International
Customs value
Customs value is the price of imported goods used to calculate customs duty and GST on importation, generally the price paid excluding international freight and insurance.
Customs value is the value placed on imported goods for customs purposes. It is the starting point for calculating customs duty and, together with freight, insurance and duty, for working out the GST on the importation. Getting it right matters because errors can lead to underpaid duty and GST, and penalties.
In most cases, customs value is based on the transaction value, which is the price actually paid or payable for the goods when sold for export to Australia. Certain adjustments are added, such as commissions, packing costs, royalties or licence fees connected with the goods, and assists such as tools or designs the buyer supplies to the seller. Costs of international freight and insurance are generally not included in the customs value, because Australia values goods on a free on board basis.
If the transaction value cannot be used, for example if the buyer and seller are related and the price is influenced by that, or the goods are given away, there are alternative methods in the customs legislation. These look at the value of identical or similar goods, or build a value from costs. These alternatives are more complex, and importers often use a customs broker to handle them.
The customs value feeds into the GST calculation. The value of the taxable importation includes the customs value, the cost of international transport and insurance, and customs duty. GST of 10% is then charged on that total. This is why GST on imported goods is higher than 10% of the invoice price when freight and duty are significant.
Importers must keep documents supporting their declared value, such as the commercial invoice, proof of payment, contracts, and records of any adjustments, generally for five years. The Australian Border Force can review values after clearance. A business registered for GST claims the GST on imports as a credit, so the cost of getting the value wrong is mainly in duty and penalties.
A common mistake is including freight in the customs value or leaving out additions such as royalties, which can distort both duty and GST. This is general information only, so confirm your situation with the Australian Border Force, the ATO or a registered tax professional.
Worked example
A registered importer buys goods for $15,000 and pays a $500 buying commission, with $1,200 for international freight and insurance. Customs value is the price plus commission, so $15,000 + $500 = $15,500, excluding freight. Assume 5% duty for illustration: $775. Value of taxable importation = $15,500 + $1,200 + $775 = $17,475. GST at 10% is $1,747.50.
Practical tips
- Remember that freight and insurance are generally not part of customs value, but are added later for GST.
- Include commissions, royalties and assists in the customs value where required.
- Keep supporting documents for your declared value for five years in case of review.