New Australian law applying GST to imported digital products and services will take effect from 1st July 2017
On 16 February 2017, the Government introduced law to Parliament that will amend the law to extend Goods and Services Tax (GST) to low value imports of physical goods imported by consumers from 1 July 2017.
A vendor registration model will be used and suppliers with an Australian turnover of $75,000 or more in a twelve month period will be required to register and charge GST.
The existing processes to collect GST on imports above $1,000 at the border are broadly unchanged.
The change was designed to harmonise tax rules for Australian and foreign retailers after local stores blamed sluggish sales on their overseas competitors having an unfair price advantage on goods priced below $1000.
According to Treasury, the measure will see a bump of $300 million in GST revenue over the forward estimates period, not accounting for collection expenses.
Question: How is the $75,000 registration threshold calculated?
Businesses will be required to register for GST if their GST turnover in Australia exceeds $75,000 (which will include sales of low value imported goods). However, if they do more than $75,000 of sales into Australia, but some of these sales are through an electronic distribution platform (a digital marketplace) and the balance of their direct sales is $75,000 or less then they will not be required to register for GST. Instead, the electronic distribution platform will register for and charge GST, provided it has more than $75,000 of Australian turnover.
Question: How is GST applied by the vendor, electronic distribution platform or goods forwarder?
GST is applied on each taxable low value item and any shipping or insurance connected with that purchase. Example: Blueco (which sells over $75,000 of goods to Australia) sells an item to a consumer in Australia for $160, including shipping and insurance. Blueco will be required to remit 1/11th or $14.55 to the ATO in relation to this sale at the end of the reporting period.
Question: I am a business in Australia that buys goods from an overseas website or call centre. What does this change mean for me?
The cost of low value goods used solely in your business will remain unaffected. An Australian business registered for GST will need to inform the overseas vendor of its ABN to buy low value goods for use in the business, so that GST is not applied to the sale. If you are a business that is not registered for GST, you will be treated as a consumer and not be able to recover the GST paid, which is the same as what happens for goods you purchase in Australia
Question: I am an overseas supplier that sell goods to consumers in Australia. What does this change means for me?
If you sell less than $75,000 of low value goods to consumers in Australia (or other supplies subject to GST) per year you will not be required to do anything. However, if you sell $75,000 or more of low value goods to consumers in Australia (or other supplies subject to GST) per year, such as through your website or call centre, then you will be required to register for and pay GST on those sales.
For further information contact the Australian Taxation Office: https://www.ato.gov.au/Business/International-tax-for-business/In-detail/Doing-business-in-Australia/International-taxation-of-goods-and-services-supplied-to-Australia/