GST and drop shipping
Article shared from the ATO.
If you use drop shipping for your business, GST will apply to sales of low value imported goods valued at $1,000 or less.
‘Drop shipping’ refers to the sale of goods located overseas at the time of the sale and sent directly to consumers in Australia from an overseas source, such as the manufacturer, wholesaler or warehouse.
Australian retailers should treat these sales the same as other domestic sales and apply GST at the point of sale.
“If you use drop shipping for your business, GST will apply to sales of low value imported goods valued at $1,000 or less.”
Imported goods valued above $1,000, as well as all tobacco products and alcoholic beverages, continue to have GST applied at the Australian border.
Australian suppliers not registered for GST must include drop shipping sales when working out if they need to register.
You must register for GST if your turnover is $75,000 or more in a 12-month period.
“Australian retailers should treat these sales the same as other domestic sales and apply GST at the point of sale.”
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© Australian Taxation Office for the Commonwealth of Australia
About the author
Marius Fourie - Director & Business Advisor
As Director and Business Advisor, Marius uses his accounting expertise and empathetic skills to work directly with business owners and help them feel at ease with their finances.
Marius saw a common need in clients that just wasn’t being met by accounting providers.
That need was for clear, open communication and streamlined accounting services that didn’t come padded out with any unnecessary features.
Business owners just don’t have time to compare different accounting firms to see which one has the best packages with the best inclusions (many of which they would pay for but never use).
Key Takeaways
Drop-shipped goods to Australian consumers now attract GST — even if goods are shipped from overseas.
As of the revised rules, low-value imported goods (A$1,000 or less) must include GST, aligning drop-shipping with domestic retail sales.
Australian retailers using drop shipping need to monitor turnover carefully
GST registration is required once turnover (including drop-shop sales) hits A$75,000 per year.
For drop-shipped items under A$1,000
GST is collected at sale — for those over A$1,000, GST (and possibly duties) apply on import at the border.
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Frequently Asked Questions
What is “drop shipping” under the GST rules?
Drop shipping refers to selling goods that are located overseas at the time of sale and shipped directly to customers in Australia from an overseas supplier (manufacturer, wholesaler or warehouse), rather than being stored domestically.
When does GST apply to a drop-shipped sale?
GST applies when the goods being sold are “low-value imported goods” worth A$1,000 or less. In such cases, Australian retailers must treat the sale like a domestic sale and include GST at point of sale.
Do I need to register for GST if I use drop shipping?
Yes — if your total turnover (including income from drop-shipping sales) reaches the GST registration threshold (currently A$75,000 in a 12-month period), you’re required to register for GST.
What about imported goods valued over A$1,000 — how is GST handled then?
For imported goods valued above A$1,000 (or for excluded goods such as alcohol/tobacco), GST (and customs duties where applicable) continues to be applied at the Australian border under standard import rules.
Is there any difference in GST treatment between domestic stock and drop-shipped (overseas) stock?
Once GST is applied under the drop-shipping rules for low-value imports, retailers must treat them the same as any other domestic sale — i.e. GST is charged at point of sale. There should be no special exemption just because stock comes directly from overseas.
Do I need to charge GST if I run a drop shipping business in Australia?
Yes — GST can apply to drop shipping sales of low value imported goods ($1,000 or less). Drop shipping is when goods are overseas at the time of sale and are shipped directly to customers in Australia. These sales should generally be treated like domestic sales, meaning GST is charged at the point of sale. Goods over $1,000, and tobacco/alcohol, usually have GST applied at the border instead.
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