Australian GST to apply to low value goods from 1 July 2017

By Allan Bullot

The question of how GST should apply to online purchases of low value goods is back in the news again.

On Friday 4th November, the Australian Government released its long awaited details on how GST and low value goods imported into Australia will apply from 1 July 2017.  These rules are brutally pragmatic and will have a significant impact on many New Zealand businesses.

Currently, sales of goods by New Zealand businesses to end consumers in Australia do not normally suffer any Australian GST if the goods are valued at under AUD 1,000 and are shipped directly from New Zealand to the end consumer in Australia.

Any New Zealand business that sells goods via the web or over the phone to Australian consumers will need to consider these changes and potentially register for Australian GST and charge the Australian GST at 10% on low value goods shipments from 1 July 2017.  The critical factor will be whether the registration threshold of AUD 75,000 of low value goods sold to Australian consumers is exceeded in any single year. 

Sales of low value goods to Australian GST registered businesses will not be impacted by these proposed changes, nor will sales to consumers if the registration threshold is not exceeded.

The way the new rules will work where there are mixed shipments of low value goods and other goods that are above the AUD1,000 threshold will be complex.

The reach of this legislation is very broad, and entities that operate as a mail forwarding platform into Australia, or an electronic distribution platform for sales of goods into Australia, can be deemed to be the supplier that needs to register for and collect the 10% Australian GST.

New Zealand businesses impacted by these changes will likely have significant software changes as well as pricing and marketing decisions to make in a relatively short time.

The Australian approach is by no means perfect.  It will also be interesting to see how the New Zealand Government reacts to the Australian changes, and there is a reasonable chance that New Zealand will look to implement some form of these changes for online sales of goods to private consumers in New Zealand in the future.

The days of consumers being able to purchase low value goods over the internet and import them with no GST do seem numbered for both Australian and New Zealand consumers.

Submissions on these proposed changes close on 2 December 2016.

As these rules progress we will keep you updated through Tax Alert.  Please contact your usual Deloitte advisor if you wish to discuss this issue further.

November 2016 Tax Alert contents

• Compliance Focus for Multinational Enterprises 
• Australian GST to apply to low value goods from 1 July 2017
• PAYE Reporting proposals finalised 
• Farmers to face increased compliance costs
• Facts and figures as Inland Revenue reports on its performance
• A snapshot of recent developments