For businesses that import goods into Australia, the invoice from the overseas supplier is only the starting point — customs duty, GST on imports, import processing charges, and freight and insurance all contribute to the true cost of getting stock to the warehouse door, and each has a different tax and accounting treatment.
Getting import bookkeeping right matters for stock valuation, BAS accuracy, duty drawback claims, and cost of goods sold. This post walks through each charge in sequence.
Customs Duty: When It Applies and How It Is Calculated
Customs duty is a tax on imported goods levied under the Customs Act 1901 and the Customs Tariff Act 1995. The duty rate depends on the tariff classification of the goods (their HS code) and the country of origin. Australia has free trade agreements with many major trading partners — goods from the United States, Japan, South Korea, China, ASEAN nations, and others may attract reduced or zero duty rates under the relevant FTA.
Duty is generally calculated as a percentage of the customs value of the goods, which is based on the transaction value (the price paid or payable for the goods in accordance with the GATT Customs Valuation Agreement). Freight and insurance may or may not be included in the customs value depending on the Incoterms of the sale.
For bookkeeping purposes, customs duty is:
- A cost of acquiring the goods, not a separately recoverable tax
- Included in the cost of inventory under AASB 102 Inventories
- Deductible as a business expense (it forms part of the cost of trading stock under section 70-15 of the ITAA 1997)
Duty is not an input tax credit — it cannot be claimed back on the BAS regardless of the nature of the goods.
GST on Imports (Taxable Importations)
Under Division 13 of the A New Tax System (Goods and Services Tax) Act 1999, the importation of goods into Australia is a taxable importation. GST of 10% is calculated on the customs value of the goods plus any customs duty, plus international transport and insurance (unless already included in the customs value).
GST on imports is paid to the ATO at the time of clearance (unless the importer is on the Deferred GST Scheme — see below). The payment is made through the Australian Border Force system, typically by the customs broker on behalf of the importer.
For a GST-registered importer acquiring goods for use in their taxable enterprise, the GST paid on importation is an input tax credit (ITC) claimable on the next BAS. The ITC effectively makes the GST on imports a timing difference — paid at clearance, recovered on the next BAS lodgement. The credit is supported by the import declaration (Form B650), which acts as the tax invoice equivalent for imported goods.
For a business not registered for GST, or importing goods for non-business use, there is no input tax credit and the GST is a cost.
The Deferred GST Scheme
The Deferred GST (DGST) Scheme allows approved importers to defer payment of GST on imports from the time of customs clearance to the time the importer's next BAS is due. This is a significant cash flow benefit for businesses that import large volumes of goods regularly.
To access the DGST Scheme, the importer must:
- Hold a current Australian Business Number (ABN)
- Be registered for GST
- Have a good compliance history with the ATO and ABF
- Apply through the Australian Border Force
Once approved, GST on imports is reported in the BAS at G10 (capital purchases) or G11 (non-capital purchases) rather than paid at the border. This aligns the GST liability with the input tax credit, meaning the net cash effect in the BAS period is zero (liability cancelled by the ITC claim).
For large importers, the DGST Scheme can eliminate the need to finance GST at the border — which at scale can represent tens of thousands of dollars in working capital.
Duty Drawback
Where goods are imported, duty is paid, and the goods are subsequently exported from Australia without being consumed in the local market, the importer may be eligible for a duty drawback refund under section 168 of the Customs Act 1901.
Duty drawback applies to:
- Goods exported in the same condition as imported
- Goods incorporated into other goods that are then exported
- Defective goods returned to the supplier
The drawback refund is processed through the ABF and is generally available for duty paid within the previous 12 months. When a drawback is received, it reduces the cost of the goods or is recognised as income depending on how the original duty was accounted for. The bookkeeping entry is typically:
- Debit Cash (drawback receipt)
- Credit Cost of Goods Sold (or Inventory Cost of Importation)
Import Processing Charges and Other Border Fees
The Import Processing Charge (IPC) is a fee levied by the ABF to recover the cost of processing import declarations. It is calculated on the value of the goods and is payable regardless of whether duty applies. As at the 2025–26 financial year, the IPC is levied at different rates for low-value and high-value cargo.
The IPC is:
- A deductible business expense (part of the cost of bringing goods to the current location)
- Not subject to GST (it is a government charge, not a taxable supply)
- Not an input tax credit
Other import-related charges that should be captured in the landed cost calculation include: customs broker fees (which attract GST and are fully ITC-claimable), international freight (subject to GST if the freight agent is Australian-registered), warehouse storage at the port, and fumigation or quarantine inspection fees.
Coding the Landed Cost of Goods
Landed cost is the total cost of getting imported goods to their final destination in the business's hands. For inventory valuation under AASB 102, goods must be measured at cost — which includes purchase price and all directly attributable costs of bringing the goods to their present location and condition.
A landed cost calculation for a typical import:
- Supplier invoice (foreign currency, converted at rate on the date of transaction)
- Plus: International freight and insurance
- Plus: Customs duty
- Plus: IPC and customs broker fees
- Less: Any applicable duty drawback
The resulting total is the cost of the inventory to be entered into the stock system. Some businesses spread landed cost across all units in the shipment proportionately (by value, weight, or quantity).
Code each component to the correct account: inventory at cost (balance sheet), with freight, duty, and IPC either absorbed into the inventory cost or coded as a landed cost expense depending on your client's accounting policy. Consistency year to year is essential to avoid distorting gross margin analysis.