The GST and Low Value Goods

What is the GST?

The ATO has announced a new tax law on the goods and services tax (GST) before the 2018 tax season. You may be wondering, what is the GST? The GST is a tax of 10% on most goods, services and other items that companies or other entities sell to Australia. We actually consume most of these goods!

New Tax Law

From 1 July 2018, the GST will affect businesses that sell low-value goods who import to consumers in Australia. Low-value goods have a customs value of A$1,000 or less when the price is under the agreement with the customer. However, any tobacco products or alcoholic beverages do not have the GST tax since they will be charged at the border.

Here’s the breakdown of the changes.

  1. Once consumers purchase goods and bring them into Australia with the help of the supplier, with goods at the price of A$1,000 or less, are now connected with Australia. 
  2. The ATO will treat an operator of an electronic distribution platform (EDP); such as an online marketplace, as the supplier of any low-value goods. This applies when companies import goods to Australia with the help of the supplier or operator.
  3. Re-deliverers are now suppliers of low-value goods when deliverers send goods outside of Australia and then re-deliver them into Australia using a shopping or mailbox option under agreement with the consumer.
  4. Any non-resident supplier who is in connection with Australia will be able to access the simplified registration and reporting system.

For a better understanding of the terms used for each reform, click here to go to the ATO page.

What do I need to do?

Now, if you are a merchant who sells goods, are a part of an electronic distribution platform (EDP) like operating a marketplace that functions online, or a re-deliverer that helps to bring goods to Australia, you have certain requirements under the new tax law.
If you meet the threshold of A$75,000, you need to do the following:

  1. Register for the GST
  2. Apply GST on the sales of low-value imported goods
  3. Lodge tax returns to the ATO

 

Here are some examples.

For merchants: KIKOS Co. is a merchant in China that imports laptops, phones, and other electronic items to Australia. Since it meets the $75,000 threshold it is mandatory that it registers for the goods and services tax in Australia.

Lucy buys a laptop from KIKOS Co. and requests them to ship it to Australia. KIKOS then realizes that the tax will apply and then includes it with the price of the laptop. After this, Lucy pays $410 and the company will return the amount of $41 on the sale to the ATO in its GST return.

For EDP Operators: Darcy Buys is a website (online marketplace) that registers for the GST and allows consumers to buy goods from merchants.

Lucy then uses Darcy Buys’ to buy a computer from KIKOS, a merchant outside of Australia, for $990. Then, KIKOS arranges the item to ship to Australia. Darcy Buys is then the supplier due to its responsibility of the GST and then returns GST of $99 on the sale to the ATO. KIKOS does report the GST to the ATO and does not count the sale for the GST.

For re-deliverers: Frilly, a store in the United States does not ship their products to Australia. Jenny purchases a dress that costs $200. Ship-It Co. is a company that ships items to outside countries like Australia. Jenny buys the dress and then uses Ship-It Co. to ship the dress to a United States address.

Jenny pays Ship-It Co. $44, including the $4 GST, for shipping her dress to the United States. In addition, Jenny will also pay $20 in GST to Ship-It Co. for the dress, which is 10% of the dress’ cost from Frilly. Overall, Ship-It Co will return the sum of $24 in GST to the ATO.

 

Did you forget to lodge your 2017 tax return?

Regardless, 1 July 2018 marks the first day of the 2017-2018 tax season and is approaching quickly. That being said, if you haven’t already lodged your 2016-2017 tax return, create an account with us by clicking here!

 

GST

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