GST Records for Overseas Supplier Purchases

To claim a GST credit on services bought from an unregistered overseas supplier, you must keep a tax invoice (or similar document) that shows the supplier’s name, the service description, the date, and the amount you paid, along with proof of payment and evidence that the service was imported for your business. This article explains exactly which documents you need, why each one matters, and how to handle common situations like missing invoices or mixed-use services.

Formula

The GST credit you can claim on a purchase from an unregistered overseas supplier is calculated using the gross-up formula:

GST credit = Invoice amount × (GST rate ÷ (100 + GST rate))

Where:

• Invoice amount – the total you paid the supplier, in Australian dollars (AUD), including any foreign currency converted at the exchange rate applicable at the time of supply.
• GST rate – the current Australian GST rate, which is 10% (as of 2024).

This formula effectively extracts the GST component from a total that already includes GST, even though the supplier did not charge it. For a 10% GST, the credit is 1/11th of the total payment.

Worked Example

You pay an overseas software provider AUD 1,100 for a 12-month subscription. The invoice does not show any GST because the supplier is not registered for Australian GST. To work out your credit:

1. Identify the total payment: AUD 1,100.
2. Apply the formula: 1,100 × (10 ÷ 110) = 1,100 × 0.090909 = 100.
3. Your GST credit is AUD 100.00.

That matches the calculator output for an invoice amount of 1,100 and a GST rate of 10%.

Why the Rules Differ for Unregistered Overseas Suppliers

When you buy services from an Australian supplier, they issue a tax invoice that shows the GST amount, and you claim that amount as an input tax credit. But when the supplier is overseas and not registered for Australian GST, they do not charge GST on the invoice. Instead, the law treats the purchase as a “reverse charge� or “increasing adjustment� – you, the recipient, are responsible for accounting for the GST as if you had supplied the service to yourself.

The key difference is that you must create the document that supports the credit, because the supplier won’t provide a standard tax invoice. That document is often called a “recipient-created tax invoice� (RCTI) or simply a “document that meets the tax invoice requirements.�

Core Documents You Must Keep

To satisfy the ATO, your records should include the following, ideally stored together for each purchase:

• Supplier’s invoice or contract – even if it doesn’t show GST, it must identify the supplier, describe the service, show the date, and state the amount in the original currency.
• Your own recipient-created tax invoice – if the supplier’s document doesn’t meet all requirements, you can create one that includes: your name and ABN, the supplier’s name and address, the service description, the date, the amount, and a note that it is a recipient-created tax invoice.
• Proof of payment – bank transfer receipts, credit card statements, or payment gateway confirmations that show the amount and the date you paid.
• Foreign currency conversion – if the invoice is in USD, EUR, etc., keep the exchange rate source (e.g., a screenshot from the RBA or your bank) and the AUD equivalent you used.
• Evidence of importation – for services, this could be a contract stating the service is performed overseas, or a log of when you accessed the service (e.g., a software login history).
• Evidence of business use – a note or spreadsheet showing how the service relates to your taxable business activities, especially if the service is partly private.

How to Create a Recipient-Created Tax Invoice

If the supplier’s invoice is missing details, you can create your own. The ATO requires a recipient-created tax invoice to include:

• Your name (or business name) and ABN.
• The supplier’s name and address (if known).
• A description of the service.
• The date the service was supplied (or the invoice date).
• The total amount payable, in AUD.
• A statement like “Recipient-created tax invoice for GST purposes.â€�

You must keep this document for at least five years after the relevant BAS period. If you use an accountant or tax agent, they will also need a copy to prepare your return.

Common Mistakes and Misconceptions

Mistake 1: Thinking you don’t need any document because the supplier is overseas. The ATO still requires a document that substantiates the credit. Without it, your BAS claim can be denied.

Mistake 2: Using the wrong exchange rate. The ATO generally accepts the rate at the time of supply, not the rate on the day you pay. Keep the rate you used and be consistent.

Mistake 3: Claiming GST on services that are not taxable supplies. For example, services that are purely for private use, or services that are GST-free (like some education or health services), do not qualify.

Mistake 4: Forgetting the reverse charge on your BAS. In some cases, you must report the GST on the purchase as a “deemed supply� and then claim the credit in the same period, which nets to zero. This is common for services that would be taxable if supplied in Australia.

Misconception: You can claim the full invoice amount as a credit. No – you only claim the GST component, which is 1/11th of the total for a 10% GST.

How Long to Keep Records and What If You Lose Them

You must keep all records for five years from the date you lodge the relevant BAS. This includes the invoice, payment proof, and any conversion calculations. If you lose a document, you can try to:

• Request a duplicate from the supplier.
• Reconstruct the invoice using bank statements and correspondence.
• If you cannot reconstruct it, you may need to reverse the credit in a later BAS.

In practice, the ATO accepts a “reasonable reconstruction� if the original is lost, but you must be able to show the amount and the nature of the supply. Keeping digital copies in a cloud folder is the safest approach.

Frequently Asked Questions

Do I need a tax invoice from the overseas supplier to claim GST?
Not necessarily. If the supplier’s invoice lacks required details, you can create a recipient-created tax invoice yourself. The key is that you have a document that meets the requirements, not that it comes from the supplier.

What if the overseas supplier refuses to provide any invoice?
You can still create a recipient-created tax invoice based on your payment records and any contract or email confirmation. You must be able to prove the supply occurred and the amount paid.

Can I claim GST on services bought for both business and private use?
Yes, but only the business portion. You need to keep a record of how you apportioned the use – for example, if you use a software subscription 70% for business, you can claim 70% of the GST credit.

Is there a difference between a “reverse charge� and an “increasing adjustment�?
Yes. A reverse charge is when you report GST on a supply as if you were the supplier. An increasing adjustment is a separate adjustment that increases your net GST. For unregistered overseas suppliers, you generally report the GST on the purchase and claim the credit in the same BAS, which nets to zero.

Do I need to keep records in a specific format?
No – paper or digital are both fine. The ATO accepts scans, PDFs, and spreadsheets. The important thing is that the records are legible and complete.

What happens if I claim GST without proper documentation?
If the ATO audits you and you cannot produce the required documents, they may disallow the credit, impose penalties, and charge interest on the unpaid amount. Keeping complete records avoids this risk.

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in t | Invoice amount (AUD) | AUD | 1000 | 0
in gst | GST rate | % | 10 | 0 | 100
out credit | GST credit amount | AUD | t * (gst / (100 + gst)) | 2