Tax Update: GST to be extended to imported goods valued at less than $1000
Currently, imports valued at less than $1000.00 are not subject to Goods and Services Tax (GST). This is fantastic for those of us who take full advantage of cheap online shopping. However, as part of the 2016/17 Federal Budget, Treasurer Scott Morrison announced that GST will be extended to low-value goods imported by consumers. The new laws aim to remove a tax advantage to foreign businesses and level the playing field for small businesses. The government expects the changes to boost revenue by $300 million over three years. Read our tax update to discover how these changes are likely to affect your online shopping ventures.
Tax update: summary of the changes
From 1 July 2018, a supply of goods from a non-resident to an Australian consumer, regardless of the value of the good, will be a ‘taxable supply’ for the purposes of GST. If imported goods are subject to GST, the supplier will be liable to remit GST to the Australian Tax Office. Similar to domestic laws, foreign vendors exporting low-value goods (i.e. valued at less than $1000) to Australia will only need to comply with the GST regime if they have a local turnover of more than $75,000 in a 12 month period.
Operators of electronic distribution platforms (EDPs) and re-deliverers can be deemed to be the supplier if certain criteria are met:
- An EDP will be the deemed supplier if the low-value goods are purchased through the platform by consumers, and brought into Australia with the assistance of the supplier or operator. An example of an EDP is eBay.
- A re-deliverer will be the deemed supplier if the goods are delivered outside of Australia as part of the supply, and the re-deliverer assists with the delivery into Australia as part of a shopping or mailbox service that it provides under arrangement with the customer. Example of re-delivery services include US to Oz and Planet Express.
GST will not be changed on low-value goods under the new laws if:
- the customer is an Australian business that provides their ABN and states to the supplier that they are GST registered;
- multiple goods of more than $1,000 value will be shipped together in one consignment to Australia (GST may apply to this transaction but under different provisions); or
- the goods are GST-free or input taxed supplies (e.g. some medical aids and appliances are GST free).
Potential problems with the changes
Big players have had diverse reactions to the proposed tax update. Online retailer Asos have branded the new laws as “ill-conceived”, while eBay have campaigned against the changes. In particular, eBay have made the point that by treating EDPs and re-deliverers as suppliers, the legislation does not treat foreign vendors consistently with domestic vendors. Joo Man Park, eBay Australia and New Zealand’s vice-president and managing director stated:
“It is open to abuse by foreign companies, it exposes Australians to the risk of double taxation, it will reduce price competition and choice for all Australians who shop online, and it will drive online trade away from trusted, cooperating online marketplaces to the dark parts of Internet.”
Ebay have also threatened to block Australian users from international sales. Time will tell whether they make good on their threat.
It is unclear how compliance can be enforced when many foreign vendors have no physical presence in Australia. The new changes will only be effective at ‘levelling the playing field’ if GST on low-value imports can be properly enforced.
These changes mean that, come July, online purchases of goods such as books, clothes and shoes will be more expensive for the consumer.