Australia’s GST on low value goods - what you need to know
Tax Alert - May 2018
Just like New Zealand, Australia now applies GST to digital products and services imported by consumers. In addition to this, GST will apply to low value goods imported by consumers into Australia from 1 July 2018.
To put this into perspective, if an Australian consumer downloads an e-book, this download is currently subject to GST. As of July 2018, if the same person buys the hard copy of the same book, GST will also apply.
Who should know about these rules?
Businesses who export goods to Australia are the main people who should consider these rules. Anyone who buys goods online which will be delivered to Australia will also be affected - think of the birthday and Christmas presents of New Zealand goodies that you buy online and get delivered directly to friends and relatives living in Australia.
Understanding the pros and cons of the Australian regime will give you a head start on what your potential submission areas might be for the NZ low value goods discussion document that was issued on Tuesday
Imports of low value goods are affected, but what will exactly change?
Currently only goods above A$1,000 are taxed at the Australian border (with the exception of alcohol and tobacco). Australian GST on importations over A$1,000 is assessed at the border and paid by the importer prior to release. This will remain the same under the new rules.
As of July 2018 Australian GST will also apply at the point of sale to physical goods with a customs value of under A$1,000 imported by consumers into Australia if the vendor’s total supplies exceed the A$75,000 registration threshold.
The Australian Tax Office (“ATO”) is predicting that around 150 New Zealand companies will make supplies in excess of the annual A$75,000 threshold and need to register for GST in Australia. Broadly the three types of registrants will be exporters, electronic distribution platforms (“EDPs”) and re-deliverers.
EDPs and re-deliverers are deemed to be suppliers for the purposes of these rules and are required to return the GST on these sales. Complying with the new legislation is proving to be tricky for EDPs meaning that some EDPs have publicly announced that they are considering turning off the ability for Australians using their site to purchase from overseas. Time will tell whether these new rules actually impact on Australian’s ability to purchase goods from such sites.
New Zealand suppliers importing goods into Australia
If your annual supplies to Australian consumers exceed A$75,000 you will need to:
- Register for GST before 1 July 2018 under the standard or simplified registration method
- Charge GST on sales of low value imported goods to consumers (unless they are GST-free supplies such as certain fresh food or input taxed supplies)
- Lodge returns and pay GST to the ATO.
If the only reason for registering in Australia is the new rules, you can apply for a simplified registration, and file quarterly GST returns. The ATO has a 24 hour turnaround time for simplified registrations. The catch with simple registration is that this is a payment only system, so no GST credits can be claimed and you are not able to issue tax invoices to purchasers (as simple registrants have an ATO reference number rather than an ABN). Instead, suppliers can issue low value goods receipts containing their ATO reference number, which are not required to be in Australian dollars.
The alternative option is to register under the standard rules which allows you to issue tax invoices and claim GST input credits. Registration is a more complex process with detailed information being required. The ATO processes standard registrations within 28 days of the provision of full information so if this is the option you wish to pursue, we recommend that you get your application underway now.
Complexity in the rules
Although it’s quite straightforward to determine if you need to register, we have found that getting your point of sale, invoicing and accounting systems to apply the new rules is not as simple. We discuss a few examples of this complexity below:
- Have you checked that none of your supplies are GST free or input taxed supplies under the Australian rules? No GST should be charged on these supplies.
- How are you separating business customers from consumers? Does your system require business customers to provide their ABN number, GST registration status and confirmation that the goods will be used in their business?
- How will you make the pricing clear on your website, will Australian customers see prices inclusive of Australian GST?
- How will consignments be dealt with? If low value items are consigned together in one parcel worth over A$1,000 duties will be paid at the border. You will have unhappy customers if the charge at the border means that they are double taxed.
- Changing website settings may not be enough, do you have customers who call New Zealand stores to arrange for delivery? How will staff process these sales in the point of sale system to ensure that the customer is charged Australian GST? What documents will be provided to the customer using this process (simplified sales receipt or tax invoice in AUD?).
- Will customs documents be completed correctly? It’s common for imports to show $0 postage and add the cost of the postage to the cost of the goods, as until now it hasn’t been necessary to get the split right on the customs documents. Continuing to do this could mean that goods under $1,000 are incorrectly pushed over the low value threshold resulting in double tax.
May 2018 Tax Alert contents
- New Zealand GST on low value imported goods announced
- Buyer beware: ring fencing may be here
- Australia’s GST on low value goods - what you need to know
- Research & development tax incentive
- Employee Share Schemes – It’s time to act
- Are you ready to file your final FBT return?
- Post-BEPS transfer pricing legislation refresh requires taxpayer action
- How non-residents can get an IRD number without a bank account
- Have your say on taxing short-term accommodation
- Recent Developments