GST core
Connected with Australia
A supply is connected with Australia when it is made in Australia or otherwise has a sufficient link to Australia, which is one condition for it to be taxable for GST.
GST is an Australian tax, so a supply must have a link to Australia before it can be taxable. The law calls this link being 'connected with Australia'. If a supply is not connected with Australia, it is generally outside the GST system, even if the supplier is Australian. The rules are set out in the A New Tax System (Goods and Services Tax) Act 1999 and vary by the kind of supply.
For goods, the position is usually simple. Goods are connected with Australia if they are delivered or made available in Australia, or if they are located in Australia when they are supplied and are not exported. Goods that are sent from Australia to an overseas customer are typically GST-free exports, so they are connected with Australia but are not charged GST, provided the conditions for exports are met.
For services and other things, the test depends on where the thing is done or where the rights are. A service done in Australia is generally connected with Australia. Supplies of real property are connected if the land is in Australia. Supplies of rights or other intangibles are connected if the rights can only be exercised in Australia, or in certain cases if the recipient is in Australia. Rules for digital products and imported services have their own detail.
The concept also applies to the supplier's side. A non-resident business that has no presence in Australia can still be making supplies that are connected with Australia, for example selling digital products to Australian consumers. In those cases the supplier may need to register for GST if its Australian sales reach the threshold. The reverse also applies, since Australian businesses selling to overseas customers need to check whether those sales are connected with Australia.
A related concept is the 'indirect tax zone', which broadly means Australia and certain external territories. Whether something is within this zone can matter for goods and services provided near borders or in territories. The details are specialised and are generally relevant only to businesses working with those territories.
Common misunderstandings include assuming that everything an Australian business does is subject to GST, or that sales to overseas customers are automatically outside the system. Neither is always true. The right answer depends on the nature of the supply and the circumstances, and the export rules can have conditions such as proof of export and the timing of payment.
This is general information only. For cross-border supplies, digital products, or property, check the detailed rules with the ATO or a registered tax professional.
Worked example
Kai, a registered Brisbane photographer, photographs a wedding in Brisbane for a local couple who pay $2,200 including GST. Because the service is performed in Australia, it is connected with Australia and is a taxable supply, so Kai reports GST of $2,200 divided by 11, which is $200. A similar job done wholly in New Zealand for a New Zealand client would generally not be connected with Australia, though the detail should be checked.
Practical tips
- Work out where a service is performed and where goods are located when supplied before deciding whether GST applies.
- Keep evidence of export, such as shipping records, if you treat a sale to an overseas customer as GST-free.
- Check the special rules if you sell digital products or services to people overseas.