From 1 July 2018 overseas businesses may need to register for Goods & Services Tax (GST), charge GST on imported goods valued at A$1,000 or less that they sell to consumers in Australia, and pay the GST collected to the Australian Taxation Office (ATO).
The GST rate is 10%.
The existing processes to collect GST on imports over A$1,000 are unchanged.
Currently, low value goods (i.e. goods with a customs value of $1,000 or less) are generally not subject to GST when imported directly into Australia by the recipient.
Due to a change of law, GST will be extended to include low value goods imported by customers in Australia from 1 July 2018.
The intent is that low value goods imported by consumers will face the same tax regime as goods that are sourced domestically.
Vendors, electronic distribution platforms and goods forwarders will all need to account for GST on sales of low value goods to consumers in Australia if they are registered or required to be registered.
The GST registration turnover threshold is A$75,000.
Summary of the changes
In summary, the reforms:
- Make supplies of goods valued at A$1,000 or less at the time of the supply connected with Australia if the goods are purchased by consumers and are brought into Australia with the assistance of a supplier;
- Treat the operator of an electronic distribution platform (EDP) as the supplier of low value goods if the goods are purchased through the platform by consumers and brought into Australia with the assistance of either the supplier or the operator;
- Treat re-deliverers as the suppliers of low value goods if the goods are delivered outside of Australia as part of the supply, and the re-deliverer assists with their delivery into Australia as part of a shopping or mailbox service that it provides under an arrangement with the consumer;
- Allow non-resident suppliers of low value goods that are connected with Australia to elect to access the simplified registration and reporting system; and
- Prevent double taxation.
- The change applies from 1 July 2018.
If you are an overseas supplier that sell goods to consumers in Australia
If you sell less than A$75,000 of low value goods to consumers in Australia (or other supplies subject to GST) per year you will not be required to do anything.
However, if you sell A$75,000 or more of low valued goods to consumers in Australia (or other supplies subject to GST) per year, such as through your website or call centre, then you will be required to register for GST and pay GST on those sales.
What does the vendor, electronic distribution platform or goods forwarder need to do?
The first thing will be to assess whether they are required to register for GST.
If they have more than A$75,000 of sales of low value goods to consumers in Australia per year, they will have to register with the ATO and pay GST on these sales. They will generally be required to pay the GST to the ATO four times per year.
How is GST applied?
GST is applied on each taxable low value item and any shipping or insurance connected with that purchase.
For example: Overseas company (which sells over $75,000 of goods to Australia) sells an item to a consumer in Australia for $160, including shipping and insurance. The overseas company will be required to remit 1/11th or $14.55 to the ATO in relation to this sale at the end of the reporting period.
GST free goods will not attract GST regardless of how they are purchased.
Business activity statements are generally lodged quarterly:
- July, August, September quarter is due by 28 October
- October, November, December quarter is due by 28 February
- January, February, March quarter is due by 28 April
- April, May, June quarter is due by 28 July
Lodgement extensions are available if activity statements are lodged electronically via registered tax agents or registered BAS agents.
Businesses that meet the A$75,000 registration threshold will need to take action to review their business systems to enable them to comply with the changes.
Businesses which are affected by these changes should contact their tax advisors as the GST rules are complex.
Further information is available at www.ato.gov.au