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GST Update for Low Value Goods Entering Australia Effective July 1st, 2018

Currently, all goods imported from overseas valued at A$1,000 or less are exempt from GST. From July 1st, 2018, Australian GST at 10% will apply to sales of low value goods (LVG) imported by consumers into Australia. Threshold for Low Value Goods (LVG) entering Australia has been reduced to AUD 0 for all goods (excluding alcohol & tobacco products).

FAQs

Answers for the following questions have been provided by Aramex as guidance only. Please note that you are recommended to view the ATO website for relevant information related to your business prior to making any decisions/changes to your systems.

 

Q1. What is GST (Goods and Services Tax)?

A1. GST is a broad-based tax - charged at 10% in Australia - applicable on most goods, services and other items sold or consumed in Australia (the indirect tax zone).

 

Q2. What are the changes to Australia’s Low Value Threshold for goods entering the country?

A2. Currently, all goods imported from overseas valued at A$1,000 or less are exempt from GST. From 1 July 2018, Australian GST at 10% will apply to sales of low value goods (LVG) imported by consumers into Australia. Threshold for Low Value Goods (LVG) entering Australia has been reduced to AUD 0 for all goods (excluding alcohol & tobacco products).

 

Q3. As an overseas business supplier of Goods into Australia, how will this change affect my business?

A3. If the total supplies of goods into Australia on B2C basis exceeds A$75,000 in a 12 month period, overseas Businesses will be required to register for the Australian goods and services tax (GST) effective from 1 July 2018. Registered businesses will be required to pay GST to Australia Tax Office (ATO) via their GST Returns filed periodically. Businesses may include online shopping platforms, independent merchants and mailbox re-delivery service providers.

GST cost on LVG should be charged and collected from Consumers at point of sale by the Businesses.

Aramex as a Courier company will NOT be responsible for paying GST to Tax office in Australia and the responsibility to pay and file GST rests solely with the Merchant supplying Goods into Australia.

 

Q4. What will my business be required to do in order to comply?

A4. Businesses that meet the registration threshold of A$75,000 will need to:

1. Register with the Australian Taxation Office (ATO):

Use link - https://www.ato.gov.au/Business/International-tax-for-business/In-detail/Doing-business-in-Australia/Australian-GST-registration-for-non-residents/

Once registered, businesses will receive 12 digit ATO Reference Number (ARN) or 11 digit Australia Business Number (ABN) depending on whether Business registers for Simplified Registration (ARN) or full Registration (ABN).

2. Charge and collect GST on sales of low value goods (unless GST free) to Australian consumers. This is recommended to be charged to Consumers at point of sale.

3. Provide Aramex with the business’ ARN or ABN when shipping goods to Australian consumers.

4. Provide Aramex with Consumer ABN if registered. If goods are imported for personal use, Consumer ABN should not be used.

[This will only apply for B2B transactions. If the Consumer is registered for GST in Australia and Business has been provided with the Consumer ABN, Registered Business Consumer in Australia will file GST return for the GST due on Import – overseas Business will not pay GST on these imports but will still be required to provide Aramex with theirARN/ABN.]

5. Business needs to confirm to Aramex if GST is “PAID” – ie. Whether GST has been charged on the sale of each of the goods. This will be captured by Aramex on the Import declaration as a GST-paid exemption code.

Note that Aramex will provide the details, noted in 3 to 5 above on transaction and consignment level (as provided by the Business to Aramex), to ATO as per GST Law requirements. Please ensure you provide accurate details to Aramex.

6. Lodge GST returns to the ATO periodically. [Business will pay GST to ATO as per filed GST Returns based on LVG as charged to Consumer at Point of Sale.]

 

Q5: If my shipments as a Supplier into Australia are below the threshold of A$75,000 annually, do I need to charge/pay GST?

A5: If the total shipment value of goods exported to Australia does not exceed the threshold of A$75,000 annually, then no GST needs to be charged to Consumer by overseas Business and no GST registration/filing is required by the Business.

 

Q6: Will there be formal clearance process for LVG shipped into Australia? Will there be a delay in delivery of my shipments?

A6: There should be no formal clearance process and no delay is envisaged in clearance and processing times of shipments of LVG. However, Aramex will monitor the process and inform customers should there be any delay for any reason.

 

Q7: Why has the GST law changed to include GST on LVG?

A7: This legislation is aimed at goods sent to consumers and bought directly from international retailers. The majority of GST paid in business to business (B2B) transactions is claimed back when goods are on-sold to the end consumer.

The new GST 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 either   

    • worth over A$1,000

    • a tobacco product

    • an alcoholic beverage

  • Businesses 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 A$1,000 – GST will be charged at the border instead, along with Custom Duty and Clearance charges as under current processes (See below Q8).

  • under the current model, there will be no changes to GST payment on goods delivered for business purposes to business addresses (B2B businesses) and Recipient Business will be responsible for filing GST return on the Imported goods.

Q8: If there are Multiple supplies of low value goods (LVG) and high value goods (HVG) in a consignment on B2C basis, how will GST apply?

A8: Note that Businesses can only charge GST on LVG (not on HVG) per transaction. If the consignment value in total is valued at greater than A$1,000 and no GST has been charged for the transactions in the consignment, then this will be treated as a taxable supply of high value shipment. In this case Customs Duty/GST and clearance charges will be charged to the importer/purchaser at the border under existing processes.

If the consignment has a mixture of LVG and HVG, and GST has been charged by Business on the LVG only, then the Business needs to inform Aramex that the GST has been “PAID” for each of the LVG items where GST has been charged to the Consumer at Point of Sale. On Clearance, as the entire consignment value is greater than A$1,000, it will go through formal Customs process – however, GST will be payable by the Consumer/Purchaser at the border on the HVG item only, along with Custom Duty and Clearance charges as under existing processes.

 

In all cases, Aramex needs to be provided with the details as mentioned in A4 above on each transaction and consignment basis.

Q9. What is required of Aramex from ATO to comply with the new GST Law?

A9: For LVG shipped into Australia, Businesses will be required to provide Aramex on each shipment and consignment level, their ARN/ABN, Consumer/Recipent business ABN if available and whether GST has been charged to the Consumer by indicating “PAID” under the GST paid Exemption code field. These details will be provided by Aramex to the ATO.

 

Q10. How much time will it take to make my business compliant with this regulation?

A10. Registration is fairly simple. You can obtain ATO Registration Number (ARN) by logging into ATO website and following the registration process. Allow sufficient time to ensure your business website is capable of capturing GST payment at the point of sale and that the tax is invoiced to the end consumer accordingly. You will also need to provide the details as noted in Q4 to Aramex for all shipments of low value arriving in Australia on or after 1 July 2018.

 

Q11. Do these changes affect the rate of duty payable on low value shipments?

A11. The changes only relate to goods and services tax so there is no impact on custom duty which is payable as per current rules on high value goods over A$1,000 at the border.

 

Q12. What are the implications if I choose not to comply?

A12. The ATO has a range of compliance and enforcement measures at its disposal in respect to the new GST collection model. Further details are published on the ATO website www.ato.gov.au/AusGSTCompliance.

 

Q13. How can I find out more information?

A13. For more information on the changes, exemptions, and how businesses can register for an ARN, visit the ATO website:

https://www.ato.gov.au/Business/International-tax-for-business/In-detail/Doing-business-in-Australia/Tax-on-retail-sales-of-goods-and-services-into-Australia/?=redirected.

You can also contact the ATO via email at AustraliaGST@ato.gov.au or directly on +61 2 6216 1111 between 8.00am to 5.00pm (UTC+10:00), Monday to Friday.

 

Q14. How often must the vendor lodge GST returns to the Australian Taxation Office (ATO)? What is the frequency of ‘periodically’?

A14. ‘Periodically’ depends on whether a business has registered in the simplified system or in the full system.

If a business has registered in the simplified system then returns will be required to be lodged on a quarterly basis. More information: https://www.ato.gov.au/business/international-tax-for-business/gst-on-low-value-imported-goods/registration/

If a business has registered in the full system then the normal rules apply, depending on turnover. Lodgement frequency will either be on a monthly or quarterly basis. More information: https://www.ato.gov.au/business/gst/lodging-your-bas-or-annual-gst-return/options-for-reporting-and-paying-gst/

 

Q15. When a business charges and collects GST on sales, must the GST be explicitly mentioned in the shopping cart (in a breakdown of the total)?

A15. Generally, the ATO expects that most businesses would follow the concept of GST-inclusive pricing and display a GST-inclusive price at the point of sale.

The ATO’s view is that if the business is unsure as to whether Australian GST will apply, the business can display a message to the consumer about the potential for additional taxes to apply.

As soon as it is clear that GST applies, the business must show the GST-inclusive price. Practically, the consumer should know before they accept the price.

See paragraph 176 of the following for more information:

https://www.ato.gov.au/law/view/document?DocID=COG/LCR20181/NAT/ATO/00001&PiT=99991231235958#P176

 

Q16. Must GST charged on sales be explicitly mentioned on the commercial invoice (a breakdown of the total) or can the vendor state, for example: ‘AUD 500 total price of the product (GST included)’?

A16. Yes, as long as the price is either inclusive of GST or GST is shown clearly on the invoice. The documentary requirements are listed on the ATO website and in the law companion guide.

See paragraph 194 of the following for more information:

https://www.ato.gov.au/law/view/document?DocID=COG/LCR20181/NAT/ATO/00001&PiT=99991231235958#P194

 

Q17. Can the business choose to pay GST on behalf of the consumer? For example, not charge GST on the sale but lodge GST periodically to the ATO anyway?

A17. For supplies made by Electronic Distribution Platforms and merchants, the GST is actually 1/11th of the price charged. See paragraph 171 of the following for more information: https://www.ato.gov.au/law/view/document?DocID=COG/LCR20181/NAT/ATO/00001&PiT=99991231235958#P171

There are special rules for re-deliverers. See paragraph 44 of the following for more information: https://www.ato.gov.au/law/view/document?DocID=COG/LCR20183/NAT/ATO/00001&PiT=99991231235958#P44