Are Exports GST-Free? The 60-Day Rule Explained

Introduction

For Australian businesses engaged in international trade, the question of whether exports are GST-free is fundamental. Under the A New Tax System (Goods and Services Tax) Act 1999, most exports of goods and certain services are treated as GST-free supplies. This means you do not charge GST to your overseas customer, and you can still claim input tax credits for GST incurred on related purchases. However, this treatment is not automatic. A critical condition—the 60-day rule—governs when goods must physically leave Australia. This pillar article explains the rule in depth, covering conditions, documentation, exceptions, and common mistakes. Whether you are a sole trader exporting handmade products, a small business shipping inventory, or a bookkeeper managing BAS for an exporter, this guide provides the authoritative reference you need.

What Are GST-Free Exports?

A GST-free supply is one on which no GST is payable, but the supplier can still claim input tax credits for GST incurred in making the supply. Exports are a key category of GST-free supplies. The rationale is that consumption occurs outside Australia, so GST should not apply. The ATO defines an export of goods as a supply that involves the goods being exported from Australia. For services, the rules are different—generally, services provided to a non-resident who is outside Australia when the service is performed are GST-free, provided the service is not connected with real property in Australia or certain other exceptions.

Key Characteristics of GST-Free Exports

• No GST charged to the overseas buyer.
• Input tax credits available for GST incurred on costs like freight, packaging, and materials.
• Must meet specific conditions under Division 38 of the GST Act.
• Documentation required to prove export occurred within the time limit.

Expert Tip: Even if you treat a supply as GST-free, you must still report it on your Business Activity Statement (BAS) at label G3 (GST-free sales). Failure to report can lead to discrepancies and ATO queries.

The 60-Day Rule Explained

The 60-day rule is the cornerstone of GST-free treatment for exports of goods. It requires that the goods be exported from Australia within 60 days of the earliest of either the date of the first tax invoice issued for the supply, or the date any payment is received for the supply. If the goods do not leave Australia within that window, the supply becomes taxable and you must remit GST.

How the 60-Day Rule Works

1. Trigger event: The 60-day clock starts on the earlier of the date you issue a tax invoice or the date you receive any payment (including a deposit).
2. Export deadline: The goods must be exported (i.e., leave Australia) within 60 calendar days after that trigger event.
3. Evidence: You must hold documentary evidence of export (e.g., bill of lading, air waybill, customs export declaration) showing the date of departure.
4. Consequence of failure: If goods are not exported within 60 days, the supply is taxable. You must issue a tax invoice (if not already done) and remit GST. You may also need to adjust your BAS.

Important Warning: The 60-day rule applies to each individual supply, not to a batch or shipment. If you issue one invoice for multiple items shipped separately, each item must be exported within 60 days of the trigger event.

Conditions for GST-Free Exports of Goods

Beyond the 60-day rule, several other conditions must be satisfied for goods to be GST-free. These are set out in section 38-185 of the GST Act.

Core Conditions

• The supplier must be the exporter: You must be the person who exports the goods, or you must arrange for their export. If you sell goods to a customer who then exports them, the supply may not be GST-free unless you are the exporter.
• Goods must be exported to a place outside Australia: The destination must be a foreign country. Goods sent to an Australian external territory (e.g., Norfolk Island) are not exports for GST purposes.
• No use or consumption in Australia: The goods must not be used or consumed in Australia before export. For example, if you sell a car to a tourist who drives it around Australia for a month before shipping it, the supply is not GST-free.
• Documentary evidence: You must hold evidence that the goods have been exported. The ATO accepts various documents (see next section).

Special Cases: Goods Not Exported Within 60 Days

If the 60-day deadline is missed, the supply becomes taxable. However, you may be able to treat it as GST-free later if the goods are eventually exported and you have not already accounted for GST. The ATO allows you to adjust the treatment in the BAS period when the goods are actually exported, provided you have not previously reported the supply as taxable. This is a complex area; professional advice is recommended.

Documentation and Evidence Requirements

To support a GST-free export, you must hold sufficient documentary evidence. The ATO does not prescribe a single document but expects a combination that clearly shows the goods left Australia. Common acceptable evidence includes:

• Bill of lading (for sea freight) showing the vessel name, port of loading, and date of departure.
• Air waybill (for air freight) showing the flight number, airport of departure, and date.
• Customs export declaration (Cargo Report or Export Declaration Number) from the Australian Border Force.
• Packing list and commercial invoice that reference the export shipment.
• Proof of payment from the overseas buyer (though not sufficient alone).

What If You Cannot Obtain Evidence?

If you cannot obtain standard export documents (e.g., for low-value goods sent via postal service), you may use alternative evidence such as:

• Australia Post or courier tracking showing delivery to an overseas address.
• Email correspondence from the buyer confirming receipt overseas.
• Bank records showing payment from an overseas account.

However, the ATO may scrutinise such evidence more closely. It is best practice to obtain a formal export document whenever possible.

Expert Tip: Keep all export documentation for at least five years. The ATO can request evidence during an audit, and missing records can result in disallowance of GST-free treatment and penalties.

Exports of Services: No 60-Day Rule

The 60-day rule applies only to goods. For services, the GST-free treatment depends on the nature of the service and the recipient. Under section 38-190, a supply of services is GST-free if:

• The recipient is a non-resident who is outside Australia when the service is performed, and
• The service is not directly connected with real property in Australia, and
• The service is not a supply of work physically performed in Australia (e.g., a consultant travelling to Australia to provide advice).

There is no time limit for services. However, you must have evidence that the recipient is overseas (e.g., a contract with an overseas address, IP address, or bank account).

Common Examples of GST-Free Services

• Software development for an overseas client.
• Online consulting or training delivered to a non-resident.
• Architectural designs for a building located overseas.
• Legal advice regarding foreign law.

Services That Are NOT GST-Free

• Services performed in Australia (e.g., a hairdresser serving a tourist).
• Services connected with Australian real property (e.g., property management for an Australian building owned by a non-resident).
• Services that are a supply of something else (e.g., hiring out goods in Australia).

How to Report Exports on Your BAS

Correct BAS reporting is essential to avoid ATO adjustments. Exports are reported as GST-free sales.

Step-by-Step BAS Reporting

1. Label G3 (GST-free sales): Enter the total value of all GST-free supplies, including exports, for the period.
2. Label G10 (Capital purchases): If you purchased capital assets (e.g., machinery) used for exports, you can claim input tax credits here.
3. Label G11 (Non-capital purchases): Claim input tax credits for expenses like freight, packaging, and materials used in export production.
4. Label 1A (GST on purchases): This is automatically calculated from G10 and G11.

If you later discover that a supply you treated as GST-free did not meet the 60-day rule, you must lodge a revised BAS or adjust in the next BAS period. The ATO allows voluntary disclosures for errors.

Common Mistakes and How to Avoid Them

Even experienced exporters can trip up. Here are frequent errors and prevention strategies.

Mistake 1: Missing the 60-Day Deadline

Many businesses assume the 60 days starts from the date of shipment, but it actually starts from the earlier of invoice or payment. If you issue an invoice weeks before shipping, the clock is already ticking. Prevention: Align your invoicing with your shipping schedule. Issue tax invoices only when goods are ready to be exported.

Mistake 2: Inadequate Documentation

Relying on a single document like a packing list without a bill of lading or air waybill. Prevention: Create a checklist of required documents for each export. Use a freight forwarder who provides official export evidence.

Mistake 3: Treating Domestic Sales as Exports

Selling goods to a foreign embassy in Australia or to a tourist who will take goods home is not an export. Prevention: Understand that the goods must physically leave Australia. Sales to embassies are GST-free under a different provision (diplomatic privileges), but not as exports.

Mistake 4: Incorrect BAS Reporting

Reporting exports as taxable sales (G1) instead of GST-free (G3). Prevention: Train staff on BAS labels. Use accounting software that automatically categorises export sales as GST-free.

Mistake 5: Not Claiming Input Tax Credits

Some exporters forget they can claim GST on costs like freight, customs brokerage, and export packaging. Prevention: Review all purchase invoices for GST and claim credits in the correct BAS period.

GST Calculator & Tools

At gstcalculatorau.com, we provide a suite of free tools to help you manage GST on exports. Our GST Calculator allows you to quickly determine the GST component of any transaction, while our Export GST-Free Checker (available in the Tools section) helps you assess whether your supply meets the conditions.

How to Use the GST Calculator for Exports

1. Navigate to the GST Calculator on our homepage.
2. Enter the total value of your export sale (e.g., $10,000 AUD).
3. Select “GST-free” as the tax status. The calculator will show $0 GST and confirm the amount is GST-free.
4. For purchases, enter the GST-inclusive amount (e.g., $1,100 for freight) and select “GST included” to see the GST credit ($100) you can claim.

Our Searchable Database lets you look up specific goods or services to see their GST treatment. For example, search “export of wine” to find rulings and examples.

Common GST Mistakes to Avoid

Beyond the export-specific errors above, here are general GST mistakes that affect exporters:

• Not registering for GST when your export turnover exceeds $75,000. Even if all sales are GST-free, you must register to claim input tax credits.
• Using incorrect exchange rates for foreign currency transactions. The ATO requires you to use the exchange rate at the time of supply. Use our currency converter tool for accuracy.
• Failing to adjust for private use of export-related assets. If you use a vehicle for both export deliveries and personal trips, you must apportion input tax credits.
• Ignoring the 60-day rule for mixed supplies (e.g., a bundle of goods and services). The goods portion must still meet the 60-day rule.

Conclusion

The 60-day rule is a critical compliance point for any Australian exporter. By understanding when the clock starts, what evidence to keep, and how to report correctly, you can confidently treat your exports as GST-free and maximise your input tax credits. Remember that the rule applies only to goods; services have different conditions. Use the tools and database at gstcalculatorau.com to verify your transactions and stay compliant. For complex situations, always consult a registered tax agent or the ATO directly.