What Is Landed Cost? Formula and Sample Calculations

Landed cost is the total expense of moving imported goods from the supplier to your warehouse or distribution centre in Australia. For importers, understanding landed cost is essential to avoid underestimating true expenses and eroding profit margins.

Many businesses focus only on the supplier’s price, overlooking other critical costs such as freight, duties, GST, insurance, and port charges. Misjudging these can lead to lost revenue, poor pricing decisions, and cash flow issues.

In this article, we’ll break down exactly what makes up your landed cost and how to calculate it accurately.

Stop Guessing Your Landed Cost

Get accurate landed cost estimates before you ship. Simplify freight quotes, customs, and GST with Couriers & Freight.

Get a Quote Now

What Is Landed Cost?

Landed cost (also known as freight landed cost) is the total amount paid to bring imported goods into Australia, from the supplier’s location to your warehouse or distribution centre.

It helps businesses determine the true cost per unit, supporting accurate pricing, stronger profit management, and smarter purchasing decisions. Without factoring in landed cost, importers risk undercharging, overpaying, or misjudging product viability.

Typical components of landed cost include:

• Product cost (per unit)
• International freight (air or sea)
• Import duties and tariffs
• Goods and Services Tax (GST)
• Insurance
• Customs clearance and brokerage fees
• Port charges and terminal handling fees

Accurately calculating landed cost ensures you account for every expense involved in importing, and helps clarify who pays for each part of the process, whether it’s you or your supplier, based on agreed Incoterms.

Why Landed Cost Matters for Australian Importers

For Australian importers, understanding landed cost is essential not only for accuracy but also for making informed and profitable business decisions.

Relying only on the supplier’s invoice can be misleading. Without factoring in freight charges, import duties, GST, insurance, and handling fees, businesses may set prices too low, underestimate total costs, or experience unexpected expenses that impact cash flow and profitability.

Fluctuating foreign exchange rates, seasonal variations in freight pricing, customs clearance delays, and compliance with GST and Australian Border Force requirements all add complexity to international trade. These elements, if overlooked, can quickly erode margins and disrupt operations.

Accurate landed cost calculations allow importers to assess the true cost of goods, compare suppliers more effectively, and plan cash flow with confidence. It also ensures full tax compliance and protects against undercharging or absorbing costs that should be factored into pricing.

Landed Cost Formula: A Simple Breakdown

To find the true cost of your imported goods, use the following landed cost formula:

Landed Cost = Product Cost + Freight + Duties + GST + Insurance + Handling Fees

Breakdown of each component:

• Product Cost: The price charged by your overseas supplier
• Freight: International shipping from the country of origin to Australia (by air or sea)
• Duties: Import tariffs based on your product’s classification and Free Trade Agreement eligibility
• GST: Typically 10% of the customs value, which is calculated from the product cost, freight, and insurance
• Insurance: Transit cover for damage, theft, or loss
• Handling Fees: Charges for port handling, customs clearance, and local delivery

Using this landed cost formula gives you a realistic cost per unit. It helps avoid underpricing, supports accurate financial planning, and ensures your import business remains profitable.

What’s Included in Landed Cost?

Your landed cost includes more than just the price of the goods. Here's a breakdown of each component every Australian importer should factor in:

Product Cost

This is the invoice amount charged by your supplier. Make sure it only covers the goods themselves and reflects the correct Incoterms, such as FOB (Free on Board) or EXW (Ex Works). Always convert foreign currencies to AUD using a trusted exchange rate source.

Freight

Freight covers the cost of shipping goods from the supplier’s location to Australia by air or sea. Air freight is faster but more costly, while sea freight is generally more economical for large volumes. Request quotes from freight forwarders early, as prices can vary with demand, seasonality and route.

Duties

Import duties are calculated based on the product’s Harmonised System (HS) code and country of origin. These are set by the Australian Border Force (ABF). Use the Australian Tariff Classification to identify your product’s correct HS code. Eligible products under certain Free Trade Agreements (FTAs) may qualify for reduced or zero duty.

GST

The Australian Tax Office (ATO) charges 10 per cent GST on most imported goods. GST is calculated on the customs value, which includes the product cost, freight and insurance. It must be paid before goods are released from customs. If your business is GST-registered, you may be able to claim input tax credits.

Insurance

Always include transit insurance to protect high-value or fragile goods during international shipping. Insurance typically covers loss, theft or damage in transit. Premiums are usually calculated as a percentage of the shipment’s total value, and many freight forwarders can include this in their quotes

Handling Fees

These cover various port and logistics costs, including terminal handling charges, customs clearance fees, port service charges and final delivery from the port to your warehouse or store. Fees will vary depending on your location, freight type and logistics provider. Request a detailed breakdown to avoid surprises.

Landed Cost Example for Australian Importers

Here is a landed cost example for a shipment from China to Sydney:

Note: GST is calculated at 10% of the customs value (product cost + freight + insurance), which equals $2,460. So GST = $246. The true landed cost per unit is $29.56, not $20.

Common Mistakes When Calculating Landed Cost

Even experienced importers can overlook key cost factors that impact profitability and compliance. Avoid these common pitfalls to ensure your landed cost calculations are accurate and reliable:

• Omitting insurance leaves goods unprotected and can also cause an underestimation of GST payable.
• Using outdated or incorrect HS codes results in miscalculated duty rates and potential customs issues.
• Forgetting to include GST on freight and insurance components leads to surprise tax bills upon clearance.
• Underestimating handling charges, such as customs clearance and local delivery fees, which can vary widely based on shipment type and location.
• Relying on old freight quotes, which may no longer reflect current market rates, especially during peak seasons or fuel price changes.

How Couriers & Freight Can Help

At Couriers & Freight, we do more than just move goods. We help Australian importers simplify and take control of their international shipping processes. From the moment you request a quote to the final delivery, our team ensures full cost visibility and supports you every step of the way.

Unlike general freight brokers, we specialise in working with small to medium Australian businesses. Our expertise in landed cost calculations means you won’t be caught off guard by hidden fees, fluctuating freight charges, or customs delays. We provide accurate quotes, expert customs brokerage support, and real-time updates so you always know where your shipment is.

Whether you're importing occasionally or managing ongoing supply chains, we make it easier to forecast costs, protect margins, and stay compliant with Australian regulations.

Need help calculating your landed cost? Get a tailored quote now and let us simplify your import process.

Take Control of Your Import Costs

Understanding your full landed cost is essential for successful and profitable importing. It helps you price accurately, avoid unexpected charges, and protect your margins.

Use a clear landed cost formula and include all relevant charges to make informed purchasing decisions and reduce financial risk. When you account for every cost, you streamline your import operations, improve efficiency, and boost competitiveness.

Stop Guessing Your Landed Cost

Get accurate landed cost estimates before you ship. Simplify freight quotes, customs, and GST with Couriers & Freight.

Get a Quote Now