GST Q&A – GST on overseas transactions

Question

We have two questions in relation to GST charged on transactions with overseas suppliers:

  1. Our council has recently received an invoice from an overseas supplier which does not have an ABN, however, does have a VAT ID. GST has been charged on this invoice. Can the supplier charge GST with no ABN and can council claim this in the business activity statement (BAS)?
  2. Our council has also received an invoice from a different overseas supplier that does not have an ABN. This supplier has charged council 10% sales tax/VAT. Can council claim this in the BAS?

Answer

The general position is that if there is no ABN, there cannot be a tax invoice—and without a tax invoice, there can be no input tax credit.

It is possible for an overseas supplier to be registered for, and therefore charge, Australian GST despite not having an ABN. The Simplified GST Registration system (refer to QC 18025) is designed to be used by non-residents who make or intend to make sales of:

  • low value goods imported by consumers into Australia; or
  • imported services and digital products to Australian consumers that are inbound intangible consumer supplies.

We assume the purchases referred to in your questions are either of imported services or low value goods.

Entities adopting the Simplified GST Registration system are assigned with an ATO reference number (ARN) instead of an ABN and cannot issue tax invoices. If your council does not hold a tax invoice for the above purchases, it is not entitled to claim GST credits.

The rules that the Australian Government introduced for imported low value goods and services/digital products are meant to work on the basis that if an Australian business is the purchaser (and entitled to an input tax credit) it should advise the overseas supplier of its ABN when purchasing and no GST should be charged.

Where GST is charged despite a business providing its ABN, technically you are meant to go back to supplier, readvise your ABN and request a refund of the amount overcharged. Unfortunately, this area is a bit of a mess because many overseas suppliers just always charge GST, regardless of the fact the customer is an Australian business that provided an ABN.

Regarding the sales tax/VAT, a GST credit is only available for acquisitions that include Australian GST. If you incur a cost that includes foreign GST (or equivalent), no GST credit is available in Australia.

Editor’s note: This area of GST is a common issue among our members. If you require further information, we have provided links to some useful ATO guidance below: