What you need to know about GST when selling overseas

If you’re keen to start selling your products or services to an overseas market, the first thing you need to do is ensure you’re aware of how taxation works for international sales, particularly in regard to GST, explains Mark Chapman, Director of Tax Communications at H&R Block.

With the growth of eCommerce, many Australian businesses have sought to capitalise on new opportunities by increasing their trade with customers overseas. Platforms such as Amazon and eBay have helped to bring together Australian businesses with distinctive products to sell and customers across the world, eager to buy.

But trans-national business brings with it a whole new set of tax challenges, particularly in regard to whether GST does or does not apply to such sales.

Does GST apply when selling overseas?

Determining whether and how goods and services tax applies is largely dependent on the type of supply made.

Supplies will be either:

• Taxable supplies: GST is payable on these supplies.
• GST-free supplies: No GST is payable on these supplies.
• Input-taxed supplies: No GST is payable on these supplies.

Exports of goods and services for consumption outside Australia generally fall into the GST-free supplies category, so GST is not generally chargeable when selling to an overseas customer.

If you’re registered for GST, this means:

• You don’t include GST in the price of your sales to overseas customers.
• You can still claim credits for the GST included in the price of purchases related to your overseas sales.

There are some circumstances where GST must be paid

Specifically, for goods to be GST-free, they must be exported from Australia within 60 days of the first of the following two events:

• You receive any payment for the goods.
• You issue an invoice for the goods.

If the goods are paid for by instalments, the payment or invoice referred to is for the final instalment. If the goods remain in Australia for more than 60 days after this date, GST applies to the sale.

Get your annual turnover right

Remember, where your turnover exceeds $75,000, you are required to register for GST. So, even though the sales themselves potentially do not attract GST, they are still included in that $75,000 figure, because such sales are included when calculating your annual turnover for GST registration purposes.

GST turnover is defined as your gross business income, excluding any:

• GST included in sales to your customers;
• Sales that are not for payment and are not taxable;
• Sales not connected with an enterprise you run;
• Input-taxed sales you make;
• Sales not connected with Australia.

Whilst it might appear that sales to overseas customers are knocked out by that last bulletpoint (sales not connected with Australia are excluded from GST turnover), that is not in fact the case.

Relevantly, a sale of goods is connected with Australia if the goods are delivered or made available in Australia to the purchaser or removed from Australia. So, goods that are exported from Australia to customers overseas are connected with Australia, and included when calculating your GST annual turnover for GST registration purposes.

That could mean that if you are not currently registered for GST because your Australian domestic sales do not reach $75,000, you may be obliged to register because your overseas sales may tip you over the $75,000 threshold. Once registered, you will then need to account for GST on your Australian sales (but probably not your overseas sales).

Sales of services overseas

Technically, for goods to be consumed outside of Australia, they must be physically transported out of Australia. Many businesses supply services rather than goods, so how do these rules apply if your business is offering services to overseas customers?

The supply of a service for consumption outside of Australia will also be GST-free, provided certain criteria are met.

The conditions which must be satisfied include:

• That the recipient is not in Australia when the services are supplied or performed (this condition includes consideration of whether the recipient has any offices in Australia and if so, the nature of those offices);
• That the effective use or enjoyment must occur outside Australia (this condition includes considering whether employees of the recipient making use of the services provided are in Australia at the time of making use of those services);
• That the supply of services is not for work performed on any tangible personal property based in Australia.
• That the supply is not connected with real property in Australia.

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