The Australian connection – GST & low value goods.

From 1 July 2018, low value imported goods supplied to consumers will be subject to GST.

Amendments to the GST legislation remove the GST exemption previously applied to imported ‘low value goods’. Low value imports will be treated as a taxable supply ‘connected with Australia’.

This means suppliers, online retailers or electronic distribution platforms, and re-deliverers may all need to consider adding 10% to the price paid for imported goods by Australian consumers.

What are ‘low value imported goods’?

Low value imported goods have a customs value of $1,000 or less.

Supplying imported goods to a consumer is a ‘taxable importation’ if the customs value of the consignment exceeds $1,000. Taxable importations will continue to be subject to GST charged at the border.

To avoid double taxation and potential penalties, suppliers must understand their obligations, particularly regarding consignments of multiple items or orders not shipped in a single consignment.

Are you required to register for GST?

Offshore businesses must register for GST if the business has current or projected annualized GST turnover of at least A$75,000 in a 12 month period. From 1 July 2018 the GST turnover must include low value imported goods (which are a low value supply).

What must you do once registered?

From 1 July 2018 registered businesses must add 10% GST to the price charged for goods which are a ‘low value supply’. Suppliers must ascertain the total customs value, and information about how the goods will be shipped, to determine if GST should be applied.

In addition there will be new reporting requirements involving lodging returns with the ATO and making payments on GST collected to the ATO.

When do you add GST?

Goods shipped in a single consignment (or a single item) with a customs value over A$1,000 will be:

• a taxable importation; and
• subject to GST payable at the border.

If a consumer purchases multiple low value items and the total customs value does not exceed $1,000:

• it will be a taxable supply (supply connected with Australia);
• a GST registered supplier should add 10% GST to the price charged to the consumer; and
• the supplier must return GST on the goods.

If a consumer purchases multiple low value items with a total customs value exceeding $1,000 then:

• this is likely to be a taxable importation;
• the supply is subject to GST at the border; and
• GST should not be added to the price charged to the consumer as this will cause double charging of GST.

However, the supplier must take reasonable steps to obtain information, and then form a reasonable belief that the goods will be imported as a single consignment, or multiple consignments but each with a customs value exceeding $1,000.

Several exceptions apply to these general rules and it is important that suppliers, including electronic distribution platforms, and redeliverers are aware of the requirements and have business systems in place to determine the GST treatment of goods supplied to Australian consumers.

Get in touch with us to discuss how your business can prepare for these changes by 1 July 2018.