New GST rules in relation to low value imported goods

From 1 July 2018, amendments to the GST legislation in Australia will require overseas sellers, operators of online marketplaces and re-deliverers to remit GST on sales of low value imported goods (LVIGs) to Australian consumers (Australian residents not registered for GST).

Under the current legislation, overseas businesses selling LVIGs into Australia are not required to charge GST (at 10%) on the same goods that Australian retailers are required to charge GST on. The new legislation will now require the overseas businesses to charge GST which is intended to level the playing field for Australian businesses.

The responsibility to remit GST to the Australian Taxation Office (ATO) will be with the supplier of the LVIGs and not the Australian consumer. As a result, the ATO has been engaging with impacted suppliers to ensure they comply with the new rules.

New law

Sales of LVIGs that have a customs value of AU$1,000 or less to Australian residents who are not registered for GST will be subject to GST from 1 July 2018. Where an Australian resident is registered for GST, sales of LVIGs will not be subject to GST where the resident provides its Australian Business Number (ABN) and a declaration confirming they are registered for GST to the overseas supplier.

Under the new legislation, there will be no changes to the GST treatment of low value goods that are GST-free (such as medical supplies) or input taxed (such as precious metals).
Who is affected?

The amendments will affect entities that make supplies of goods into Australia where:

  •  the supply is an offshore supply of low value goods; and
  •  the recipient acquires the supply as a consumer.

Specifically, the following types of entities that make or facilitate sales or delivery of LVIGs to Australian consumers will be affected by the new law:

  •  sellers;
  • operators of online marketplaces (electronic distribution platforms); and
  • re-deliverers.

A re-deliverer is a business that provides a service to assist in purchasing goods from overseas suppliers. A re-deliverer will generally be a mail, post and / or package forwarder.

An entity will be an operator of an online marketplace if it allows other entities to make supplies of LVIGs to Australian consumers via an electronic distribution platform (EDP) . An EDP is generally an online marketplace such as Alibaba, Asos or Amazon.

The current GST registration turnover threshold of $75,000 will apply to supplies covered by the new legislation.

Key take away

The amendments in relation to the supply of LVIGs are a relatively major change to the Australian GST system, not only for Australian consumers, but also for overseas businesses making supplies of LVIGs to Australia. It is important that these businesses start to consider whether their business is captured under the new rules and, if so, what changes to its commercial practices, reporting requirements and internal systems need to be made.