Confused about whether you are being charged Australian GST by an overseas supplier? You are not alone! It seems like every month, things are changing in this space, especially for eCommerce businesses that are large consumers of overseas services and digital products.
The ATO has written a comprehensive GST guide that you can read here.
In summary, this is how it works:
- If your business is registered for GST and has been sent an invoice from another Australian registered business, GST must be paid and claimed back. A tax invoice must be supplied by the supplier, clearly stating the GST charged. Many overseas businesses have an Australian company – for example Google Australia Pty Ltd raises all invoices for pay per click advertising in Australia, therefore GST must be paid and claimed. This invoice is normally raised in $AUD.
- If your business is registered for GST and has been sent an invoice from an Overseas Corporation that has an Australian GST registration for imported services and/or digital products (software, subscriptions, services) no GST is payable if your business has notified your supplier of your ABN and GST registration status. An invoice must be sent by the supplier, clearly stating that no GST has been charged. An example of this would be Facebook. Most Facebook advertising is charged from their Ireland company, and no GST is charged providing your business has notified Facebook of your GST registration. This invoice may or may not be raised in $AUD. Other examples are Shopify, and eBay.
- If your business is registered for GST and has been sent an invoice from an Overseas Corporation that has not registered for Australian GST, no GST should be claimed. This organization is not required to send your business a tax invoice. Usually, this invoice is raised in the source currency of the originating country.
So how can your business determine whether the supplier is based in (1) Australia, (2) Overseas but registered for GST, or (3) Overseas but not registered for GST? The best way to tell, if you have an invoice, is to examine this invoice for information relating to an ABN / GST registration. If you are unable to tell from the invoice, or have no invoice at all, the next step is to perform an Australian ABN search here.
If the organization is:
(1) Located in Australia and registered for GST, you will clearly see this in the ABN search.
(2) Located overseas, but registered for GST, this will also show up in the ABN search, most commonly as a ‘Other Incorporated Entity’ with a GST registered status.
(3) Overseas and not registered for GST you will not see a match in your ABN search.
If you are unable to resolve your query about an overseas payment, our advice would be to not claim GST on the good or service. Chances are this will be correct GST treatment, and the most conservative approach.