When importing goods to Australia, you will generally be subject to several taxes and duties, including Goods and Services Tax (GST), Customs Duties, Import Processing Charges, Freight, and Insurance Costs. These all make up the taxable value of the importation.
The Department of Home Affairs collects GST at a rate of 10% of the value of the taxable importation. Any GST calculated is payable before the goods are released by Home Affairs. Sales of goods that are to be imported into Australia that have a customs value at or below $1,000 can be classed as non-taxable importations and not subject to GST.
Businesses are entitled to claim a GST credit for the GST charged on importation if all the following apply:
- you make a taxable importation.
- are registered for GST.
- you import the goods for a creditable purpose.
You can claim GST credits on imported goods in the activity statement relevant to the tax period in which you pay the assessed GST on the import of those goods. However, before you can claim a GST credit, you must have documentation showing the goods have been imported and GST was either paid or deferred at the time the goods entered Australia.
You must not claim a GST credit if you do not hold relevant documentation or have ready access to that documentation.
To accurately process this GST credit in Xero and account for it in your activity statement you should follow the below steps:
- Create a bill and enter the description and quantity details, then:
- In the Unit Price field enter the GST amount payable.
- In the Account field, select the GST account.
- In the Tax Rate field, select the GST on Imports tax rate.
- Save or approve your transaction.
It is also helpful to attach the importation documentation to the transaction by dragging and dropping the file over the transaction in Xero.
If you require assistance with this, please contact our office.