Australian GST for Foreign Businesses: Essential Tax Guide

If you are a foreign business wishing to do business in Australia, or expanding your existing corporate affairs (e.g. through a restructure of existing operations), there are a number of legal, commercial and taxation consequences that obviously need to be considered.

One such consideration is whether the transactions you undertake, as a foreign business, attract Australian GST – good and services tax (similar to Value Added Tax or VAT as it is known in some jurisdictions). It is important to consider this issue upfront and price your sales or supplies accordingly, as otherwise there is potential for you to lose sale proceeds equivalent to the amount of GST, generally being 1/11^th of the amount you charge for sales, to the Australian Taxation Office (and various other reporting and compliance issues).

What Sort of Transactions are Affected?

GST has the potential to affect almost any and all sales you undertake in Australia, to the extent the sales are ‘connected with Australia’ (where exemptions and concessions do not apply, etc).

This can include (but is not limited to):

Whether a sale you make is ‘connected with Australia’ is a complex concept, and advice should be sought prior to reaching any tax positions in this regard.

Generally, where you carry on a business or enterprise and your sales that are connected with Australia exceed $75,000 (GST-exclusive value), you will likely be required to register for GST in Australia. This will impact the profile of your business operations within the country, including how you engage with and invoice your customers.

Various exemptions and concessions can apply depending on the circumstances.

Australian-Based Business Recipients

For non-resident businesses, you may be supplying services to Australian businesses, through an enterprise that you do not carry on in the indirect tax zone (i.e. Australia).

Where such circumstances exist, there may be an opportunity for you to stay outside of the GST system in Australia.

There are a number of requirements to satisfy to qualify for this exception, including that the recipient of your supply is an ‘Australian-based business recipient’. This is broadly defined to include entities that are:

Where you qualify for this exception, you are neither required to charge GST on your sales nor be registered for GST in Australia (that is, if these types of sales are the only sales you make).

It is important to get these tax positions correct to ensure you do not unnecessarily increase your price on account of GST, thereby indirectly disadvantaging your customers.

Imported Goods

Where you import goods into Australia, you will likely to have an amount on account of Australian GST to remit to the Australian Border Force prior to the release of the goods into the country.

It is important to remember that the GST amount required to be paid to the Australian Border Force may not apply just in respect of the value of the goods i.e. it could include the customs value of the goods, as well as customs duty, cost of transporting the goods to Australia, insurance, etc.

You may be entitled to claim input tax credits on your taxable importations where you meet the requirements.

There may also be mechanisms available to defer the GST liability on your taxable importations under the Deferred GST Scheme.

Further, when you sell an imported good to an Australian customer, it could be regarded as a second and separate transaction for GST purposes on which GST applies. Independent advice is recommended to ascertain whether this could be the case. 

Resident Agency

One avenue to reduce GST-related administrative, compliance and reporting burden in Australia is for non-residents to utilise a Division 57 resident agency arrangement.

Under such an arrangement, an appointed Australian ‘resident agent’ is liable for GST on supplies and importations made by a non-resident (rather than the non-resident itself). The Australian ‘resident agent’ need not necessarily be related or associated with you.

There are a number of requirements to satisfy to put in place a Division 57 resident agency arrangement and further advice is recommended. 

Reverse Charge

Another avenue to reduce GST-related administrative, compliance and reporting is the utilisation of a Division 83 ‘reverse charge’ arrangement (note, this is different to the reverse charge rules under Division 84 which applies to taxpayers undertaking financial activity, etc).

Under such an arrangement, the Australian recipient of a supply can agree to remit the GST on any taxable supplies made by you as the non-resident supplier.

Again, there are a number of requirements to satisfy to put in place a Division 83 reverse charge arrangement and further advice is recommended.

How Can We Help You?

GST is a complex area of the Australian tax landscape, and the ramifications of getting it wrong for non-residents is significant. The article in question only highlights a very small amount of issues and matters to consider in a GST context when non-residents are doing business in Australia.

If you are a foreign business looking to set up or expand your operations in Australia, or you are looking to invest in Australia, please have a conversation with us with regard to managing your Australian GST and broader taxation obligations correctly.