From 1 July 2018, the Australia Government is including GST on low value goods (AUD1,000 and under) supplied by overseas retailers to Australian consumers. Under these changes, the Government will use the vendor collection model for collecting goods and services tax, where vendors (including online stores) will collect the GST on low value imported goods at the time of sale.
The intention of the new measures is to collect GST from consumers of low value imported products and not to cause border delays on the importation of low value goods, nor should it create a situation of double taxation.
To avoid getting caught out, ensure your supplier has obtained an ABN and received a declaration indicating that the you are registered for GST.
This change is significant not only in the Australian GST system, but also to the global GST or valued added tax (VAT) stage because Australia is the first country to introduce such an impost on low value goods made from outside the indirect tax zone. Other countries are expected to follow suit and legislate along similar lines.
The key features for the GST on low value goods provisions are as follows:
- From 1 July 2018, there will be GST on low value goods (less than AUD 1,000) supplied by overseas retailers to Australian consumers as they will become taxable supplies for Australian GST purposes. These measures also apply to Australian retailers that use a drop shipment model (i.e. direct shipping to Australia from outside of Australia).
- The supply of a number of low value goods in one shipment order would be individually treated as low value goods, even if they are over AUD 1,000 in aggregate (although there are some limited exceptions to this).
- An ‘Australian consumer’ means an Australian resident not registered for GST in Australia.
- Goods will be included in the supplier’s GST turnover. If the supplier’s GST turnover exceeds the turnover threshold of AUD 75,000, it is required to register for GST in Australia.
- Where supplies of low value goods are made via online marketplaces, the GST liability on these supplies would shift to the online retailer.
- The GST liability on sales of low value goods may also shift to ‘redeliverers’ (service providers that assist individuals obtain goods from foreign suppliers, for example, by providing a mailing address for delivery in a particular jurisdiction and then arranging the transport into Australia).
- There are provisions to ensure that the supply of goods is not subject to double taxation (i.e. when GST is charged at point of sale and again at the border).
We recommend suppliers/marketplaces/redeliverers undertake the following steps as soon as possible:
- Businesses that meet the A$75,000 registration threshold will need to take action now to review their business systems to ensure that they are able to comply.
- Identify supplies of low value goods expected to be imported to Australian consumers.
- Assess pricing changes required for imposition of GST.
- Review agreements to ensure appropriate GST clauses are included.
- Update customer communications.
- Check that systems can account for GST on relevant sales from 1 July 2018.
- Consider how prices will be displayed.
- Implement processes to identify B2B supplies separately from B2C.
- Consider whether the EDP/marketplace rules apply and if so, how the GST will be collected on the transaction.
- Register for full or limited registration as applicable.
- Consider how to deal with the AUD 1,000 threshold i.e. at an item level or basket level.
- Consider foreign currency exchange requirements.
- Consider whether any GST-free provisions apply.
- Consider any additional charges (e.g. transport and gift wrapping) and whether GST will apply.
Magellan is already working with a number of clients to ensure their supply chain is uninterrupted due to these new provisions. If you would like some further advice regarding this change, please get in touch with me via email or on +61 7 2493 4169
For more information visit the ATO: https://www.ato.gov.au/General/New-legislation/In-detail/Indirect-taxes/GST/GST-on-low-value-imported-goods/
At Magellan Logistics, we provide a variety of freight forwarding services throughout Australia. Contact us today for more information.