The Deferred GST Scheme: Cash Flow Relief for Importers

Introduction

For Australian businesses that import goods, the Goods and Services Tax (GST) payable at the border can create significant cash flow pressure. The Deferred GST Scheme, administered by the Australian Taxation Office (ATO), offers a practical solution: instead of paying GST on imported goods at the time of importation, eligible importers can defer that payment until their next Business Activity Statement (BAS) is due. This article provides a definitive, encyclopedia-style reference on the Deferred GST Scheme, covering its mechanics, eligibility, application process, and strategic benefits. Whether you are a sole trader, small business operator, bookkeeper, or experienced importer, understanding this scheme can improve your working capital management and simplify GST compliance.

What Is the Deferred GST Scheme?

The Deferred GST Scheme is an ATO-approved arrangement that allows importers to defer the payment of GST on taxable imports. Under standard rules, GST on imported goods must be paid to the Australian Border Force (ABF) at the time of customs clearance. With the deferred scheme, the GST liability is instead reported and paid through the importer’s BAS, typically 21 days after the end of the relevant tax period. This effectively provides an interest-free cash flow benefit for the period between importation and BAS lodgment.

Key Features

• Deferral of GST payment – No upfront payment at the border.
• Integration with BAS – GST is reported and paid via the importer’s regular BAS cycle.
• Interest-free period – The deferral does not attract interest or penalties if the BAS is lodged and paid on time.
• Voluntary scheme – Importers can choose to apply or continue using standard payment methods.

Expert Tip: The Deferred GST Scheme is not a waiver of GST—it is a timing concession. You must still account for the GST on your BAS and pay it by the due date. Late payment will incur general interest charges (GIC) and penalties.

Eligibility Criteria

To access the Deferred GST Scheme, an importer must meet specific eligibility requirements set by the ATO. These criteria ensure that only compliant and financially sound businesses benefit from the scheme.

Who Can Apply?

• GST-registered businesses – You must be registered for GST and have an Australian Business Number (ABN).
• No outstanding tax debts – Your tax affairs must be up to date, with no overdue amounts owed to the ATO.
• Compliant lodgment history – You must have lodged all required BAS and other returns on time for the past 12 months (or since registration if shorter).
• Not an excluded entity – Certain entities, such as those under external administration or with a history of serious non-compliance, may be ineligible.

Goods Covered

The scheme applies to most taxable imports, including goods for resale, raw materials, and capital equipment. It does not apply to:

• Goods that are GST-free or input-taxed (e.g., basic food, medical supplies, residential rent).
• Goods imported under a customs duty concession that also exempts GST.
• Goods imported by unregistered entities.

Special Cases

Importers who use a customs broker can still apply for the scheme. The broker will handle the customs clearance, but the deferred GST is reported by the importer on their BAS. The ATO also allows the scheme for periodic lodgment (monthly or quarterly BAS) depending on the importer’s reporting cycle.

How the Scheme Works

Understanding the operational flow of the Deferred GST Scheme is essential for correct implementation. The process involves three key stages: importation, BAS reporting, and payment.

Step 1: Importation and Customs Clearance

When goods arrive in Australia, the importer (or their customs broker) lodges an import declaration with the ABF. If the importer has been approved for the deferred scheme, they must indicate this on the declaration using the appropriate deferral code. The ABF will then clear the goods without requiring payment of GST at the border.

Step 2: BAS Reporting

At the end of the relevant tax period (monthly or quarterly), the importer includes the deferred GST amount in their BAS. The GST on imports is reported in the same way as other GST on taxable supplies. The importer can also claim an input tax credit (ITC) for the same amount, provided the goods are used for creditable purposes. This results in a net GST position that may be payable or refundable.

Step 3: Payment

The net GST amount (after ITCs) is paid to the ATO by the BAS due date. For monthly lodgers, this is 21 days after the end of the month. For quarterly lodgers, it is 28 days after the end of the quarter. The deferred GST is effectively settled at this point.

Cash Flow Benefits

The primary advantage of the Deferred GST Scheme is improved cash flow. By postponing GST payment, businesses can retain funds for operational needs, inventory purchases, or investment.

Quantifying the Benefit

Consider an importer who brings in $100,000 worth of goods (GST-inclusive value $110,000). Under standard rules, $10,000 GST must be paid at the border. With the deferred scheme, that $10,000 remains in the business for an average of 30–60 days (depending on BAS cycle). If the business has a cost of capital of 10% per annum, the saving is approximately $82–$164 per $10,000 deferred. For high-volume importers, these savings accumulate significantly.

Strategic Use

The scheme is particularly beneficial for businesses with thin margins or seasonal cash flow cycles. It can also reduce the need for short-term borrowing or overdraft facilities. However, it is not a substitute for proper cash flow management—the GST must still be paid eventually.

Warning: The deferred GST is still a liability. Do not treat it as free money. Ensure you set aside funds to cover the BAS payment when due. Many businesses fail by spending the deferred GST on other expenses.

Application and Approval Process

Applying for the Deferred GST Scheme is a straightforward process, but it requires careful preparation. The ATO assesses applications based on compliance history and financial standing.

How to Apply

1. Check eligibility – Ensure you meet the criteria listed above.
2. Complete the application form – Use the ATO’s online form (available via the Business Portal or your registered tax agent).
3. Provide supporting documents – The ATO may request recent BAS lodgments, payment history, and financial statements.
4. Wait for approval – Processing typically takes 2–4 weeks. The ATO will notify you in writing.
5. Notify your customs broker – Once approved, provide your broker with the deferral approval number so they can use the correct code on import declarations.

Ongoing Obligations

Approval is not permanent. The ATO may review your eligibility periodically. You must continue to lodge BAS on time and pay any amounts due. If you fall into arrears, the ATO can revoke the deferral privilege.

Reporting and Compliance

Correct reporting of deferred GST is critical to avoid errors and penalties. The scheme integrates with standard BAS reporting, but there are specific considerations.

BAS Labels

On your BAS, report the deferred GST on imports in the same label as other GST on taxable supplies (G1 for sales, G10 for purchases if claiming ITC). The ATO does not require a separate label for deferred GST. However, you must keep records that distinguish deferred GST from other GST amounts for audit purposes.

Record-Keeping

Maintain the following records:

• Import declarations showing the deferral code.
• Customs invoices and packing lists.
• BAS working papers showing the calculation of deferred GST and ITC.
• Correspondence with the ATO regarding the scheme.

Common Compliance Issues

• Double counting – Do not report the deferred GST twice (once at import and again on BAS). The scheme replaces the border payment.
• Incorrect ITC claims – You can only claim ITC for the deferred GST if the goods are used for creditable purposes (e.g., resale, manufacturing). If the goods are used for private or input-taxed purposes, no ITC is available.
• Late lodgment – Missing a BAS deadline can result in revocation of the scheme and penalties.

Comparison: Deferred vs. Standard GST Payment

Understanding the differences between the two methods helps importers decide which approach suits their business.

Common Pitfalls and How to Avoid Them

Even experienced importers can stumble with the Deferred GST Scheme. Here are frequent mistakes and preventive measures.

• Pitfall: Forgetting to use the deferral code on import declarations. Solution: Train your customs broker and double-check each declaration.
• Pitfall: Spending the deferred GST on other expenses. Solution: Set up a separate bank account or accounting category to hold the deferred amount until BAS payment.
• Pitfall: Claiming ITC on goods not used for business purposes. Solution: Review the intended use of each import and adjust ITC claims accordingly.
• Pitfall: Missing BAS lodgment deadlines. Solution: Use calendar reminders or automated BAS preparation tools.
• Pitfall: Not notifying the ATO of changes in business circumstances (e.g., ceasing to trade). Solution: Update your registration and notify the ATO promptly.

GST Calculator & Tools

At gstcalculatorau.com, we provide a suite of free tools to help you manage GST on imports. Our GST on Imports Calculator allows you to estimate the deferred GST amount and plan your cash flow. Here’s how to use it:

1. Enter the customs value of the goods (in AUD).
2. Add any duty and other costs (optional).
3. Select whether you are using the Deferred GST Scheme.
4. Click ‘Calculate’ to see the GST amount and the deferred payment date based on your BAS cycle.

Our site also features a BAS Calculator and a GST Database where you can search for how GST applies to specific goods. These tools are designed to support your compliance and decision-making.

Common GST Mistakes to Avoid

Beyond the deferred scheme, importers often make general GST errors. Here are five frequent mistakes and how to prevent them:

• Mistake 1: Not registering for GST when required (e.g., if imports exceed $75,000 annual turnover). Prevention: Monitor your import volume and register promptly.
• Mistake 2: Incorrectly classifying goods as GST-free or input-taxed. Prevention: Use the ATO’s GST classification tool or consult a specialist.
• Mistake 3: Failing to claim ITC on imports used for business. Prevention: Keep detailed records and claim ITC on your BAS.
• Mistake 4: Mixing personal and business imports. Prevention: Use separate accounts and clear documentation.
• Mistake 5: Ignoring currency conversion rules. Prevention: Use the ATO’s approved exchange rates for import valuation.

Conclusion

The Deferred GST Scheme is a powerful tool for improving cash flow and simplifying GST compliance for importers. By understanding eligibility, application procedures, and reporting requirements, you can leverage this scheme to your advantage. However, it requires discipline—deferred GST is still a liability that must be managed carefully. Use the resources at gstcalculatorau.com to calculate your GST obligations, explore our database, and stay informed. For specific advice tailored to your business, consult a registered tax agent or the ATO directly.