International
Offshore supplier
An offshore supplier is a business based outside Australia that sells goods or services to Australian customers, and it may need to register for and charge GST depending on what it sells.
An offshore supplier is simply a seller whose business operations are located outside Australia. It might be a foreign software company, a manufacturer shipping goods to Australian consumers, or a consultant providing advice remotely. Where the supplier is based matters because Australian GST law is built around supplies that are connected with Australia, and the rules for collecting GST differ for offshore sellers.
Offshore suppliers selling to Australian consumers must register for GST if their sales that are connected with Australia reach the registration threshold. This applies to digital products and services, and to low value imported goods sold to consumers, subject to the rules on electronic distribution platforms. Many offshore suppliers use a simplified registration system designed for non-residents, which has lighter reporting requirements than the standard system.
When an offshore supplier is registered, it charges GST to Australian consumers and reports it, usually quarterly. Customers see the GST in the price. When the customer is a GST-registered business, the supplier may rely on a declaration from the customer that it is registered and therefore not charge GST on the sale, leaving the business to deal with any reverse charge.
If an offshore supplier is not registered, an Australian business buying services from it may be liable for the reverse charge in limited circumstances, such as where the purchase is not wholly for a creditable purpose. A non-registered Australian buyer simply pays the invoice. Imported physical goods are different again, because GST on goods is generally collected at the border by Customs, unless the goods are low value goods dealt with through the supplier or platform.
A common misunderstanding is that dealing with an offshore supplier is always cheaper because of no GST. In many cases that gap has closed, and registered offshore suppliers now charge it. Another mistake is claiming a GST credit based on an overseas invoice that does not meet tax invoice requirements. The supplier must be registered and the invoice must show the GST, so check this before claiming.
For Australian businesses that sell to overseas customers, the exports and cross-border supply rules apply instead. If you buy from or sell to overseas parties regularly, keep the supplier details, ABN or GST registration number, invoice and payment records together. This page is general information only, so confirm your position with the ATO or a registered tax professional.
Worked example
A registered Australian accounting firm buys a $1,000 (GST-exclusive) legal document review from an offshore law firm that is not registered for GST and charges no GST. The firm uses the service wholly for taxable business purposes, so no reverse charge arises and it pays $1,000. If the offshore firm were registered and charged $100 GST on a $1,100 tax invoice, the firm could claim the $100 as a credit.
Practical tips
- Ask offshore suppliers whether they are registered for Australian GST and whether their invoice is a tax invoice. You need that to claim a credit.
- Do not assume zero GST on an overseas purchase. Check the invoice, and consider whether the reverse charge could apply if the purchase is not wholly for business use.
- Record the supplier's country and registration details when you onboard them, so you can justify your GST treatment later.