• Exposure Draft legislation – Application of GST to low value imports

On 4 November 2016, the Treasurer released an Exposure Draft of legislation which determines that low value goods imported by consumers into Australia from 1 July 2017 will be subject to GST.

This change was originally announced in the 2016-17 Federal Budget.

Current position and changes announced

At present, when goods with a customs value over $1,000 are imported by the recipient any GST on importation is paid by the recipient at the point of import (unless the recipient is registered for the deferred GST scheme).  However, the importation of goods with a customs value of $1,000 or less is not subject to GST when directly imported into Australia by the recipient.

From 1 July 2017, GST will be applied to goods imported by ‘consumers’ (the definition of which also includes Australian businesses importing goods but not for the purposes of its enterprise), regardless of the customs value of those goods.

The importation of goods with a customs value in excess of the $1,000 threshold will not be impacted by these changes.

Specific impact of the changes from 1 July 2017

The purpose of these changes is to ensure that goods imported into Australia valued at $1,000 or less are now ‘connected with the indirect tax zone’ and subject to GST in the same way as domestic goods sold by Australian suppliers.  Broadly, the new regime is intended to remove the competitive advantage of offshore suppliers supplying these low value goods to Australian consumers over and above that of Australian suppliers of the same goods.

More specifically, under the new regime if an un-registered non-resident supplier sells low value goods to consumers in Australia (together with any other taxable or GST-free supplies) to a value of $75,000 or more within any 12 month period, then that supplier will be required to register for GST. The supplier may, however, be able to apply to use a simplified GST registration system.

Broadly, the changes mean that the importation of low value goods by Australian consumers will now attract GST.  However, it should be noted that it is not only non-resident suppliers that will be impacted by these changes. The following entities may also be impacted:

  • Those operating an electronic distribution platform (i.e. a marketplace website that allows entities to make supplies of low value goods available to end users delivered by means of electronic communication);
  • Those operating as ‘goods forwarders’ (e.g. entities that provide an overseas address for Australian consumers to have low value goods sent to which are then re-sent to the consumer in Australia).

It is also important to note that the following should not be impacted by the changes:

  • Non-resident suppliers selling low value goods to Australian consumers (and making no other taxable or GST-free supplies) to a value of less than $75,000 within any 12 month period; and
  • GST-registered Australian businesses importing low value goods, where those businesses have informed their non-resident vendors that they import goods in the course of their enterprise and have provided their ABN.