• 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 GST Act.

    Attention

    Read this in conjunction with GST - completing your activity statement (NAT 7392).

    End of attention

    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 do you 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.

    Find out more

    For more information on cash and non-cash accounting, refer to:

    End of find out more

    When do you 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 must the GST be reverse-charged?

    In some cases, things your Australian business purchases that are done or performed outside Australia (other than goods and real property), 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.

    This rule applies if all of the following applies:

    • the sale to you is not made through a business that the seller carries on in Australia
    • the thing you purchase is done or performed outside Australia
    • you purchase the thing solely or partly for the purpose of a business you carry on in Australia
    • the sale to you is for payment
    • your purchase is partly of a private or domestic nature or relates partly or solely to making input taxed supplies
    • 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.

    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.

    This is because your business outside Australia will satisfy the first two points of the rules set out in 'When must the GST be reverse charged?'.

    If this notional sale satisfies all of the other reverse charge rules set out in that section, then you are liable to pay GST on it.

    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.

    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.

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

    When may the GST 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 must the GST 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 do you report purchases from offshore 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.

    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.

    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.

    Find out more

    For more information about GST and reverse charges, refer to paragraphs 35 - 42 of Goods and services tax ruling GSTR 2000/31External LinkGoods and services tax: supplies connected with Australia.

    End of find out more

    More information

    If you need more information, you can:

    • phone us on 13 28 66, or
    • 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: 24 Jun 2015QC 17450