Landed Cost for Australian E-Commerce Importers

Between the 2020-21 and 2024-25 financial years, the Australian dollar fell from an average of 74.68 US cents to 64.82 US cents. An importer whose supplier never changed its US dollar price still paid 15.2 per cent more in Australian dollars for exactly the same goods.

Most online retailers never see that shift, because they measure product cost using the supplier invoice. The supplier invoice is not the cost of the product. It is the starting point.

This guide sets out what landed cost is, which costs Australian tax law requires you to capitalise into trading stock, how to allocate freight and duty across a mixed shipment, which exchange rate applies, and what happens to unsold imported stock at 30 June.

What Is Landed Cost?

The distinction matters because two different numbers are often called "cost". The first is what the supplier billed. The second is what the business actually spent to have saleable stock sitting in its warehouse. On imported goods, the gap between them is rarely small.

Pricing, discounting and reorder decisions made on the first number will be wrong in a predictable direction: they will flatter the product. Our e-commerce profit margin calculator shows what happens to reported margin once the real cost of selling is loaded in. This article deals with the step before that, which is establishing the cost itself.

What Costs Form Part of the Cost of Trading Stock?

This is the point most importers get wrong. Freight and duty are commonly coded straight to an expense account when the invoice arrives. For tax purposes, where stock is valued at cost, those amounts belong in the value of the stock and are only released to the profit and loss as the goods are sold.

Coding freight to expenses understates profit while stock is building and overstates it while stock is being run down. In a growing importing business, which is almost always building stock, the effect is a persistent understatement of taxable income. That is a compliance exposure, not a saving.

The ATO confirms that where you are entitled to GST credits, you generally exclude the GST component when calculating the value of trading stock. The general trading stock rules then work the deduction out from opening stock plus purchases less closing stock. Getting the inputs right is what our bookkeeping team builds into the ledger from day one.

How Do You Allocate Freight and Duty Across a Shipment?

The choice is not academic. On a mixed container, two defensible bases can produce per unit costs that differ by 6 to 8 per cent on the same product. That difference flows directly into reported margin and into every pricing decision that follows.

Worked example: one container, three products

A Melbourne homewares importer orders a container from an overseas supplier that invoices in US dollars. The supplier invoice is US$48,000 for 4,000 units across three products. The stock becomes on hand when the exchange rate is A$1.00 = US$0.6482.

There is A$13,673 of on-costs to spread across the three products. The table below shows what happens when the same A$13,673 is allocated on value and then on unit count.

Product C sells for A$69 excluding GST. On the supplier invoice alone, its cost is A$29.31 and gross margin looks like 57.5 per cent. On a properly built landed cost allocated by value, the cost is A$34.72 and the margin is 49.7 per cent. That is 7.8 percentage points of margin that never existed.

Our view is that value is the sensible default for goods of broadly similar size, and weight or volume should be used where one product is disproportionately heavy or bulky. Whichever you choose, document the reasoning and apply it consistently. A basis that changes between shipments makes period comparisons meaningless.

Which Exchange Rate Applies to Imported Stock?

This is a detail that catches out businesses using a single year-end rate for everything. The ATO sets out the position clearly in its trading stock valuation example: stock valued at cost is translated at the rate applying when it became stock on hand, under item 3 of the table in subsection 960-50(6).

Taxpayers may generally use either the prevailing rate at the date of the transaction or an average rate for a period, provided the average is a reasonable approximation of the actual rates. Where currency moves sharply within a year, an annual average can stop being reasonable, and a shorter averaging period becomes the better answer. The translation rules sit in Subdivision 960-C of the Income Tax Assessment Act 1997, and the ATO explains their operation in its guidance on foreign exchange gains and losses.

Why a stable supplier price is not a stable cost

A supplier holding its price at US$20 per unit looks like cost stability. It is not. At the 2020-21 financial year average of 74.68 US cents, that unit cost A$26.78. At the 2024-25 average of 64.82 US cents, the same unit cost A$30.85. The supplier changed nothing and the cost rose 15.2 per cent.

The currency you are billed in matters as much as the currency of the country you buy from. Many suppliers based in China invoice in US dollars, which leaves the buyer carrying US dollar exposure rather than Chinese yuan exposure. Over the same seven years, the Australian dollar moved through a range of roughly 13 per cent against the US dollar and roughly 5 per cent against the yuan.

There is a second gap worth watching. The rate published by the RBA is not the rate your bank gave you. Bank and payment provider spreads mean the effective rate paid is usually worse than the market rate quoted online. Reconcile against the actual amount debited, not the screen rate. Modelling the effect of a further fall before it happens is exactly what a 3-way forecast is for.

How Is GST Calculated on Imported Goods?

Applying the ATO's rules on GST and imported goods to the container above, the value of the taxable importation is A$84,934, being the customs value of A$74,051 plus duty of A$3,703, freight of A$6,400 and insurance of A$780. GST is A$8,493.

That A$8,493 is a cash flow event, not a cost. A GST-registered importer bringing goods in for a creditable purpose claims it back. The question is when. Paying it at the border and recovering it on the next activity statement can leave the money out of the business for weeks.

The deferred GST scheme

The deferred GST scheme allows approved importers to defer GST on taxable imports to their monthly activity statement instead of paying it at the border. The liability is then offset against the GST credit in the same statement, so in most cases nothing is paid out at all.

• You must be registered for GST and hold an ABN
• You must lodge activity statements monthly, so quarterly lodgers need to switch
• Lodgement and payment must be made electronically
• Customs duty is still payable at the border; only GST is deferred
• Your tax affairs must be up to date, and late lodgement can cost you access

The trade-off is real. Monthly lodgement means twelve activity statements a year rather than four, which is more work and less room for error. For a business importing regularly, the cash flow benefit usually outweighs it. For an occasional importer, often it does not. Our BAS and IAS team can model both before you apply, and the Australian Border Force sets out how the deferral operates at the border.

Consignments with a customs value at or below A$1,000 are generally non-taxable importations, though GST may still apply at the point of sale where the overseas supplier or marketplace is registered. We cover that in detail in our guide to GST for Australian e-commerce sellers.

What Happens to Unsold Imported Stock at 30 June?

The three methods are set out by the ATO in its guidance on valuing trading stock. Market selling value is what the stock would fetch in the ordinary course of business. Replacement value is what it would cost to obtain a near identical item on the last day of the income year.

For importers this is a genuine planning point rather than a formality. Where stock has been superseded or is not moving, market selling value or replacement value may be materially below landed cost, and choosing the lower valuation reduces closing stock and therefore taxable income. The choice must be supportable, so keep the evidence.

Note the interaction with currency. If you value at cost, the historical rate applies. If you switch an item to replacement value, you are translating at the year-end rate instead. Where the dollar has fallen, replacement value can exceed original cost, which is the opposite of what most people expect from a write-down.

Under the simplified trading stock rules, an eligible small business that reasonably estimates the movement in stock value at $5,000 or less need not conduct a stocktake or bring the change to account. In our experience most importers exceed that threshold quickly, and a proper count is worth doing regardless. Timing decisions of this kind sit naturally inside annual tax planning, and the accuracy of the underlying numbers is what our tax compliance reviews test.

What Importing Taught Us About Margin Discipline

In our work with Watches of Mayfair, a luxury e-commerce client selling imported stock, the discipline that mattered most was knowing the real cost of every item before it was priced. Luxury goods carry high unit values, which means customs duty, freight and insurance are large absolute amounts, and small errors in how they are allocated move margin quickly.

Two things made the difference. The business tracked landed cost rather than supplier price, so pricing decisions were made against a number that was actually true. And it kept fixed overheads deliberately low, so a period of rising interest rates and weaker discretionary spending could be absorbed without cutting into core operations or taking on debt.

When conditions improved, that same lean structure let the business scale without unwinding excess cost. The lesson generalises. Margin management is not only about knowing your numbers; it is about building a cost base that survives a downturn and can move quickly in a recovery. We see the same pattern across our e-commerce accounting clients, and it starts with costing stock properly. Where the underlying system is the problem rather than the method, our Xero and Shopify setup guide covers the integration side.

Summary and Key Takeaways

Revenue tells you what customers are buying. Landed cost tells you whether it was worth selling. For an importing business, it is the number every other decision depends on. Earlier stage sellers building this from scratch can start with our startup advisory support.

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