GST on Low Value Imported Goods

Taking effect from 1 July 2018, the GST treatment on the supply of low value imported goods made by offshore vendors directly will change. These changes will affect goods sold to Australian consumers through online platforms or via redelivery services.

This represents a significant modification from the position that has existed since the introduction of GST, which provided concessional treatment for low value imported goods. Under the existing provisions, GST is not applied to the importation of goods where they fall under the low value threshold.

The newly legislated model for imposing GST on low value imported goods does not have the effect of removing the low value threshold. Rather, it imposes an obligation on certain suppliers to charge and collect GST on supplies of low value goods under a vendor collection model.

The legislated changes were originally to take effect from 1 July 2017, however after the bill was referred to the Senate Economics Legislation Committee, it was passed into legislation subject to a delay of the introduction of the measures for one year until 1 July 2018 and the undertaking of a Productivity Commission public inquiry.

Regardless of the findings of the Productivity Commission, it should be noted that the legislation that has already passed will be effective from 1 July 2018 as currently drafted, unless subsequent amendments occur.

Accordingly, where a supplier (or deemed supplier) makes offshore supplies of goods (except tobacco or alcohol products) that have a customs value of AUD $1,000 or less when the price is first agreed with the customer, the supply of the goods will be connected with Australia and within the Australian GST system.

In the case where such a supplier reaches the GST registration turnover threshold of AUD $75,000 or more on a current or projected basis including its supplies of low value imported goods, the supplier will be required to register for GST, charge and remit GST on those supplies and prepare GST returns.

A number of types of GST registration will be available to such suppliers, including a simplified GST registration for eligible non-residents who want to electronically register, report and pay their GST liabilities on a quarterly basis. This option does not allow the supplier to claim Australian GST credits, however for suppliers operating purely outside of Australia this should not cause issues. Suppliers who only sell low value imported goods will not be able to apply for simplified GST registration until 1 January 2018.

It is intended that the new measures will not give rise to border delays in relation to the importation of low value goods where suppliers have already paid GST on the taxable supply. Double taxation should also not occur on low value goods at the initial supply and subsequent border entry point.

As noted above, the new provisions are only intended to capture supplies of low value imported goods to consumers. In this regard, an entity will be a consumer if it is not registered for GST or does not acquire the supply in carrying on its enterprise in Australia.

For more information about these new measures, or to obtain advice around GST and cross-border transactions, contact your financial adviser.

By David Penpraze

Associate Partner – Specialist Tax