make preparations to include it into your pricing models.”
The new legislation requires eligible businesses to join up together with the ATO for any Vendor Number plate (VRN), used to track GST payable on any overseas supplier’s goods. Suppliers have the effect of GST payment to the consumer at the Pos, then remitting it towards the ATO regularly.
3. Repairs and Returns
“Many businesses arrived at us with questions regarding whether they’re answerable for import duty and tax whenever they send the products abroad for repair, or receive items away from overseas customers for repair or replacement,” says Mike Attwood, Customs Duty Manager at DHL Express Australia. “The key question we need to inquire is: are you conducting the repairs under warranty?”
If your business repairs or replaces a product included in its warranty obligations, you pay neither duties nor taxes about the product – providing your documentation reflects this. Range from the words “Warranty Replacement” or “Repair”, record the item’s value as “No Charge”, and make sure you continue to enter a “Value for Customs” – that which you paid to produce an item originally – within your documents.
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