Are You Paying the Right Amount of Import Duty? 3 Common Problems

When importing goods into Australia, the amount of duty you pay will depend upon on the type of item being imported and its value. If it is discovered that you have been importing items but not paying the correct amount of duty, you could face prosecution or a fine. Below is a guide to three ways that Australian businesses sometimes underpay import tax.

Importing goods as part of a company supply chain

If your business has operations in other countries, you may sometimes have to import goods as part of your business supply chain. Many multinational companies are set up, so the activities in each country fall under a different arm of the company. The main reason for breaking up a large multinational into smaller shell companies is that it helps to reduce the business's tax bill.

However, this type of set up can create a situation where a business registered in one country has to buy goods from a sister company which is registered abroad. For example, if you are importing electronics from a sister company in China, you will need to pay to import the goods. However, because you are buying from a company supply chain the value of the goods may be much lower than they would be on the open market, which can affect the amount of duty. It is essential that such imports are clearly flagged with customs so that an underpayment does not occur.

Making several payments over a period

It is also possible to underpay customs duty if you are making several payments to a foreign supplier over a period of trading. Underpayments often occur when any future payments are not listed on the customs paperwork. It is vital that you include the total cost of each item even if this payment is yet to be made.

Providing assistance to foreign manufacturers

If your company has outsourced its manufacturing to a foreign country to reduce costs, you may still be supplying assistance in the design and production of the products during the manufacturing process. The cost of this additional support will usually be deducted from the final price your business pays for the completed items. However, it can also create a situation in which the listed value of the goods and the amount of duty paid at customs does not match. Any deductions which are due to assistance provided during the manufacturing process should be explicitly listed on the customs declaration form.

If you would like to find out more, you should contact a customs broker.