Despite being probably the most attractive export markets in Asia Pacific, Australia isn’t always easy and simple location to trade. In terms of cross-border trade, the country ranked 91st away from 190 countries in the World Bank’s Simplicity of Working report for 2017 – well below other regional powerhouses like Singapore, Hong Kong, and Japan. To succeed in Australia, goods-based businesses need to have a solid knowledge of how its numerous customs and trading rules apply to them.
“The best option for most Australian businesses, particularly Australian SME, is always to work with a logistics provider who are able to handle the heavier complexities in the customs clearance process on their behalf,” says Ben Somerville, DHL Express’ Senior Manager of Customs & Regulatory Affairs for Oceania. “With a little effort though, everyone can learn enough of the fundamentals to look at their cross-border operations to another level.” Listed here are five quick lessons to have any business started:
1. GST (and its deferral)
Most Australian businesses will face the 10% Products or services Tax, or GST, around the products you can purchase plus the goods they import. Any GST a business pays could be claimed back as being a refund from Australian Tax Office (ATO). Certain importers, however, can simply avoid paying the tax instead of having to claim it back, under just what the ATO describes as “GST deferral”. However, your business have to be registered not merely for GST payment, but in addition for monthly Business Activity Statements (BAS) to get entitled to deferrals.
“You don’t reduce any costs by deferring your GST, but you do simplify and streamline your cash-flow,” advises Somerville. “That may prove worthwhile for businesses to modify onto monthly BAS reporting, specially those that have bound to the more common quarterly schedule until now.”
Duty is 5% and refers to goods value while GST is 10% and applies to sum of goods value, freight, insurance, and duty
SMEs must be sure they know the gap between duties as well as the GST.
2. Changes towards the LVT (Low Value Threshold)
Up to now, Australia had the greatest Low-Value Threshold (LVT) for imported goods on earth, exempting most items of $1000 and below from GST. That’s set to alter from 1 July 2018, since the Federal Government looks to scrap the LVT for all those B2C (read: e-commerce) imports. B2B imports and B2C companies with less than AU$75,000 in turnover shouldn’t have the modifications.
“Now that this legislation has become undergone Parliament, Australian businesses should start get yourself ready for the changes sooner rather than later,” counsels Somerville. “Work with your overseas suppliers on subscribing to a Vendor Registration Number (VRN) with the ATO, familiarize yourselves with how to remit GST after charging it, and prepare to add it into your pricing models.”
The modern legislation requires eligible businesses to join up together with the ATO for the Vendor Registration Number (VRN), used to track GST payable on any overseas supplier’s goods. Suppliers are responsible for GST payment to the consumer on the Point of Sale, then remitting it for the ATO regularly.
3. Repairs and Returns
“Many businesses visit us with questions about whether they’re responsible 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 ask them is: are you conducting the repairs under warranty?”
If the business repairs or replaces a product or service within its warranty obligations, you have to pay neither duties nor taxes about the product – so long as your documentation reflects this. Range from the words “Warranty Replacement” or “Repair”, record the item’s value as “No Charge”, and be sure you continue to enter a “Value for Customs” – that which you paid to make an item originally – within your documents.
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