On 1 July 2018, Australia’s law around GST on low value imported goods changed.
New Australian laws extending goods and services tax (GST) to low value imports of physical goods by consumers came into force on 1 July 2018. From this date, the Australian Taxation Office (ATO) will impose GST on the supply of goods valued at equal to or less than AUD $1,000 from outside of Australia to Australian consumers.
With the introduction of the Treasury Laws Amendment Act (GST Low Value goods) Act 2017 (Cth) in June 2017, GST liability is imposed on merchants who sell goods valued at AUD $1,000 or less to an Australian consumer in circumstances where the business has delivered or facilitated delivery of those goods into Australia. Business-to-business sales are excluded from the new laws.
Previously under the A New Tax System (Goods and Services Tax) Act 1999 (Cth), a GST-free threshold applied to low value goods with GST only payable on transactions valued at over AUD $1,000.
The reforms significantly impact operators of electronic distribution platforms (online marketplaces) (EDPs) as well as redelivers, characterised as businesses which forward goods to Australia from overseas companies, who now face GST liability and mandatory GST registration and reporting via the ATO.
What you need to do
Merchants need to register for GST where they meet the annual GST turnover registration threshold of AUD $75,000. From 1 July 2018, those which meet the registration threshold must register online with the ATO for GST and charge GST on sales of low value imported goods (unless they are GST-free or sales of alcoholic beverages and tobacco products), as well as lodge returns to the ATO.
Businesses should consider how their current practices and systems will manage GST, such as the amount of GST payable on a supply chain. It is recommended that businesses also reflect on whether the terms and conditions of their website and platforms allow for collection of this data and the recovery of GST, especially those who operate online marketplaces. Affected businesses may also want to consider how they will establish a system to determine the status of their customers, notification and recover of GST, as well as a system to ensure GST is correctly captured and reported.
Existing processes to collect GST on imports above AUD $1,000 at the border will remain the same. While overseas merchants, operators of EDPs and re-deliverers may now be liable for GST on low value goods, GST will continue to be payable at the border by the importer of record on goods valued at more than AUD $1,000 imported into the country. Similarly, border clearance processes will not change under the reforms.
If you are unsure how your business will be impacted, or require assistance in complying with the new laws, contact your MSI Global Alliance adviser for more information