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  • Information for business purchasers

    Australian goods and services tax (GST) generally applies to sales of imported services and digital products to Australian consumers.

    If you are registered for GST and have an ABN you are not an Australian consumer and GST will not apply to the purchase of imported services and digital products that you use in your business in Australia.

    However if you have an ABN but are not registered for GST, GST will apply to these purchases.

    Examples of imported services and digital products are online supplies of software, digital trade journal/magazine subscriptions, website design or publishing services and legal, accounting or similar consultancy services.

    GST does not apply to your business purchases of imported services and digital products if you are a business registered for GST in Australia.

    For overseas suppliers not to charge GST, they are required to obtain:

    • your Australian business number (ABN), and
    • a statement that you are registered for GST.

    If you are purchasing imported services or digital products only for your private use, you should not provide your ABN or state you are registered. If you do supply this information, you will need to pay the GST to the ATO under the reverse charge rules.

    Penalties can apply if you provide false information to a supplier, such as quoting an ABN when you are not registered.

    Example – Australian business registered for GST

    Kev's Karate is an Australian business registered for GST. The business makes an online purchase of an electronic version of a computer protection program from an overseas supplier 'Computer B Safe'. Computer B Safe is registered for Australian GST. The computer protection program is for business use.

    The price listed for this product on Computer B Safe's website is $200 plus additional taxes that may apply (for example, GST). Kev's Karate is making a business purchase, provides their ABN and tells the supplier they are registered for GST. Therefore, Computer B Safe does not charge Kev's Karate Australian GST on the purchase.

    End of example

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    About the law

    The Australian law ensures that businesses that are registered or required to be registered for GST are in the same net GST position when acquiring imported services and digital products for their business, as they would be if they obtained these products or services locally.

    However, the rules also ensure that overseas suppliers are not unnecessarily drawn into the Australian GST system. When overseas suppliers make sales to Australian GST registered businesses, the law requires the business purchaser (not the overseas supplier) to determine if GST is payable, and if so, to pay any GST due to the ATO using the reverse charge rules.

    Paying GST on your purchase (reverse charge rules)

    There are some circumstances where GST is paid by the purchaser. This is called a 'reverse charge'.

    The reverse charge rules apply even if you provide the supplier with your ABN and a statement that you are registered for GST.

    You will need to pay GST to the ATO under the reverse charge rules on your purchases from offshore businesses if all the following conditions are met:

    • you are registered or required to be registered for GST
    • you would not have been entitled to claim a full GST credit if you had been charged GST
    • you import services or digital products
    • the imported services or digital products are not GST-free or input taxed.

    If the reverse charge rules apply because you meet the conditions above, the reverse-charged GST is 10% of the price of the purchase.

    You may be able to claim a partial GST credit for the purchase on which you had a GST reverse charge liability.

    You cannot claim a GST credit if:

    • 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.

    See also:

    • Reverse charge of GST and things purchased from offshore

    Incorrectly charged GST

    You should not be charged GST on purchases of imported services and digital products if you provide your ABN and state you are registered for GST.

    If GST has been incorrectly charged you should seek a refund from the supplier.

    Tax invoices

    A supplier is not required to provide a tax invoice for sales of imported services or digital products.

    Overseas businesses registered in our new Simplified GST system for non-residents are not given an ABN. Instead, we give them an ATO Reference number (ARN).

    Unless a supplier has an ABN, they cannot issue a valid tax invoice to you. Accordingly, if you do not hold a valid tax invoice for the purchase, you will not be entitled to a GST credit.

    See also:

    Last modified: 27 Sep 2017QC 53382