Importing goods into Australia creates a distinct bookkeeping challenge: the cost of the goods is assembled from multiple components — supplier invoice, international freight, marine insurance, customs duty, and import processing charge — that arrive on separate documents, often in different currencies, at different times. Get the landed cost wrong and your inventory valuation, cost of goods sold, and gross margin are all incorrect. This guide covers the key obligations and practical disciplines for bookkeepers managing importer clients.
GST on Imports: The Border Charge and the ITC
When goods are imported into Australia, GST is levied on the "taxable importation value" under Division 13 of the GST Act. The taxable importation value is:
Customs value + customs duty + international transport + insurance costs
This is materially different from domestic GST, where GST is calculated on the invoice price from the supplier. For imports, the base is the customs value (essentially the transaction value of the goods as assessed by the Australian Border Force) plus all dutiable amounts.
The GST on imports is collected by the Australian Border Force (ABF) at the time of customs clearance. It is not collected from the overseas supplier. If your client imports $100,000 (AUD) of goods with $5,000 of duty and $3,000 of freight, the GST is 10% × $108,000 = $10,800 — payable to the ABF before the goods are released.
The good news for registered importers: the full import GST is claimable as an ITC on the next BAS, in the period in which the import entry was made. The importer needs the tax invoice substitute — the import declaration entry document (Form B650 or the customs broker's equivalent statement) — to support the ITC claim.
Customs Duty: A Cost, Not a Credit
Unlike import GST, customs duty is not refundable. It is a cost of acquiring the goods and must be treated accordingly. Under the Australian accounting standards (AASB 102 Inventories), the cost of inventories includes all costs of purchase — purchase price, import duties, transport, handling — less any trade discounts.
Customs duty must be capitalised into the cost of the inventory, not expensed as a separate operating cost. Expensing duty separately understates inventory value, overstates COGS in the period, and distorts gross margin.
Duty rates are determined by the tariff classification of the goods under the Customs Tariff Act 1995. The tariff code (equivalent to the international Harmonized System code) determines both the duty rate and any applicable anti-dumping or countervailing measures. Misclassifying goods — even inadvertently — and subsequently correcting the classification means the additional duty is also a cost of the goods, not an operating expense.
If your client is importing goods that may qualify for a preferential tariff rate under a free trade agreement (FTA) — such as the Australia-China FTA (ChAFTA), AUSFTA (US), or CPTPP — confirm that the customs broker is applying the correct preference code. Failing to claim an FTA rate the goods qualify for is leaving money on the table.
Assembling the Landed Cost Correctly
The correct unit cost of imported goods requires assembling four components, which typically arrive as follows:
| Component | Document | Timing |
|---|---|---|
| FOB purchase price | Supplier commercial invoice | Before or at shipment |
| International freight | Freight forwarder/carrier invoice | During transit |
| Marine insurance | Insurance certificate | At or before shipment |
| Customs duty + IPC | Customs broker invoice / entry advice | At clearance |
The bookkeeper's challenge is that the goods may arrive and be entered into the warehouse — and revenue may be earned from selling them — before all four cost documents have been received and processed. An accruals-based approach is essential: accrue the expected freight, insurance, and duty at the time of import entry based on the customs broker's preliminary advice, and adjust when final invoices arrive.
Failure to accrue landed costs correctly leads to understated inventory and COGS distortion, which is a common finding in ATO income tax audits of importers.
Deferred GST Scheme: The Cash Flow Lever
For high-volume importers, paying import GST at the border and waiting to recover it on the next quarterly BAS creates a significant cash flow drag. An importer clearing $5 million of goods per year could be funding $500,000 of GST at any time, with recovery delayed 30–90 days.
The Deferred GST Scheme (DGST), available under Division 33 of the GST Act, allows approved importers to defer import GST from the border to their activity statement. Instead of paying GST to the ABF at clearance, the importer reports the import GST as a liability on their BAS and claims the corresponding ITC in the same lodgement period — resulting in a net nil cash impact.
DGST approval requires an ATO application. The importer must be registered for GST, lodging BAS monthly, and have a satisfactory compliance history. For eligible clients, the cash flow benefit is immediate and substantial. If your importer client is not on the DGST, assess whether they qualify and raise it with the client and their tax agent.
Foreign Currency: Which Exchange Rate to Use
Overseas suppliers almost universally invoice in foreign currency — USD, EUR, RMB, JPY. Both the customs value and the income tax cost base of the goods must be expressed in AUD.
For customs purposes: The ABF uses the weekly exchange rate published by the Reserve Bank of Australia (RBA), effective for the week in which the import declaration is made. The customs broker applies this rate automatically when lodging the entry. The AUD customs value on the entry document is the authoritative figure for duty and GST calculation.
For income tax and accounting purposes: ATO guidance (consistent with ITAA 1997) requires that the AUD cost of imported trading stock be determined at the exchange rate applicable at the date of import (which in practice aligns with the customs entry date). This is not the invoice date and not the payment date.
Forward contracts: If your client uses forward exchange contracts to hedge import purchases, the AUD settlement amount under the contract may differ from the spot rate at import entry. The foreign currency gain or loss on the hedge is a separate treasury item, reported separately under the foreign currency provisions in ITAA 1997 Division 775 (where applicable).
Incoterms and Their Bookkeeping Implications
The Incoterms (International Commercial Terms) in the supply contract determine who bears responsibility for freight, insurance, and the risk of loss during transit. The two most common terms for importers:
- FOB (Free On Board): The seller delivers goods to the port of departure. Title and risk transfer to the buyer at that point. The buyer (importer) arranges and pays for international freight and insurance. The freight and insurance invoices appear in the importer's books.
- CIF (Cost, Insurance, and Freight): The seller arranges and pays for freight and insurance to the port of destination. The buyer pays only from arrival. The freight and insurance are bundled into the supplier's invoice price, not separately visible.
For a CIF import, the "freight and insurance" component of the landed cost is embedded in the commercial invoice value. The customs broker will typically unbundle these for duty calculation purposes, but the bookkeeper must ensure the full CIF price (not just the FOB equivalent) is used in the inventory cost calculation.
Month-End Reconciliation Checklist for Importers
- Reconcile all import entries cleared in the month to customs broker statements — confirm each entry has been posted with the correct landed cost components
- Accrue freight and insurance for shipments in transit at month-end where final invoices have not yet arrived
- Confirm import GST on all entries has been claimed as ITC on the BAS for the correct period
- Verify customs duty has been capitalised into inventory cost, not expensed as a separate line
- Reconcile foreign currency balances — supplier trade creditors — at the closing RBA rate; post any translation gains or losses
- Review open purchase orders for shipments not yet cleared and assess if goods have transferred risk (FOB vs. CIF)
- Confirm DGST is active and import GST deferred correctly for eligible entries
- Check for any amended duty assessments from the ABF — post additional duty to inventory cost
- Confirm tariff classifications for new product lines have been reviewed by the customs broker