Every commercial shipment entering Australia is assessed for customs duty. The rate you pay depends on what you’re importing, where it was manufactured, and whether a Free Trade Agreement applies. For businesses importing regularly, understanding how duty rates work is the difference between competitive landed costs and margin erosion.

This guide explains how Australian customs duty is calculated, the main rate categories, how to use Free Trade Agreements to reduce your costs, and what happens if you get it wrong.

How Australian Customs Duty Works

Customs duty in Australia is governed by the Customs Tariff Act 1995. The duty rate applied to your goods is determined by two things:

The HS code (tariff classification): Every product is assigned an 8-digit tariff code under the Australian Customs Tariff, based on the international Harmonised System. The code determines the applicable duty rate.
The country of origin: If the goods originate from a country with which Australia has a Free Trade Agreement, a preferential (lower) duty rate may apply.

The duty is calculated as a percentage of the customs value. For most goods, the customs value is the transaction value: the price paid for the goods, plus the cost of freight and insurance to the Australian port (essentially a CIF basis).

Types of Duty Rates

General rate (MFN)

The General rate, also known as the Most Favoured Nation (MFN) rate, applies when no preferential trade agreement is in place. For most goods, the general rate is 5%. Some product categories attract higher rates, and many attract 0%.

Common general duty rates:

0%: Raw materials, most machinery, medical equipment, many chemicals, books.
5%: Most manufactured goods including clothing, footwear, furniture, electronics, plastics, processed food.
Higher rates: Certain textiles (up to 5% plus specific tariff components), some agricultural products.

Preferential rates (FTA rates)

If your goods qualify under one of Australia’s Free Trade Agreements, you can claim a preferential duty rate. In most cases, this means 0% duty. Australia currently has FTAs with major trading partners including:

China (ChAFTA): Most goods at 0% duty.
Japan (JAEPA): Progressive duty reductions, many goods now at 0%.
South Korea (KAFTA): Most goods at 0%.
ASEAN (AANZFTA): Covers Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam.
United States (AUSFTA): Most goods at 0%.
United Kingdom (A-UKFTA): Progressive reductions since 2023.
New Zealand (ANZCERTA/CER): Duty-free trade on virtually all goods.
RCEP: Regional Comprehensive Economic Partnership covering 15 Asia-Pacific nations.

To claim a preferential rate, you must provide a valid Certificate of Origin at the time of import, and the goods must meet the Rules of Origin requirements for the relevant FTA.

Duty-free threshold

Goods imported into Australia with a customs value of AUD 1,000 or less are generally exempt from customs duty (though GST may still apply on some goods purchased from registered overseas vendors).

How Customs Duty Is Calculated

The calculation is straightforward once you have the right inputs:

Customs Duty = Customs Value x Duty Rate

Where:

Customs Value = Transaction value of the goods + international freight + insurance (CIF value).
Duty Rate = The rate determined by the HS code and origin (general or preferential).

GST is then calculated on top:

GST = (Customs Value + Duty) x 10%

Worked example

You import electronics from China worth AUD $20,000 (FOB). Freight to Melbourne is AUD $2,000 and insurance is AUD $200.

Customs value: $20,000 + $2,000 + $200 = $22,200
Duty (general 5%): $22,200 x 5% = $1,110
Duty (ChAFTA 0%): $22,200 x 0% = $0
GST (without ChAFTA): ($22,200 + $1,110) x 10% = $2,331
GST (with ChAFTA): ($22,200 + $0) x 10% = $2,220

Total saving by using ChAFTA in this example: $1,221 (the $1,110 duty plus $111 in GST on the duty).

How to Find the Duty Rate for Your Product

Identify the HS code: Use the Australian Customs Tariff Schedule (available on the ABF website) to classify your product. Start with the broadest category and narrow down.
Check the general rate: The tariff schedule shows the general (MFN) rate next to each tariff item.
Check FTA rates: If your goods originate from an FTA partner country, check the relevant FTA tariff schedule for preferential rates. These are published separately for each agreement.
Confirm with your customs broker: For complex products, composite materials, or goods that could be classified under multiple headings, professional advice is worth the cost.

Free Trade Agreements: How to Claim the Savings

Claiming a preferential FTA duty rate requires three things:

Correct HS code: The preferential rate is tied to the tariff classification. A wrong code can disqualify you from the reduced rate.
Valid Certificate of Origin: Issued by an authorised body in the exporting country. The certificate must reference the specific FTA and confirm that the goods meet the Rules of Origin.
Rules of Origin compliance: The goods must be grown, manufactured, or substantially transformed in the FTA partner country. Simply transshipping goods through a country does not qualify.

Many importers miss FTA savings because they don’t request a Certificate of Origin from their supplier. Make it a standard part of your purchase order process for any supplier in an FTA country.

Tariff Concession Orders (TCOs)

If you’re importing goods that are not manufactured in Australia and attract a duty rate above 0%, you may be able to apply for a Tariff Concession Order (TCO). A TCO reduces the duty rate to 0% for specific goods where there is no local substitute. TCOs are published by the ABF and any importer can use an existing TCO that matches their product. You can also apply for a new TCO if one does not already exist.

What Happens If You Get Duty Wrong?

The ABF conducts post-clearance audits to verify that importers have declared the correct HS codes, origin, and customs values. If an audit finds that you’ve been paying the wrong duty rate, the consequences include:

Retrospective duty assessment: The ABF can go back up to four years and reassess duty on all affected imports. For high-volume importers, this can amount to hundreds of thousands of dollars.
Penalties: Intentional undervaluation or misclassification can attract penalties of up to three times the duty shortfall, plus potential prosecution.
Increased scrutiny: Once flagged, your future imports may be subject to more frequent checks and profile assessments.

On the flip side, if an audit reveals you’ve been overpaying duty, you can apply for a refund (drawback) of the excess amount. This is another reason to periodically review your tariff classifications and FTA utilisation with your customs broker.

GST on Imports

In addition to customs duty, GST of 10% is payable on most imported goods. GST is calculated on the customs value plus duty. If your business is registered for GST, you can claim the GST paid on imports as an input tax credit on your BAS, which effectively makes it a cash flow cost rather than a permanent one.

Businesses that import frequently can apply for a Deferred GST scheme, which allows you to defer GST payments on imports to your next BAS lodgement rather than paying at the border. This significantly improves cash flow for regular importers.

Key Takeaways

Most goods entering Australia attract either 0% or 5% customs duty under the general tariff.
Free Trade Agreements can reduce duty to 0% for goods from partner countries, but you need a Certificate of Origin to claim the savings.
Duty is calculated on the CIF value (goods + freight + insurance), and GST is calculated on the CIF value plus duty.
Tariff classification (HS codes) determines the duty rate. Getting this right is critical.
GST-registered businesses can claim import GST back as an input tax credit and can apply for the Deferred GST scheme.
The ABF audits retrospectively, so accuracy matters now and not just at the time of import.

WWCF’s customs brokers classify goods and manage duty optimisation for importers across Australia. Whether you need a tariff review, help claiming FTA savings, or support setting up Deferred GST, our team can help.

Want to make sure you’re paying the right duty rate? Contact WWCF for a customs tariff review.

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