As the clocks went forward this week and heralded the coming of warmer days, our thoughts turned to what to do in the summer holidays. However, if you are an overseas seller of low value imported goods to consumers in Australia, there is something else to start planning for.
From 1st July 2018, under new rules, Australian GST will apply to offshore supplies of low value goods (LVIGs) imported into Australia by customers who are private individuals. This means that if you are a non-resident seller that makes sales or facilitates the delivery of LVIGs to Australian consumers, you will have to start collecting the GST on your supplies of LVIGs at the time of sale.
What are low value goods?
LVIGs are physical goods with a customs value of AUD 1,000 or less (excluding tobacco, tobacco products or alcoholic drinks) and at present, these goods enter Australia free of GST charges. Goods with a customs value over AUD 1,000 are subject to import GST at the border and this mechanism will continue to apply.
How are suppliers impacted?
Affected businesses will have to register and charge GST on their supplies of LVIGs to consumers if their current or projected annual turnover reaches the GST registration threshold of AUD 75,000. They will charge the 10% Australian standard rate of GST on their supplies at the time of sale of the goods and be responsible for paying it to the Australian tax authorities. Import GST will not be incurred when the goods arrive in Australia.
If supplies of LVIGs are made through an electronic distribution platform, the GST liability for the supplies is shifted from the supplier to the EDP operator. In certain situations, redeliverers may be required to account for the GST.
Non-resident suppliers may choose to register electronically through the simplified registration procedure. However, taxpayers registered via this system cannot issue tax invoices or recover input tax credits and hence all business activities undertaken by impacted businesses will have to be considered to ensure the correct type of registration is obtained.
Now is the time to get in touch with your usual contact to discuss the practical implications of these changes for your business.