• GST and things purchased from offshore

    For GST, luxury car tax and wine equalisation tax purposes, from 1 July 2015, where the term ‘Australia’ is used in this document, it is referring to the ‘indirect tax zone’ as defined in subsection 195-1 of the A New Tax System (Goods and Services Act) Act 1999 (GST Act).

    Read this in conjunction with GST – completing your activity statement.

    Find out about:

    Terms we use

    When we say:

    • sales – we mean the GST term supplies
    • purchases – we mean the GST term acquisitions
    • GST credits – we mean the GST term input tax credits
    • reporting period – we mean the tax period that applies to you
    • payment – made or received we mean the GST term consideration
    • business – we mean the GST term enterprise
    • Australia – we mean the GST term indirect tax zone.

    How to complete your activity statement

    You may use either the calculation worksheet method or the accounts method to complete the relevant labels on your activity statement for the reporting period.

    The amounts you report on your activity statement will depend on the accounting basis you have chosen or are otherwise required or permitted to use. You can account on a cash basis or a non-cash basis.

    See also:

    When to pay GST on things you have purchased from offshore

    There are two special rules that apply to things you purchase from offshore:

    1. Under the first rule, you must pay GST for purchases you have made in certain situations, even though you are the purchaser and even if the sale would not normally be subject to GST.
    2. Under the second rule, you may agree to pay the GST for purchases you have made in certain situations even though you are the purchaser.

    Payment of the GST by the purchaser under either of these rules is called a 'reverse charge'.

    When GST must be reverse charged

    In some cases, things (other than goods and real property) that your Australian business purchases which are done outside Australia or made through a business carried on by a seller outside Australia are subject to GST. In this instance, you are liable to pay the GST, even though you are the purchaser and even if the seller would not be required to pay GST on the sale.

    You are liable for GST under this reverse charge rule in the following circumstances:

    • The reverse charge rule applies if all the following requirements are satisfied:
      • the thing you purchase is done or performed outside Australia
      • the sale to you is not made through a business that the seller carries on in Australia
      • you purchase the thing solely or partly for the purpose of a business that you carry on in Australia
      • your purchase is partly of a private or domestic nature or relates partly or solely to making input taxed supplies
      • the sale to you is for payment
      • you are registered or required to be registered for GST.
    • The reverse charge rule applies if all the following requirements are satisfied:
      • the sale is connected with Australia because the thing you purchase is a right or option to acquire another thing, and the sale of that other thing would be connected with Australia
      • you purchase the thing solely or partly for the purpose of a business that you carry on in Australia
      • your purchase is partly of a private or domestic nature or relates partly or solely to making input taxed supplies
      • the sale to you is for payment
      • you are registered or required to be registered for GST.
    • The reverse charge rule applies if all the following requirements are satisfied:
      • the sale to you is not made through a business that a non-resident seller carries on in Australia
      • the thing you purchase is done or performed in Australia
      • you are an Australian-based business recipient
      • you purchase the thing solely or partly for the purpose of a business that you carry on in Australia
      • your purchase is partly of a private or domestic nature or relates partly or solely to making input taxed supplies
      • the sale to you is for payment
      • you are registered or required to be registered for GST.

    You are not required to pay GST on any portion of the purchase that would have been GST-free or input taxed if the thing you purchased had been done or performed in Australia.

    There are some cases where a non-resident seller makes sales through a resident agent. They have an agreement in place that the sales will continue to be connected with Australia, resulting in the agent being liable for GST. In this instance, the agent or the seller will notify you.

    From 1 July 2017, if you are registered for GST and misrepresent your status as an Australian consumer in respect of your purchase of services and intangibles, you may be liable for GST on the sale to you under the extension of the reverse charge rules.

    Amount of GST payable by you

    The amount of the reverse charged GST is 10% of the price of the purchase.

    Transfers between your branches

    If you carry on a business in Australia and you also carry on either that or another business outside Australia, you are making a sale to your Australian business that is not connected with Australia if:

    • you transfer anything from the business outside Australia to the business in Australia
    • your business outside Australia does anything for the business in Australia.

    As this transfer is taken to be a sale that is not connected with Australia, if this notional sale satisfies the last four points of the first reverse charge rule set out in the section When GST must be reverse charged, then you are liable to pay GST on the transfer.

    This rule does not apply to transfers of the services of an employee to the extent that any payments made by the business in Australia to the business outside of Australia for the employee's services would be withholding payments (for income tax purposes) if they were made directly from the business in Australia to the employee.

    For example, where the offshore business sends one of its employees to work in the Australian business for a period of time and the Australian business pays an amount reimbursing the offshore business for the employee's salary for the period. This payment would not be subject to the GST reverse charge under the rules about transfers between branches.

    Sales for no consideration or insufficient consideration between associates

    A sale without consideration that is made between associates can also be a taxable sale under the reverse charge rule set out in the section When GST must be reverse charged, if the other requirements in that section are satisfied.

    Where a sale for no consideration is a taxable sale that is reverse charged to you, the price of the sale is the GST inclusive market value of the sale. Similarly, if the consideration for a sale is less than its GST inclusive market value, the price of the sale is its GST inclusive market value.

    The use of GST inclusive market value means that the price of the sale is not discounted to remove GST. Such discounting should only be done where an amount of GST is included in the market value that is identified. In the case of sales that are subject to the reverse charge rules, it is expected that GST will not be included in the market value of the sale because the seller makes a sale through a business it does not carry on in Australia, and, in most cases, the sale is not connected with Australia.

    Employee share schemes

    Certain supplies relating to employee share schemes are also exempt from these rules.

    GST credits

    You may be able to claim a GST credit for the purchase.

    However, you cannot claim a GST credit to the extent that either:

    • the purchase relates to making sales that would be input taxed
    • the purchase is of a private or domestic nature
    • you do not provide or are not liable to provide payment for the purchase. However, special rules apply to a sale for no consideration between associates that is a taxable sale because of the reverse charge rules.

    You do not need to hold a tax invoice to claim this GST credit.

    When GST may be reverse charged

    You may agree with a non-resident seller to pay the GST on a sale to you, rather than the seller pay the GST. This rule applies if:

    • the non-resident seller does not make the sale to you through a business they carry on in Australia
    • you are registered or required to be registered for GST
    • you agree with the non-resident seller that the GST is payable by you
    • you are not required under the rule set out above (see When GST must be reverse charged) to pay GST on the sale
    • the sale to you is not made through a resident agent of the non-resident seller.

    Amount of GST payable by you

    The amount of the reverse charged GST is 10% of the price of the purchase.

    GST credits

    You may be able to claim a GST credit for the purchase.

    However, you cannot claim a GST credit for any of the following reasons:

    • the purchase relates to making sales that would be input taxed
    • the purchase is of a private or domestic nature
    • you do not provide or are not liable to provide payment for the purchase.

    You do not need to hold a tax invoice to claim this GST credit.

    How to report offshore purchases and reverse charge GST on your activity statement

    Report at G1 (total sales) the amount you paid or are liable to pay for the purchase to which the GST reverse charge applies, multiplied by 11/10.

    For sales without consideration or insufficient consideration that are made between associates to which the GST reverse charge applies, report at G1 (total sales) the GST inclusive market value for the purchase (which in most reverse charge cases, it is expected that GST will not be included in the market value of the sale), multiplied by 11/10.

    If you are using the accounts method, report at 1A (GST on sales) the GST you are liable to pay for the purchase to which the reverse charge applies.

    If using the calculation worksheet method, use the worksheet to work out how much GST to report at 1A.

    Report at G10 (capital purchases) or G11 (non-capital purchases) the amount you paid or are liable to pay for the purchase, multiplied by 11/10.

    For sales without consideration or insufficient consideration that are made between associates to which the GST reverse charge applies, report at G10 (capital purchases) or G11 (non-capital purchases) the GST inclusive market value for the purchase, multiplied by 11/10.

    If you are using the accounts method, report any GST credit you are entitled to claim for the purchase at 1B (GST on purchases).

    If using the calculation worksheet method, use the worksheet to work out how much GST credit to report at 1B. For this method, you may need to report amounts at either G13 (purchases for making input taxed supplies) or G15 (estimated purchases for private use or not income tax deductible), in order to calculate the correct amount of GST credits to report at 1B.

    More information

    If you need more information, you can either:

    • phone us on 13 28 66
    • write to us at
      • Australian Taxation Office
        PO Box 3524
        ALBURY NSW 2640.

    If you don't speak English well and need help from the ATO, phone the Translating and Interpreting Service on 13 14 50.

    If you are deaf, or have a hearing or speech impairment, phone the ATO through the National Relay Service (NRS) on the numbers listed below:

    • TTY users, phone 13 36 77 and ask for the ATO number you need
    • Speak and Listen (speech-to-speech relay) users, phone 1300 555 727 and ask for the ATO number you need
    • internet relay users, connect to the NRS on relayservice.com.au and ask for the ATO number you need.
      Last modified: 13 Feb 2017QC 17450