International
Imported services
Imported services are services and other intangible supplies bought from a supplier outside Australia, which can carry GST through the reverse charge or through the overseas supplier registering for GST.
Imported services are services, rights and other non-physical things that an Australian business or individual acquires from an overseas supplier. Common examples include offshore software development, foreign consulting advice, overseas cloud hosting, licences to use intellectual property, and online advertising bought from a foreign platform. Because nothing physical crosses the border, Customs does not collect GST on them the way it does on imported goods. A separate set of GST rules applies instead.
There are two main ways GST can end up being paid on an imported service. The first is that the overseas supplier is required to register for GST and charge it, which is the usual outcome for many digital products sold to Australian consumers. The second is the reverse charge, where the Australian recipient accounts for the GST itself. The reverse charge only matters in a narrow set of cases, because it applies when the buyer is registered for GST but does not acquire the service wholly for a creditable purpose.
This is why a fully GST-registered business making taxable sales often has nothing extra to do. If it buys an overseas service solely for its taxable business activities, the reverse charge would produce a GST liability and an equal credit, so the law treats the two as cancelling out and no reverse charge applies. A business that makes input-taxed supplies, such as a lender or residential landlord, or that uses the service partly for private purposes, is more likely to be caught.
For a business that is not registered for GST, imported services are generally not subject to the reverse charge at all, even if the supplier did not charge GST. Individuals and unregistered small businesses simply pay whatever the overseas supplier charges. If the supplier is required to register and charge Australian GST, that amount will appear on the invoice, and a registered buyer can claim a credit if the purchase is for a creditable purpose and they hold a valid tax invoice.
One common misunderstanding is that every overseas purchase is automatically GST-free because it comes from abroad. Whether a supply is connected with Australia depends on where the work is done, where the recipient is, and the type of supply, not simply the supplier's address. Another mistake is paying an overseas supplier an amount that includes GST when they are not registered, which cannot be claimed as a credit without a proper tax invoice.
Reverse charge amounts are reported on the Business Activity Statement, with the GST payable included and any matching credit claimed in the same period. Keep contracts, invoices and records of how the service was used, since the proportion of creditable purpose drives the result. This page is general information only, so confirm how your purchases are treated with the ATO or a registered tax professional.
Worked example
A registered dental practice, which makes mostly GST-free health supplies, pays an overseas firm $5,000 (GST-exclusive) for software development, used 60% for creditable purposes. Because the practice does not acquire it wholly for a creditable purpose, the reverse charge applies to the non-creditable part. GST on the supply is $500 (10%). The reverse charge amount is $500 x 40% = $200 payable, and no credit is claimable on that portion.
Practical tips
- Check each overseas purchase against whether it is wholly for a creditable purpose. If it is, the reverse charge normally does not apply and you have no extra BAS entry.
- Keep invoices from overseas suppliers and a note of how the service was used. A supplier charging Australian GST should show it on a tax invoice, otherwise you cannot claim a credit.
- Review your overseas subscriptions once a year, because a service that started as purely business use may drift into private use.