GST on low value imported goods
From 1 July 2018, the Goods and Services Tax (GST) will apply to overseas sales of low value goods to consumers in Australia, where the goods have a customs value of less than or equal to AUD1,000. The AUD1,000 thresholds for GST, duty and reporting at the border will remain.
For tax purposes these are treated as domestic sales and not importations.
- There will be no changes to GST collection at the border for low value goods.
- There will be no changes to border clearance processes.
Overseas vendors with Australian sales that are subject to GST of AUD75,000 or more per annum, must:
- register with the Australian Taxation Office (ATO)
- charge and collect GST on sales of low value imported goods to consumers (unless they are GST-free or sales of alcoholic beverages and tobacco products)
- lodge returns with the ATO and make payments to them
- ensure certain information is included in the customs documents for the goods.
The ATO is communicating, educating and assisting affected businesses to comply with the measure.
Affected businesses may be:
- merchants— who sell goods directly to consumers
- electronic distribution platforms (EDPs)— such as websites that provide a marketplace for merchants to sell goods to consumers
- redeliverers— businesses that are engaged by consumers to provide shopping or mailbox services e.g. a service that offers consumers a specific mailing address overseas, and then repackages and forwards the goods onto the consumer.
Measures are in place to prevent GST being charged twice. The new law is designed so that businesses:
- will not charge GST on a sale when GST will be charged at the border, because an item is
- worth over AUD1,000
- a tobacco product or alcoholic beverage
- will not need to charge GST on a sale if it is clear that multiple goods will be shipped to Australia in one consignment worth over AUD1,000 as per the current threshold.
If GST is paid on a sale and then again at the border, the importer (or consumer) will need to seek a refund of the GST from the retailer.
For more information see Preventing GST from being charged twice on the ATO website.
Changes to the ICS
Overseas businesses that are registered for GST and sell low value goods to Australia, are required to provide all relevant information on customs documents, e.g. import declarations or self-assessed clearance documents.
To support the ATO and facilitate the movement of low value goods across the border, changes have been made to the Integrated Cargo System (ICS) to collect additional information, including:
- an additional field on import declarations and all forms of self-assessed clearance (SAC) declarations, including those made on a cargo report, to allow the capture of a Vendor Registration Number (Vendor ID) – this is either an Australian Business Number or ATO Reference Number
- an additional field on air and sea cargo reports to allow the capture of an importer identifier (if an ABN has been quoted)
- an additional GST exemption code for use on an import declaration when GST has already been paid on imported goods.
This will also help prevent double taxation and assist with data collection.
Overseas businesses who are suppliers for GST purposes as well as transporters/customs brokers may need to prepare your business systems and processes for the changes to the ICS before 1 July 2018.
See also External Release Notes 17.04.02.
Inquiry into collection models for GST on low value imported goods
As part of the Act which legislated for the collection of GST on low value imported goods from 1 July 2018, the Australian Government asked the Productivity Commission to undertake a four month inquiry into models for collecting GST on low value imported goods.
The final Inquiry Report was handed to the Australian Government on 31 October 2017, then tabled in Parliament and publicly released on 9 November 2017.
The main finding of the inquiry, at this time, is that the legislated model—the vendor collection model—is the most feasible among the alternatives at this time.
Low Value Import Threshold Taskforce
The changes to the GST law to apply to overseas sales of low value goods to consumers in Australia, were based on prior analysis of the retail industry. On 4 November 2011, the Productivity Commission released its Final Report on theEconomic Structure and Performance of the Australian Retail Industry.
- Recommendation 7.1 stated that, in principle, the low value threshold exemption for GST and duty on imported goods should be lowered to promote tax neutrality with domestic sales. However, the Government should not proceed to lower the threshold until it is cost effective to do so.
- Recommendation 7.2 of the report stated: 'The Government should establish a taskforce charged with investigating new approaches to the processing of low value imported parcels, particularly those in the international mail stream, and recommending a new process which would deliver significant improvement and efficiencies in handling.'
In response to Recommendation 7.2, the taskforce was established comprising an independent expert panel. The taskforce released its Final Report on 6 September 2012, and on 3 December 2012, the Government's interim response was released.