GST on low value goods – how it impacts non-resident businesses with Australian customers

The change

From 1 July 2018, supplies of low value goods (with a value of AUD1000 or less) by offshore vendors to Australian consumers, will be taxable supplies and the vendor may need to register for Australian goods and services tax (GST) with the Australian Taxation Office (“ATO”).

Where the offshore vendor’s supplies to Australian consumers exceeds AUD75,000 per financial year, they will be required to charge, collect and remit GST to the ATO.

An Australian consumer for the purposes of this change is an individual or entity that is a tax resident of Australia and not registered for GST.

These measures will not affect the current GST treatment of taxable importations.

“Electronic distribution platforms” and redeliverers”

Where the supply is made through an “electronic distribution platform” (“EDP”) or by a “redeliverer”, this entity will be deemed to be the supplier and it will be responsible for the GST obligations.

At this stage, it is unclear whether an offshore vendor that makes supplies directly to Australian consumers and through an EDP will have both amounts count towards the GST threshold.

How to comply

Most importantly, vendors need to register for GST if it will (or it believes that it will) supply over AUD75,000 of low value goods to Australian consumers. Vendors will need to ensure their IT systems can track supplies of under AUD1000 to Australian consumers.

There are two options for registration:

  • Complete the normal Australian GST registration process. This will also allow the vendor to claim GST credits on purchases it makes from Australia.  The vendor will need to lodge a Business Activity Statement (“BAS”) at regular intervals recording its sales and purchases, and lodge this with the ATO. To do this, the vendor will need an Australian Business Number (ABN”); or
  • The vendor can complete a “simplified GST registration” which will not entitle them to claim any GST credits. The vendor will need to set up an AUSid, which will allow them to register for the simplified BAS and be issued with an ATO Reference Number (“ARN”), which they will quote when preparing their activity statements.

Registered offshore vendors need to ensure their Australian customs documentation includes the following requirements:

  • Their ARN or ABN
  • The customer’s ABN (if this has been provided);
  • Indicates whether GST has already been paid on the imported goods

How it will be enforced

Vendors may have received a letter from the Australian Taxation Office advising that they need to register for GST and begin charging it on supplies to Australian consumers from 1 July 2018.

The ATO has a list of targeted approximately 5,000 suppliers and will monitor registrations by these businesses. It will likely seek an explanation from those vendors who do not register.

The ATO has indicated that it will use all of its available enforcement powers to encourage compliance with the new laws, including but not limited to:

  • Communicating with overseas tax authorities regarding non-compliance with Australian taxation laws;
  • Issuing default assessments;
  • Garnisheeing payments from Australia;
  • Seizing vendor assets located in Australia;
  • Commencing proceedings against offshore vendors in Australian Courts;
  • Geo-blocking of vendor websites.

How we can help

William Buck has significant experience in assisting overseas businesses in relation to their Australian tax position. We can advise you in relation to determining if you have GST obligations in Australia and whether there are options for managing those obligations. We can also assist with the initial registration process and the ongoing compliance requirements.