GST on Imports: What Australian Businesses Need to Know (and How to Code it in Xero)

When you purchase goods from overseas to use in your business, it’s easy to assume that the transaction is entirely GST-free — especially when the supplier invoice shows no GST. But in Australia, GST can still apply at the point of importation, and if you’re not recording this correctly, you could be missing out on valuable GST credits.

Let’s break down how it works — and how to correctly record GST on imports in Xero.

Overseas Purchases: GST-Free from the Supplier, But Not Always Overall

Goods purchased from international suppliers are generally GST-free at the point of sale, because the supplier is located outside of Australia and not registered for GST here.

However, when the goods arrive in Australia and the value exceeds $1,000, GST is typically charged at the border by Australian Border Force (ABF). This is usually handled by your freight forwarder or customs broker, who will pay the GST on your behalf and pass the charge on to you.

This GST is claimable as a credit, but only if you:

• Have a valid Import Declaration or customs invoice showing the GST paid

• Code it correctly in your accounting software

  
  

Common Mistake: Relying Solely on the Supplier Invoice

The overseas supplier invoice will usually show no GST — and that’s perfectly correct. But if you stop there and don’t record the GST you’ve paid at the border, you’ll be missing out on a legitimate GST credit.

The key document to refer to is the Customs Import Declaration (or invoice from your freight forwarder) which shows the GST amount charged at the time of import.

How to Record GST on Imports in Xero

Here's how you can record the GST correctly in Xero to claim the input tax credit:

1. Enter a Bill for the Customs/Freight Invoice

• From the Bills screen in Xero, create a new bill to your freight forwarder or customs broker.

• Use the description “Import GST for [goods]” or similar.

• On the line item, enter the exact GST amount listed on the customs documentation.

2. Use the Tax Code: 'GST on Imports' (usually 0% on net, but full GST on the tax line)

• In Xero AU, use the tax rate "GST on Imports" (10%) for the GST portion.

• Important: The base amount should be coded with no GST, and only the GST line should reflect the import GST paid.

Example:

Description	Account	Amount	Tax Rate
Import GST	GST Paid	$0.00	GST on Imports (10%)
			GST = $250.00

This setup ensures that GST is recorded correctly for reporting purposes but doesn’t duplicate the cost of the goods.

3. Match to Your Bank Transaction

Once payment to the freight provider clears your bank, reconcile the transaction against this bill in Xero. This keeps your GST reporting accurate and ensures you're not missing out on claiming that import GST credit.

Quick Checklist:

• ✅ Don’t rely solely on the overseas supplier invoice

• ✅ Ask your customs broker or freight forwarder for the GST documentation

• ✅ Code the import GST correctly in Xero using “GST on Imports”

• ✅ Keep records in case the ATO asks for verification

  
  

Final Thoughts

GST on imports is one of those areas that often gets overlooked, but it can have a real financial impact on your business if not handled correctly. Claiming the GST back can improve your cash flow — and make sure your BAS is accurate.

If you're not sure whether you're claiming everything you should, or how to handle this in Xero or another software, a bookkeeper or BAS agent can help tidy things up.

Check your customs invoice for GST