• GST and international freight transport

    This section covers GST and international freight transport of goods for:

    • suppliers of international transport and associated services
    • subcontractors providing transport and associated services within Australia
    • importers
    • exporters.

    It does not include information on the international transport of postal goods.

    Inbound transport for importing goods

    The international transport of goods (including the arranging of such services) is GST-free from a place outside Australia to the place of consignment in Australia for a supplier of that transport into Australia. 'Place of consignment' is defined in the GST law and is generally determined by the agreement between the entity responsible for delivering the goods to Australia and its contractual counterparty (overarching agreement). The overarching agreement would be:

    • The sale of goods agreement if the seller is responsible for delivering the goods to Australia;
    • The buyer‘s agreement with a transport supplier (or forwarder) if the buyer is responsible for transporting (or arranging for the transport) of the goods from the country of export to Australia; or
    • In circumstances where there is no overarching agreement (for example, self-transport), the port or airport of final destination.

    Loading, handling and facilitation services (associated services) provided during the course of the international transport are GST-free where those services are:

    • Provided to a non-resident recipient who is not in Australia when the supply is made; or
    • Supplied by the supplier of the international transport service.

    In relation to an inbound move, the place of consignment determines the extent to which transport and associated services are:

    • GST-free
    • Included in the taxable value of the imported goods (i.e. the base upon which GST payable on importation is calculated).

    International Transport suppliers

    It is unusual for entities that physically transport goods internationally (such as international air and shipping lines) to hold, or have access to, the relevant overarching agreement described above. That being the case, the ATO accepts that international air and shipping lines should use their contracts for international carriage (i.e. Airway Bills and Bills of Lading, respectively) to determine the place of consignment under the GST law. In these circumstances, the ATO allows shipping and airlines to assume that the place of consignment is at the terminal gate of the port or airport of discharge as specified on the relevant Bill (Bill of Lading or Airway Bill).

    In some circumstances the relevant Terminal Gate could be situated at an inland port or airport. For example, some sea freight movements involve a subsequent leg of transport either to an inland port or another seaport. As long as that port is the nominated port of discharge on the relevant Bill then that place will be the relevant Terminal Gate and therefore the place of consignment.

    This means that the transport and handling of goods (including issuing and processing documentation) at or up to the terminal gate at the port or airport of discharge, made by the supplier under the contract for international carriage, will be GST-free as these services are made at, or prior to, the place of consignment.

    Can the services of an international airline or shipping line after the terminal gate at the port of discharge be GST-free?

    Yes, but in these circumstances the ATO expects that the international airline or shipping line to hold, or seek access to, the relevant overarching agreement that verifies that the place of consignment is beyond the terminal gate of the port of discharge.

    Subcontractors and forwarders who do not bring the goods to Australia

    Subcontractors and forwarders who provide (or arrange) transport and related services within Australia to another Australian entity, and do not provide (or arrange) the international transport of goods, will make a taxable supply of their respective services. Where those services form part of the international transport of goods they will be GST-free.

    Subcontractors and forwarders who provide (or arrange) domestic transport and associated services to a non-resident who is not in Australia when the services are provided, make a GST-free supply where those services form part of the international transport of goods.

    Services provided by an Australian supplier to an Australian customer after the place of consignment will generally be taxable.

    Suppliers who arrange for goods to be brought to Australia

    Forwarders, brokers, removalists and express couriers are often engaged by an Australian entity (such as the buyer or owner of the goods) to provide or arrange the transport of goods (and associated domestic services) from a location outside Australia to a location in Australia. The supply of these services by the entity providing or arranging the international transport should be GST-free as the place of consignment will generally be the place specified on the contract between the supplier (i.e. the forwarder, broker or courier) and the Australian counterparty (see example 1 and 2).

    However, the ATO recognises that many forwarders and brokers cannot comply with these rules without incurring significant compliance costs. In particular, the ATO understands that:

    • the systems and processes used by many forwarders and brokers do not have the capacity to distinguish domestic services provided to Australian importers when the forwarder or broker did not arrange to bring the goods to Australia (which would be taxable) from the same domestic services provided to the same customers when the forwarder or broker did arrange to bring the goods to Australia (which would be GST-free); and
    • brokers cannot accurately determine the value of domestic services to include in the value of a taxable importation of goods at the time the goods are entered for home consumption.

    Consequently, in relation to the international inbound movement of goods where a forwarder or broker is engaged to arrange for the transport of goods from a location outside Australia to a location in Australia, the ATO will allow the forwarder or broker to treat the place of consignment as the port or airport of discharge specified on the contract between the supplier (i.e. the forwarder or broker) and its Australian customer. The domestic services provided (or arranged) by the forwarder or broker in these circumstances may be treated as taxable supplies and as such, should not form part of the value of the taxable importation of the relevant goods (see example 3).

    Will a GST registered customer be entitled to a GST credit if the supply is treated as a taxable supply but could be GST-free?

    Where a GST registered customer of the forwarder or broker is charged GST in these circumstances, the customer will be entitled to a credit for the GST amount payable and shown on the tax invoice to the extent entitled.

    An exception to this is where the GST registered customer of the forwarder or broker could have been reasonably expected to know that the freight forwarder did not pay the GST to the Commissioner.

    Value of the taxable importation includes GST-free amount

    The value of the taxable importation of goods should include the following:

    • The customs value of the goods
    • The amount paid or payable to:
      • transport and insure the goods to the place of consignment in Australia;
      • load, handle and facilitate the transport of goods up to the place of consignment, provided the amount is not reflected in the cost of transport or customs value; and
    • Any customs duty and wine equalisation tax that may be payable.

    If the domestic services provided (or arranged) by the forwarder or broker are treated as a taxable supply to the importer (or entity making the taxable importation if a different entity), these amounts do not need to be included in calculating the value of the taxable importation (see example 3).

    See also:

    Example 1: A non-resident seller agrees to deliver goods to Australia

    A Swiss bicycle store sells and agrees to deliver bicycle frames to a buyer in Horsham, Victoria. Global Transporters, a non-resident freight forwarder that has no presence in Australia, is contracted by the Swiss vendor to transport the frames to Horsham. Global Transporters engages Ships International, an international shipping line, to transport the frames to the Port of Melbourne (being the port of discharge) on a freight pre-paid basis. Global Transporters contracts Ossie Freight Forwarder to provide (or arrange) the Australian services necessary to deliver the goods to the recipient’s premises in Horsham.

    Global Transporters' supply is GST-free as:

    • The Horsham address is the place of consignment for the purposes of the international transport of the frames; and
    • Global Transporters is the entity engaged by the vendor to arrange for the transport of the goods to Australia.

    To the extent Ships International’s transport services are connected with Australia, its supply is entirely GST-free as it supplies the international transport of the goods and its services are made prior to the place of consignment. In these circumstances, Ships International:

    • Will charge Global Transporters for ocean freight and all services provided at the ports of origin and destination;
    • Will not have access to the relevant sale of goods contract between the vendor and the Victorian purchaser; and
    • Is entitled to assume the Port of Melbourne, being the port of discharge specified on the Bill of Lading, is the place of consignment for its services.

    This means that Ships International will not include GST in its charges to Global Transporters.

    Ossie Freight Forwarder's transport supply to Global Transporters is GST-free as it:

    • forms part of the international transport of the frames as the services occur at, or prior to, the place of consignment; and
    • is made to a non-resident who is not in Australia when the supply of its services are made.

    If Ossie Freight Forwarder engages a subcontractor to transport the frames to the Horsham address, the subcontractor will make a taxable supply to Ossie Freight Forwarder.

    The value of the taxable importation of the goods should include all the charges made by Global Transporters to the vendor to transport the goods from the port of origin to Horsham.

    This example would equally apply (with the appropriate changes) if the goods were shipped as air freight under similar terms and circumstances.

    Example 2: A resident buyer takes delivery of goods outside Australia where the place of consignment is the buyer's premises

    Matthew's Toy Shop (“Matthew”) purchases a shipment of games and toys from China on FOB terms. Under these terms, the non-resident vendor agrees to deliver the goods to an airline at a named airport in China. Matthew assumes all risk of loss or damage from the time the goods are delivered to the airport in China.

    Matthew contracts Ossie Express Couriers to transport the goods from China to his shop in Canberra. It is this contract that determines the place of consignment.

    The supply by Ossie Express Couriers is GST-free (assuming its systems can treat the supply as such), as it is the entity contracted to bring the goods to Australia and the place of consignment is Matthew’s shop in Canberra, being the place of dispatch set out in its contract with Matthew to transport the goods to Australia.

    Under the contract between Ossie Express Couriers and the Chinese airline, the games and toys will be shipped to Sydney International Airport. This supply by the Chinese airline is also entirely GST-free as the airline has transported the goods to Australia under its contract with Ossie Express Couriers.

    The amount charged by Ossie Express Couriers to Matthew should be included in the value of the taxable importation of the goods, in these circumstances.

    Example 3: A resident buyer takes delivery of goods outside Australia and the Australian forwarder treats the place of consignment as the local port

    Using the same facts as example 2 with the notable exception that:

    • Ossie Freight Forwarder’s systems and processes cannot treat the supply of domestic services in these circumstances as GST-free; and
    • The broker engaged by Ossie Freight Forwarder cannot accurately determine the value of the domestic services prior to the goods being entered for home consumption.

    The GST implications are as follows:

    • Ossie Freight Forwarder may treat the supply of services in Australia (that is, all services provided to Matthew after the aircraft turns off its engines at Sydney airport) as taxable supplies;
    • Ossie Freight Forwarder should treat the supply of international air freight as GST-free;
    • Only the amount charged by Ossie Freight Forwarder to Matthew for international air freight should be included in the value of the taxable importation of the relevant goods;
    • Matthew should be entitled to claim an input tax credit for the GST charged by Ossie Freight Forwarder for the Australian services, provided it is registered for GST purposes and the goods were acquired for a creditable purpose; and
    • The supply by the Chinese airline should remain GST-free.

    This example would equally apply (with the appropriate changes) if the goods were shipped as ocean freight under similar terms and circumstances.

    End of example

    Outbound transport for exporting goods

    The international transport of goods (including the arranging of such services) is GST-free from the place of export in Australia to a destination outside Australia.

    The place of export is defined in the GST law. The place of export for goods (not being postal articles) to be packed in a freight container will generally be the last place from which the goods to be exported were collected or delivered, prior to being so packed; however if the goods were packed where they were produced the place of export is where they are packed.

    The place of export determines the extent to which transport and services associated with the export of goods from Australia, will be GST-free.

    Subcontractors who do not take the goods out of Australia

    Subcontractors and forwarders who provide (or arrange) transport and associated services within Australia to another Australian entity, and do not provide (or arrange) the international transport of goods will make a taxable supply of their respective services.

    Australian subcontractors who provide services to non-resident customers (who are not in Australia when the services are provided) and those services form part of the international transport of goods from Australia by the customer, will make a GST-free supply. Supplies of loading, handling and other services that facilitate the international transport of goods, are also GST-free when made to a non-resident who is not in Australia when the services are provided.

    Forwarders, brokers and removalists who arrange for goods to be transported out of Australia

    Forwarders, brokers, express couriers and removalists are often engaged by an Australian entity to provide or arrange the transport of household goods and personal effects/unaccompanied personal effects (HHGPE/UPE) (and associated domestic services) from a location in Australia to a location outside Australia. The supply of these services by the entity providing or arranging the international transport should be GST-free from the place of export to the location outside Australia.

    However, services not associated with the transport of goods to a location outside of Australia are not GST-free. For example services by a removalist in cleaning a house or extended storage costs (generally greater than 90 days) are not services associated with GST-free transport and are therefore not GST-free.

    Example 4: Outbound removalist

    Stan is registered for GST and operates an international removalist company that undertakes or arranges the Australian and international legs of international moves.

    Jessica lives in an apartment in Sydney and stores some of her belongings in a nearby storage facility. Jessica contracts Stan to transport her household items from her current residence and the storage facility to a location in London, to supply (or arrange) insurance for the transport of the goods, store the goods for 30 days prior to export, and to clean her apartment. Stan collects Jessica’s goods and moves them in a truck to his depot where they are stored and placed in a freight container 30 days after collection. The goods are stored for 30 days to allow enough time for Jessica to organise a place in London.

    The place of export is the place the goods were collected (both Jessica’s residence and the storage facility). Stan’s supply to Jessica in packing and transporting her household goods from her Sydney residence and the storage facility to the place of delivery in London is GST-free. However, the supply of cleaning services is not GST-free as these services do not facilitate the supply of GST-free transport.

    End of example

    Forwarders, brokers and removalists who handle goods transported into Australia

    Australian resident international movers are engaged by foreign removalists to have HHGPE examined by Department of Agriculture and Water Resources (DAWR) in bonded storage for quarantine purposes.

    DAWR charge the importer (via the local entity) for the time spent conducting the inspection and entering data into the DAWR computer system. DAWR’s supply is non-taxable. The local entity will provide assistance to the DAWR officer by way of moving, opening and resealing packages for inspection. This is a clearance and delivery service made by the local entity.

    The cost to the importer is split 50% for DAWR inspection and 50% for the assistance by the local entity.

    Where the local entity bills the quarantine inspection charges and the clearance and delivery charges back to the non-resident mover the services are GST-free.

    Example 5: Inbound personal effects

    Tate, an Australian resident living overseas, is returning to Australia. In order to bring his household goods and personal effects back to Australia he engages TSM International Removalists (TSM), a non-resident removalist that has no presence in Australia. TSM contracts with PCB Removals (PCB), an Australian based mover, to arrange destination services in Australia, which include customs clearance, quarantine clearance and delivery to Tate’s residence.

    PCB arranges for the customs clearance and quarantine inspection service to be conducted at their bond store in Australia. The charges relating to the quarantine inspection will be GST-Free as PCB is engaged by TSM to undertake destination services which it (TSM) is obligated to provide to Tate under the terms of the international transport contract.

    Tate will be in Australia before the arrival of his personal effects. As a result TSM advised Tate to pay the quarantine charges when billed for the service in Australia. The quarantine inspection charge will retain its GST-Free character as it is still part of the over-arching international transport contract.

    End of example

    See also:

      Last modified: 09 Mar 2016QC 23139