A recent change to Australian tax law will ensure that Goods and Services Tax (GST) is payable by overseas suppliers on supplies of ‘low value imported goods’ (goods valued at AU$1,000 or less) to Australian consumers. Currently, such importations by overseas suppliers are not subject to GST. The changes are intended to increase competitiveness by levelling the playing field for Australian retailers with overseas suppliers.
The amendments are due to commence on 1 July 2018, however, was originally intended to apply from 1 July 2017 to coincide with the imposition of GST to intangible supplies such as digital services (commonly referred to as the ‘Netflix tax’). The Australian Government postponed the date of effect by 12 months to provide more time to overseas suppliers to update their internal systems and processes to comply with the new GST rules.
Who is affected by the changes?
The amendments impact overseas suppliers of goods with an Australian turnover of AU$75,000 or more in a twelve month period. Such suppliers, which include operators of electronic distribution platforms (EDP) and re-deliverers (i.e. businesses that purchase goods from overseas suppliers for delivery into Australia as part of a shopping or mailbox service that it provides under an arrangement with the consumer), will be required to register for and charge GST on sales of low value imported goods to Australian consumers.
Note that the existing processes to collect GST on imports above AU$1,000 by Australian Customs will remain unchanged. That is, goods with a customs value of more than AU$1,000 are subject to GST at the point of importation by the importer.
The amendments also include rules to prevent the goods from being subject to double taxation.
With the changes applying from 1 July 2018, overseas businesses that make sales of goods to Australian consumers need to consider if and how these changes will impact them. Affected overseas suppliers will need to implement system changes to manage their new Australian GST compliance and liability obligations. These system changes include the ability to: (i) obtain information to confirm whether the customer is an Australian consumer; (ii) calculation of applicable GST on sales; and (iii) ensure compliance with Australian invoice requirements. Overseas suppliers should also be reviewing their current sale agreements to ensure that they can recover GST from customers if required.
Under the new laws, there is also an option to register as a ‘limited registration’ entity which gives access to simplified GST registration and reporting obligations that should provide compliance cost savings. However, these entities will not be entitled to claim input tax credits for GST incurred on purchases and will not be able to obtain an Australian Business Number. Consideration should be given to determine the benefits and costs involved with such a registration.
Delays in addressing the above mentioned considerations may expose overseas suppliers to Australian GST liabilities with no ability to impose or recover any applicable GST from the Australian consumer.
For more information, please contact either Andrew Lam or Winson Liew of Hill Rogers.