Australia has introduced goods and services tax (GST) legislation relating to ‘low value’ imported goods and services
There are two parts to the regime:
1. GST on digital products and services
From 1 July 2017, GST was applied to digital products and services imported into Australia (sometimes called ‘the Netflix tax’). It applies to things such as music bought online and digital streaming services. Implementation has already taken place.
2. GST on physical ‘low value’ goods
From 1 July 2018, GST will be applied to imports of ‘low value imported goods’ in certain circumstances where it has not previously applied. This means that low value goods (LVG) valued under A$1000, which are not currently subject to GST, may be subject to GST at importation. This is likely to have the most impact on New Zealand exporters.
Note that the legislation will not affect customs duty, which is still not payable on goods below the A$1000 threshold. More details are set out below.
What are the likely impacts on New Zealand exporters of LVG to Australia?
• GST will not be payable on all transactions including LVG. It only applies to “business to consumer sales” in general so will not apply to sales to Australian entities quoting an ABN where the goods are being used for the business of that entity.
• Sales of goods already exempt from GST (including some food) will still be exempt from GST.
• Some LVG have always been subject to GST on import regardless of value, such as tobacco and alcohol. Those arrangements do not change.
• In all cases where GST will now be payable on retail sales into Australia, the party responsible for the sale will need to calculate, collect and remit the GST properly to avoid recovery actions, penalties and interest. The obligation falls to different persons depending on the transaction.
• If an entity takes delivery of goods in the country of export (for example, New Zealand) and then declares the goods to the purchaser in Australia who ordered the goods, then that entity who receives the goods and delivers the goods is a “Re-Deliverer”, who then becomes liable to charge the GST to the purchaser.
• If an entity arranges for retail sales online in a specific way, that entity could be classified as an ‘electronic distribution platform’ (EDP). This would require them to register for GST, levy, collect GST and remit it back.
• Exporters who sell through online retailers that are EDPs should expect and accommodate changes in their relationship with the EDP. This could include being required to provide additional evidence of sales to check the GST being charged is correct, having to pay an indemnity if it is required to pay additional GST, or having an indemnity against penalties if the transaction is not reported correctly.
• Exporters who sell direct will need to include GST in their prices and even though they may not need to register, they may choose to. Otherwise, the GST is a new cost of business along with the compliance issues.
• If the GST on sales by an exporter or EDP or Re-Deliverer over a 12-month period is over AU$75,000 the exporter must register for GST.
• When advertising goods for sale in New Zealand, exporters will need to identify the GST charges payable if the goods are being sent to Australia, which may require adjustment of ‘online price calculators’.
Applying and collecting GST on physical ‘low value’ goods
The collection regime is effectively a two-tiered system, depending on the value of the imported goods – if the customs value is A$1000 or less, the supplier is potentially liable to remit GST to the ATO. For goods with a customs value of more than A$1000, GST will continue to be payable at the point of importation by the importer.
The ‘Supplier’ is the business who supplies or assists in getting goods to consumers in Australia, and includes Merchants, Re-Deliverers and operators of EDP. As set out above, if a Supplier’s projected ‘Annualised GST Turnover’ (gross income on sales into Australia, less GST) is AU$75,000 or above (or AU$150,000 for a not-for-profit entity), they must register for GST and account for GST on all sales of low value goods.
If you are exporting goods to Australia and would like to discuss these issues further, please contact us.