Australian exporters are in an unusual GST position: their sales are GST-free (zero-rated), meaning they do not charge or collect GST on their export revenue, but they continue to incur GST on their Australian-sourced inputs. The result is a business that consistently produces net GST refunds on its BAS — a position the ATO scrutinises closely, and one that requires impeccable documentation to defend.
The Zero-Rating of Export Supplies
Under section 38-185 of the GST Act, a supply of goods is GST-free if the goods are exported from Australia within 60 days of the payment (or the earlier of payment or invoice). Similarly, under section 38-190, the supply of a service that is either directly connected with goods situated outside Australia, or exported to a non-resident who is not in Australia when the service is performed, is GST-free.
The practical consequence:
- Goods exports: no GST charged to the overseas buyer; goods should not have GST on the export invoice
- Service exports: services supplied to an overseas client (who is not in Australia and does not use the service in Australia) are GST-free
- Digital services to overseas business customers: if the overseas customer is a GST-registered business using the service in their business, the supply is GST-free; if the customer is a consumer, the B2C digital service rules apply and the overseas customer's jurisdiction may impose equivalent obligations (though Australia's GST does not apply)
Evidence Required to Support Zero-Rating
The ATO does not accept "we exported the goods" as sufficient documentation. The exporter must hold export evidence, typically:
- Customs export declaration: the formal customs document showing the goods were exported. For consignments above certain thresholds, a formal export declaration is required by the Department of Home Affairs.
- Bill of lading or airway bill: the transport document issued by the carrier confirming the goods were loaded for export
- Commercial invoice: the invoice issued to the overseas buyer, showing FOB or CIF price, product description, country of destination, and the exporter's ABN
- Shipping confirmation or tracking evidence: for smaller parcels, a tracking confirmation showing delivery to an overseas address
Export evidence must be held for five years from the relevant BAS period. The ATO's audit focus on exporters is specifically on whether valid export evidence exists — businesses that treat exports as GST-free without retaining documentation are exposed.
Managing the GST Refund Position
An exporter that buys all its inputs in Australia and sells everything overseas will have a large, permanent ITC refund claim on every BAS. The ATO's risk model flags businesses with consistently large refund positions for review — not as a presumption of fraud, but as an administrative verification measure.
Exporters should maintain a clear record of:
- The value of GST-free export sales by period
- The ITCs claimed on inputs, linked to tax invoices
- The export documentation for each sale
Some exporters choose a monthly BAS cycle (rather than quarterly) to accelerate the cash return from consistent ITC refunds. This is permitted and often makes cash flow sense for exporters who have large upfront input costs.
International Freight and Insurance Costs
The GST treatment of freight and insurance on export shipments depends on the terms of sale (Incoterms) and who is the Australian recipient of the freight service:
- FOB (Free on Board): the exporter's obligation ends when goods are loaded at the Australian port. The exporter bears the cost of pre-shipment freight (to the port) — this is subject to GST and the exporter claims the ITC.
- CIF (Cost, Insurance, and Freight): the exporter pays for international freight and insurance. The international freight component (from Australian port to destination port) is GST-free under section 38-355 (international transport). The domestic freight component (to the Australian port) is taxable.
International freight invoices from shipping lines often combine domestic and international components — the GST should only apply to the domestic leg. Review freight invoices carefully before claiming or remitting GST.
Customs Duty on Imports of Raw Materials
Many exporters source raw materials or components from overseas. Import duty and customs charges apply on entry into Australia. The GST component on the customs entry (calculated on the customs value plus duty) is an ITC claimable by the GST-registered importer.
Duty is not recoverable as an ITC — it is a cost and should be added to the cost of the imported goods (increasing their inventory or cost of goods sold value). Distinguishing the recoverable GST from the non-recoverable duty on the import entry is a common source of error.
The Touristery and Retail Schemes
Australia operates the Tourist Refund Scheme (TRS), which allows overseas tourists to claim a refund of GST paid on goods purchased in Australia and taken out of the country. This scheme is relevant for exporters primarily because some retailers who sell to tourists at their Australian premises can help tourists claim TRS — the retailer's accounts are not directly affected, but the reporting of TRS sales through the retailer's ABN must be handled correctly.
Foreign Currency Invoicing
Exporters frequently invoice in USD, EUR, or the buyer's currency. The bookkeeping requirements for foreign currency are:
- Translate each foreign currency invoice to AUD on the invoice date (or use the ATO-accepted monthly average exchange rate)
- Record the exchange difference when payment is received (foreign exchange gain or loss)
- For GST purposes: the GST on any Australian-sourced element is calculated in AUD; the conversion for any taxable portion should use the actual exchange rate on the supply date, not the payment date
If the exporter hedges foreign currency exposure through forward contracts, the gains and losses on the hedge instruments must also be recognised — forward contracts that qualify as tax hedging have specific rules under Division 230 of the ITAA 1997.
Anti-Avoidance: Triangular Arrangements
The ATO watches for arrangements where goods are sold to an overseas entity but remain in Australia or are re-imported. The zero-rating is only available for goods that physically leave Australia. Arrangements designed to generate ITC refunds on Australian inputs while keeping the goods in Australia — even if technically sold to an overseas related party — will be treated as taxable supplies with GST charged.