Australia applies a VAT system that is similar with the one that can be found in European countries. The difference is that VAT in Australia is named the Goods and Services Tax (GST).
This tax applies for all goods and services that are traded at a national level and companies that sell such products in Australia will have to register for VAT in certain situations.
Please mind that the VAT registration in Australia can become mandatory in certain cases for foreign entities that sell goods and services in this country.
Considering that there arenumerous tax procedures that have to be respected by companies, our law firm in Australia is prepared to help local and foreign businessmen with advice on this matter.
What are the requirements for VAT registration in Australia for foreign companies?
As a foreign company, the obligation to conclude procedures related to VAT in Australia may occur if the company delivers products to Australian clients or if the products are brought into Australia.
If you represent a foreign company that wants to expand its operations on the Australian market, it is necessary to verify the VAT procedures that will apply to your business activity.
It must be noted that VAT can be charged for almost all the economic operations that are prescribed under the applicable law and the most common scenarios when a foreign economic operator needs a VAT in Australia are presented in the list below:
- the VAT is necessary when the economic operator delivers goods on the Australian market;
- the same applies in the case in which the foreign company imports goods on the local market;
- VAT is imposed for the import of various goods which are then assembled in Australia or installed here;
- businesses are charged with the VAT for the exports of goods from Australia;
- the VAT is applied for those who supply property to other entities (this also includes the rental of real estate properties);
- VAT is charged for entities that provide services (most of the services are charged with this tax).
Please mind that foreign companies operating in Australia are required to appoint a tax representative.
If you want to expand your business operations in this country and you needtax assistance, our team of lawyers in Australia can help you register with thelocal tax authorities, obtain the VAT number and further on, once the company starts its activity, to submit itstax returns.
The tax agent that will be appointed by the foreign company has to be an Australian resident – this means that the person representing the company can be a foreigner who has obtained the residency in Australia.
It is not mandatory to appoint an Australian citizen, for instance. The main role of the tax agent is to maintain the relation between the foreign company and the local tax institutions.
Is there a simplified VAT registration in Australia in 2024?
In the case of non-resident entities, the local tax law provides the possibility of concluding a simplified VAT registration procedure. This is the case of those who sell online services and digital products on the Australian market, and it also includes those who import goods with a low value.
There is also the possibility to start the VAT registration in Australia for entities that operate as online merchants and electronic distribution platforms operators. Those that qualify for simplified VAT registration can complete the procedure on the online platform of the Australian Taxation Office.
If you need to find out more information on the registration steps, you can request more details from our Australian lawyers.
When is the standard VAT registration required?
The standard registration for VAT in Australia is necessary in the case when a company has already been issued with an ABN number or needs to obtain an ABN number. It is also required in the case when the company makes sales that are connected to Australia.
The ABN number can be then used for many legal matters and procedures. Companies can register online, complete registration procedures by phone, through their registered tax agent or by submitting the Form NAT 2954.
The above mentioned options can be used for GST registration and reporting, as long as the business has already obtained the ABN number, according to the Australian Taxation Office.
The standard procedure should be selected by companies that will issue invoices and which can be entitled to VAT credits. Our law firm in Australia can present additional information concerning the standard procedure.
When is it mandatory for a foreign company to register for VAT?
Companies that operate in Australia and which are considered non-resident businesses are required to register for VAT if 2 basic conditions occur at the same time:
- the company develops a business activity that is charged with the VAT in Australia;
- the VAT turnover is of minimum $75,000 (from sales concluded from Australia).
In the case in which the foreign entity operates as a non-profit enterprise, the obligation to register for VAT will appear in the moment when a threshold of $150,000 is achieved, which is the same threshold applicable to local businesses as well.
The VAT registration procedures should be initiated if the company identifies with any of the 2 following scenarios:
- the company has a current VAT turnover of $75,000/$150,000 reached in the current month and the previous 11 months of the financial year;
- the company has projected to reach a VAT threshold of $75,000/$150,000 for the current month and the next 11 months.
When developing commercial activities with other businesses that are registered in Australia, foreign companies must make sure that local businesses have a valid Australian Business Number (ABN), as well that they are registered for VAT purposes.
Our team of lawyers in Australia can help foreign companies access public information about Australian-registered companies. Not complying with the tax reporting in due time can result in significant penalties. Penalties are established as a point-based system. For instance, not registering for GST in due time or cancelling the GST registration when not required can result in 20 penalty points. The same number of penalty points is applicable to tax invoices that are not reported as prescribed by the law.
What is a foreign company in Australia?
A foreign company in Australia is an entity that respects the definition of the Section 9 of the Corporation Act 2001. The simple definition presented in this Section refers to any type of company that has already been registered in another country.
If the company is already registered in a foreign company and wants to develop commercial activities in Australia, it will be considered a foreign company, as its tax residency is elsewhere, but, since it will carry commercial activities here, it will also have tax obligations in Australia.
Depending on the types of services or goods sold/imported in the country, and the value of the sales, the foreign company will need to conclude different procedures of VAT registration in Australia, by opting for one of the 2 systems presented above, meaning:
- the simplified registration;
- the standard registration.
Please mind that a foreign company in Australia is required to complete certain registration procedures with the local institutions, including with the Australian Securities and Investment Commission (ASIC).
Even though the foreign business has already been registered with the authorities of its home country, it is still legally required to conduct registration formalities with ASIC, in order to obtain the right to conduct business activities here.
What are the procedures for VAT registration in Australia in 2024 for local businesses?
The Australian tax laws recognize 2 types of VAT registrations: 1) the voluntary registration and 2) the mandatory registration.
The voluntary registration can be done in the case in which you are the business owner of a company that develops commercial activities in Australiaand which has an annual turnover of less than $75,000.
In the case in which the company applies for VAT registration, then the company will be issued with a VAT number in Australia, in accordance with the rules of the Australian Taxation Office.
A company is legally required to register for VAT in the situation in which the yearly revenue reaches a certain threshold. If your company falls under this category, then we invite you to request in-depth tax advice from our team of lawyers in Sydney.
With regards to VAT, our Australian law firm has prepared a short list of aspects investors should be aware of:
- the VAT in Australia was introduced in July 2000 and it follows the same system that can be found in the European Union (EU);
- the obligation to register for VAT is imposed when the annual threshold is above $75,000, and this is applied when the turnover of the company is above this sum, or when the company estimates that its turnover will be higher;
- in the case of legal entities that operate as non-profit businesses, the VAT registration in Australia is mandatory when the entity has a turnover above $150,000;
- companies that registered for VAT in Australia will maintain their status of VAT payers for a period of 12 months;
- non-residents who obtain an income from the sale of low value purchases have to register for VAT in the case in which they import goods that have a value above $1,000.
What documents are necessary to register for VAT in Australia?
In the case you are required to register for VAT and you need a VAT number in Australia, you will have to prepare specific documents necessary for this procedure. The papers have to be submitted along with the registration form that is provided by the Australian Taxation Office.
Here, the representatives of companies liable to the payment of the VAT have to present the following papers:
- the company’s certificate of incorporation;
- the extract issued by the Trade Register of the country where the company was incorporated;
- the VAT certificate;
- in the case in which the company will appoint a local representative, such as one of the lawyers working at our law firm in Australia, the power of attorney.
What are the obligations of a company that is a VAT payer in Australia in 2024?
Once a company, be it local or foreign, has registered for VAT in Australia, it will have a set of obligations that have to be completed in due time and following the applicable procedures. Companies are also entitled to specific rights and benefits as VAT payers.
First, the company must know in which category it is included (taxable for VAT or VAT exempted). After determining this, the company must be able to issue invoices accordingly. For VAT payers, the VAT must be shown on the invoice.
The overall VAT that is payable to thelocal tax authorities has to be put aside and then paid to the tax office, no later than the date at which the procedure must be concluded (our lawyers in Australia can offer advice on the tax compliance system).
Another obligation is to submit financial returns at the end of the financial year, which present details on the VAT charged and paid by the company. Companies can also claim credits for the VAT charged in Australia, through a method that can be explained by our Australian law firm.
Please mind that locally incorporated companies can benefit from certain VAT concessions, as long as they qualify as small businesses. The definition of a small company under the current tax law is any company that has an aggregate turnover below $10 million.
Our law firm in Australia can present the types of VAT concessions available for businesses and how can a business apply for them (one of them is that the VAT can be paid on a quarterly basis instead of monthly).
What goods are charged with the VAT in Australia?
If you want to sell goods in Australia and you are interested in finding out what goods benefit from a lower VAT rate or a VAT exemption, you can request in-depth information from our team of Australian lawyers.
From the beginning, foreign entities must be aware that the standard VAT rate in Australia is charged at a rate of 10%, a rate that is imposed to most of the goods and services traded at a national level.
For those who want to trade food products there can be various tax advantages, including when we refer to the VAT in Australia, as numerous foodstuffs are exempted from the payment of VAT.
Of course, there is a wide list of food products that are charged with the VAT and which are not considered basic food products. For a presentation on the types of VAT charged to foodstuffs, our Australian law firm remains at your disposal.
An exemption on thistax is applied to medical products (a part of the medical products sold on this market), education related services and products (a part, not all), health services and other services and products that are prescribed under the national tax law.
Companies can be exempted from the payment of thistax if they sell any of the following goods as well:
- cars and other vehicles designed for disabled persons, as long as the sellers meet all the requirements for such vehicles prescribed by the Australian law;
- the accommodation services offered to elderly persons living in retirement homes;
- the above rule applies for the food offered in retirement homes;
- the supply of international transportation is also exempted from VAT;
- companies that sell goods in the duty-free areas in Australia do not have to apply VAT.
Provided that you represent a company from a foreign country that issues documents in another language than English, which is the national language in Australia, the above mentioned documents have to be translated into English (an official translation is necessary).
If you need more details on VAT registration in Australia, we invite you to address to our Australian law firm, where you can receive advice on other tax measures applicable to businesses.
According to the Australia Taxation Office (ATO), companies that have not yet registered for VAT in 2024 should verify each month if they have reached the required threshold. If so, they will have 21 days to complete the necessary formalities.
You should also know that you are required to register for VAT in 2024 in the case in which your business provides taxi services or other type of similar services (limousine or car-riding services). Unlike any of the above mentioned basic requirements for businesses, for this category there isn’t any threshold.
Therefore, if you will engage in this activity in 2024, you will have the obligation to register for VAT this year.