Do you owe Goods and Services Tax (GST) in Australia for Low Value Import Goods (LVIG)?
There are a lot of letters being sent by the Australian Taxation Office (ATO) to companies outside Australia telling them they are being reviewed or audited for GST in Australia. GST is the Australian version of a sales tax or value added tax.
Many of these companies have nothing to do with Australia except that they are generally aware that they do sell some products to some Australian customers.
This is a new law in Australia. It starts from 1 July 2018 and it is a big deal here.
The first thing you are going to want to do is work out if you actually owe any GST. If you are being audited or reviewed, the ATO has found some information that tells them that they think you will owe GST. However, this does not mean that you do.
In this article we will give you a brief overview on how these rules work.
New GST position from 1 July 2018
From 1 July 2018 the following persons may have to pay GST on sales of low value goods to consumers in Australia if they process sales of goods worth $75,000 or more to Australian customers:
- overseas vendors,
- electronic distribution platforms (basically websites / online shops) and
- goods forwarders (basically fulfilment warehouses and places that collect and forward on goods)
The 10% GST impost on low value goods will only apply to sales made to Australian consumers which is defined technically to be purchasers not registered for GST in Australia or GST-registered purchasers that acquired such low value goods solely for private purposes.
The tricky part is that only one of these three will have to pay GST, and that will depend on the situation. You might be the vendor, but it might be the electronic distribution platform that needs to pay the GST, not you. That is where it gets tricky and the law is new so it is not entirely clear yet how this will play out. You don’t want to be paying GST if someone else owes it and not you.
The rules in detail
Under the new rules, an offshore supplier will normally be required to register, collect and remit GST where the following conditions are satisfied:
- there is an offshore supply of goods. This means goods are brought to Australia, and the supplier delivers the goods to Australia or procures, arranges or facilitates delivery
of the goods into Australia. In some circumstances, the operator of an electronic
distribution platform or a redeliverer is treated as the supplier (see below).
- the goods are “low value”. This requires that their customs value would have been $1,000 or less if they had been exported at the time when the consideration for the supply was first agreed. Tobacco or alcoholic beverages are excluded and continue to be treated as taxable importations, as under the former rules.
Eectronic distribution platform operators and redeliverers
An entity may be treated as the supplier if the entity is the operator of an “electronic distribution platform” through which the supply is made, or the entity is a “redeliverer” of the goods.
In these cases, the operator or redeliverer is liable to pay the GST. An entity is liable as operator or as redeliverer if it delivers the goods into Australia, or “procures, arranges or facilitates” the delivery of the goods into Australia, e.g. by providing offshore mailbox or shopping services.
If there are multiple redeliverers, generally the first redeliverer to deal with the customer is liable for the GST.
For the ATO’s views on when a redeliverer is responsible for GST on a supply of low value imported goods and who is responsible for GST when there are multiple redeliverers of supplies, see Law Companion Ruling LCR 2018/3.
Taxable importation
These rules will not apply if the supplier has taken reasonable steps to obtain information about whether the supply will be a taxable importation (which means GST is charged in a different way) and reasonably believes that the supply will be a taxable importation. In such a case, the normal rules for taxable importations apply and GST will be paid at the border. Taking “reasonable steps” generally requires the supplier to seek to obtain information, whether directly or by setting up business systems and processes, about how the goods are to be consigned.
Where a redeliverer is treated as the supplier, the reasonable belief must be held at the time it assists in bringing the goods into Australia. Where the operator of a distribution platform is the supplier, the belief must be held at the last time the consideration for the supply changes prior to export.
What to do
Previously low value goods (value less than $1,000) sold by overseas businesses were exempt from GST (GST threshold exemption of AUD$1,000) but this was giving overseas sellers an unfair advantage over local businesses which had to pay GST.
The Government changed the law to make the playing field even and is keen to ensure there is compliance.
If you need to pay GST, you will need to be registered for GST (there are options available for limited registration which is administratively easier) and will need to pay the GST. Otherwise, there will be significant penalties and fines applied. This is an area with significant audit activity by the ATO.
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We can help
We have significant expertise and experience dealing with cross border transactions, ATO audits and general compliance. If you need any help please feel free to contact us and we would be happy to discuss this with you.