When you import goods into Australia, you generally pay customs duty. This is a tax payment based on the value of your cargo that you’ll make to Customs for bringing foreign goods into the country. Under some circumstances, however, you may be able to apply for a duty refund.
Below, we’ll outline the nature and purpose of customs duties, how much customs duties you’ll need to pay when importing products and how you’re able to get a refund for that duty payment. We’ll also look at the time frame required to lodge a customs duty refund application.
Why do we pay customs duties in Australia?
Generally, all goods imported into the country attract duties and taxes.
Customs duties are one of the many methods used for economic protection. The ultimate purpose of customs duty is to protect the Australian economy, including its residents and domestic jobs, from foreign competition. This is achieved by controlling both the inward and outward flows of foreign goods whilst simultaneously raising revenue for the Federal Government.
How much customs duties will I have to pay?
The amount of customs duties payable will depend on the tariff that is imposed on your particular products. Each tariff is classified under the Customs Tariff Act 1995, and importers are required under the scheme to self-assess the correct tariff classification of the goods they are importing into Australia. This, in turn, will require a consideration of the Harmonised System (HS) Code for your cargo.
As a guide, the way to calculate the value of the duty payable on the majority of cargo is 5 per cent of the FOB value. The Goods and Services Tax (GST) to pay on top of that will then be 10 per cent of the CIF plus the Duty value. The terms “FOB” and “CIF” are acronyms used in the Incoterms, which is a system of globally recognised terms used to allocate the risks between importers and exporters in international transactions.
As the system is complicated, the best step for you to take is to speak to an expert customs broker to determine the duty that applies to your commodity.
When would I overpay duty?
There are a range of circumstances when you may overpay a customs duty. Not having a relevant free trade certificate at the time of importing cargo is the primary reason we see importers overpaying customs duties.
Other circumstances of overpayment are referred to as “refund reasons” as prescribed in the Customs Regulation 2015. Some of these circumstances are quite specific, and can include:
- Damaged goods. If your goods have deteriorated or have been damaged, lost or destroyed before the goods arrive at Australia customs (or, whilst the goods are in control of customs), you may be eligible for a refund.
- Withdrawn import entry. If your goods’ import entry has been withdrawn pursuant to 71F of the Customs Act 1901, you’ll be eligible for a refund.
- Gaseous fuel. If your goods are gaseous fuel, that constitutes a ‘refund reason’.
- Rebate. If the price of the goods had a rebate or some kind of decrease that was not taken into account when determining the customs value, you can possibly get a refund.
- If you’ve paid customs duty on a new or unused passenger motor vehicle that was used for evaluation/testing, and then was subsequently donated to an education institution, you can also get a refund.
- Error. If you can show you’ve paid the customs duties “through manifest error of fact or patent misconception of the law”, you may be entitled to a customs duty refund. This may include, for instance, an erroneous misclassification of a tariff or an incorrect HS Code classification.
What is the process of getting a customs refund?
Under the relevant national regulations, you’ll be eligible to lodge a refund application to the Australian Border Force (ABF) if you:
- own goods (or act on behalf of the owner of goods);
- have lodged the original version of what is known as the full import declaration (FID), self‑ assessed clearance (SAC), or return; and
- have paid the customs duty once the goods have entered into Australia.
If you work with an experienced freight forwarder such as ICE, they will be able to lodge an application for a refund by making amendments to the relevant FID, SAC, or returning and making application either:
- electronically; or
- by submitting a completed and signed Form B653 – Refund Application.
In the application your forwarder will quote the correct “reason code” pursuant to the Customs Regulation 2015 – this will indicate to the ABF the circumstances under which you are claiming a refund entitlement.
Is there a time frame to lodge a customs refund?
Yes – four years after the date on which you first paid the customs duty.
How strict is the time limit to lodge a customs refund?
The four-year limit is a very strict timeframe and the following lawsuit brought in the High Court of Australia, the nation’s highest court of appeal, demonstrates an interesting case of an importer who tried to recover a customs duty after the period expired.
In 2004, Mr Thiess imported a yacht into Australia. The yacht’s gross weight was 108 tonnes, but it was mistakenly believed to be 160 tonnes. This was a critical error, as it resulted in the wrong tariff classification being applied.
For yachts that had a tonnage of 150 or higher, no duty existed. Mr Thiess, therefore, paid $494,472 in customs duty plus an extra $49,447 in GST when he had no obligation to do so. He did not realise this error had been made until 2006.
At the time, the time limit to bring a customs refund application was 12 months (not four years, like it is today). Mr Thiess was unable to apply for a customs refund due to the expired timeframe, so he sued Customs to retrieve his money (altogether being $543,919) under the common law.
He lost his case in the Queensland courts, so he appealed to the High Court.
The High Court declared that he was unable to get his money back because the federal legislation – being the Customs Act 1901 – barred any right to recover any money paid to Customs, unless:
- the payment was made “under protest” and an action for recovery was commenced within six months; or
- the importer had a right to a refund.
The Scheme at the time, the High Court said, incentivised importers to be “vigilant” when importing their goods.
The bottom line
The bottom line with this case is as the High Court said – you must be vigilant when selecting the correct tariff classification and assessing your liability for customs duty.
Otherwise, you may be in a position where you are paying customs duties when you have no requirement to do so.
You can read the full case, Thiess v Collector of Customs  HCA 12, here.
Let the experts handle it
It is critical to be “vigilant” when making tariff classifications and this is also the case when applying for customs refunds.
Expert brokers understand the customs process, the time-frames required and the complexities that the system presents.
At International Cargo Express, we have many years of combined experience assisting importers to claim customs duties refunds. Please get in touch with our customs duty experts today for an obligation-free chat, or leave a comment below.