Businesses that import goods into Australia face a layered set of charges that must be accounted for correctly before the goods can be brought to account as inventory or fixed assets. Customs duty, GST on imports, excise-equivalent charges, and in some cases wine equalisation tax all interact at the border. Getting the bookkeeping wrong at this stage means either understating inventory cost — affecting gross margin calculations — or misstating Input Tax Credits. This guide covers the key areas bookkeepers working with importing businesses need to understand.
Customs Duty as Part of Cost of Goods
Customs duty is levied under the Customs Act 1901 at rates specified in Schedule 3 of the Customs Tariff Act 1995. The duty rate depends on the tariff classification of the goods (using the Harmonized System code) and on the country of origin, which determines whether a preferential rate applies under Australia's free trade agreements (AUSFTA with the US, ChAFTA with China, KAFTA with South Korea, CPTPP, and others).
The accounting treatment is straightforward: customs duty paid is a cost of acquisition and must be included in the cost of the imported goods, not expensed separately. Under AASB 102 (Inventories), the cost of inventories comprises all costs of purchase, including import duties and other taxes (not subsequently recoverable from the ATO), inward freight, handling, and other directly attributable costs to bringing the inventory to its present location and condition. A bookkeeper who treats customs duty as an operating expense — rather than adding it to inventory cost — understates inventory and overstates the expense in the period of import.
For capital assets imported from overseas, the same principle applies under AASB 116: the cost of the asset includes import duties, non-refundable purchase taxes, and any other directly attributable costs of bringing the asset to the location and condition necessary for it to be capable of operating.
GST on Imported Goods
GST on imported goods is collected by the Australian Border Force at the time of importation, not by the ATO through the normal BAS cycle. This creates a timing difference that bookkeepers frequently mishandle. The GST paid at importation is an Input Tax Credit — but it appears as a payment to the ABF, not as a tax invoice from a supplier, which confuses bookkeeping workflows.
The GST is calculated on the customs value of the goods plus duty plus any other charges specified in s.13-20 of the A New Tax System (Goods and Services Tax) Act 1999. For most goods, this means: Customs Value (the transaction value per the WTO Customs Valuation Agreement, broadly the arm's length price in foreign currency converted at the ABF's ruling exchange rate on the date of assessment) + duty = the taxable importation value. GST = 10% of that amount.
The ITC is claimable on the BAS for the tax period in which the import entry is cleared — which may be a different period from when the supplier invoice was issued. The import entry number on the ABF's customs entry is the record the ATO requires; an import declaration (N10 or N20) serves as the tax invoice equivalent under reg. 70-5.02 of the GST Regulations.
Low-Value Imports (under $1,000) from offshore suppliers that are registered for the GST low-value imports scheme pay GST at the time of purchase from the supplier. Those goods do not attract a separate GST charge at the border. The bookkeeper must code the GST based on the supplier invoice, not on a customs entry.
Exchange Rate Treatment for Import Transactions
When goods are purchased in a foreign currency, the transaction must be converted to Australian dollars for both the duty assessment and the bookkeeping entries. The ABF uses its own ruling rate on the assessment date; the business may use any reasonable basis for its own accounting records (spot rate on invoice date, bank settlement rate, or a periodic average rate under AASB 121).
The practical consequence is that the customs duty — calculated on the ABF's exchange rate — will differ from the duty shown on the foreign currency invoice converted at the business's own rate. The bookkeeper must use the duty amount from the import entry (in AUD as assessed by the ABF), not a recalculated figure. Exchange differences arising between invoice date and payment date are dealt with under AASB 121 as foreign currency gains and losses, not as adjustments to inventory cost.
Wine Equalisation Tax (WET)
Wine equalisation tax applies to imported wine, including grape wine, fruit wine, and mead, at a rate of 29% on the customs value. WET is payable in addition to customs duty and GST. Unlike duty, WET does have a rebate mechanism — the WET rebate (capped at $350,000 per financial year for eligible domestic producers under s.19-15 of the A New Tax System (Wine Equalisation Tax) Act 1999). Importers are generally not eligible for the WET rebate, which is directed at domestic grape growers and winemakers.
From an accounting perspective, WET paid on imported wine is a cost of acquisition (added to inventory cost, like duty) unless it is recoverable. For a retailer who charges WET-inclusive prices, the WET embedded in the selling price must be remitted to the ATO quarterly on the BAS. The ITC system does not offset WET — the two systems operate separately.
Duty Drawback on Re-exported Goods
Where imported goods are subsequently re-exported without being consumed or used in Australia, a duty drawback claim can be lodged with the ABF under s.168 of the Customs Act 1901. The drawback recovers the customs duty paid on import. Drawback claims must be lodged within four years of the original importation and require supporting documentation: the original import entry, evidence of re-exportation, and proof that the goods have not been used in Australia.
The accounting treatment for a drawback receivable is a reversal of the duty cost in inventory: if the goods have not yet been sold, the drawback reduces inventory cost. If the goods have been sold, the drawback recovery is treated as income (or a cost reduction) in the period the drawback is approved — not in the period the original import duty was paid. The bookkeeper must monitor the drawback claim status and accrue the receivable only when it is virtually certain of receipt.
How Reconlink Supports Importing Businesses
Importing businesses typically have high-volume transaction files from freight forwarders and customs brokers alongside their trading bank statements. Reconlink's automated coding rule engine can be configured to recognise the standard description patterns of ABF duty payments, WET remittances, and freight forwarder disbursements, categorising them to the correct cost accounts. Importing a bank statement (CSV, Excel or PDF) — or forwarding it to your per-client email inbox — brings all your import settlement transactions in at once, making it straightforward to reconcile the landed cost of goods against purchase orders and inventory receipts. BAS export ensures GST on imports claimed as ITCs are correctly reported in G10 or G11 on the quarterly return.