Looking for opportunities to improve cash flow? If you import goods as part of your business, you don’t have to pay goods and services tax (GST) upfront if you’re registered for the ATO’s deferred GST scheme. Provided you meet certain eligibility requirements, you can defer payment of the GST until your next activity statement.

The scheme can benefit not only wholesalers, distributors and retailers, but also any business that imports goods for use in carrying on its business.

The concept

Usually, GST is payable on most imports into Australia and goods will not be released until the GST is paid to customs. This can have significant cash flow implications for importers. While you’re generally able to claim a credit later for the GST paid, you still need to have the funds to pay the GST at the time of importation.

The ATO’s deferred GST scheme allows participants to defer payment of the GST amount until their next business activity statement (BAS) is due.  At this time, you can generally claim back the GST on purchases in your BAS, so the payment of GST will be fully offset by the GST you can claim.

This means you can start selling or using the imports in your business right away without having to come up with the GST amount when the goods arrive in the country.

Eligibility for the scheme

Businesses who wish to take advantage of this scheme must apply first and be approved by the ATO.

To be eligible, you must:

• have an ABN;
• be registered for GST;
• lodge your BAS online (this can be done yourself or through your registered tax or BAS agent); and
• lodge your BAS monthly.

Many businesses lodge their BAS quarterly, which means they would need to elect to lodge monthly in order to access the deferred GST scheme.  If this applies to you, you’ll need to weigh up whether the deferred GST scheme is worth switching to more frequent BAS lodgement.

It’s also important to note that when you make the election to lodge monthly, the change won’t take effect until the start of the next quarter, so you won’t be able to defer GST on imports until the start of that quarter.

Once you’re approved for the deferred GST scheme, it’s important that you lodge and pay your monthly BAS on time. The ATO may remove you from the scheme if you fall behind, and in this case you’d need to reapply for the scheme.

Timing of the deferral and credits

Once you’re approved, your GST amounts on taxable imports will be deferred until the first BAS you lodge after the goods are imported (which for monthly lodgers is due 21 days after the end of the month). The deferred amount is reported electronically by customs to the ATO, who will use this data to pre-fill the “deferred GST” in your BAS.

The deferred GST liability is then effectively offset by a GST credit you can claim for the deferred GST amount. As with all GST amounts you pay on purchases you make for your business, you can claim a credit for the deferred GST liability on your imports to the extent that you use the goods in carrying on your business (and you can’t claim a credit for private use or to make input-taxed supplies).  Therefore, the overall effect of participating in the deferred GST scheme is that your GST on imports is deferred and offset, and you aren’t required to have funds available to pay the GST when the goods are initially imported.

Could your cash flow be improved?

If you’re not already taking advantage of the ATO’s scheme to defer GST payments on imports, it’s time to talk to us!  Contact us to discuss how the deferred GST scheme could benefit your business or to explore other strategies for improving your cash flow position.