As part of the Federal Budget earlier this year, the Australian Government announced that GST will be extended to low value goods imported by consumers from 1 July 2017.

The Australian Government has now released draft legislation for comment (on Friday 4 November 2016). The intent of the measure is that low value goods imported by consumers will face the same tax regime as goods that are sourced domestically. In essence, overseas suppliers that have an Australian turnover of A$75,000 or more will be required to register for, collect and remit GST (at the rate of 10%) for low value goods supplied to consumers in Australia, using a vendor registration model.

New taxing nexus - low value goods

  • A new taxing nexus treats supplies of goods valued at A$1,000 or less as "connected" with the Indirect Tax Zone (ITZ) and subject to GST, if the goods are purchased by consumers and are brought to the ITZ with the assistance of the supplier. This includes both where the supplier delivers the goods and where the supplier procures, arranges or facilitates the delivery of the goods into the ITZ. However, it would not include merely making the goods available for collection or providing contact information for otherwise unrelated transport companies.
  • A supply of goods will be taken to be "low value goods" if the customs value of the goods would have been A$1,000 or less, had the goods been imported at the time when the consideration for the supply was first agreed between the parties.
  • The proposals note that even if a supply of goods satisfies all of these requirements, it will not be connected with the ITZ as a result of the amendments if the supplier reasonably believes when selling the goods that they will be imported as a taxable importation (e.g. the goods are valued at more than $1,000); and the goods are imported as a taxable importation. A reasonable belief could be based on specific information about the shipment or general knowledge about how a supplier’s goods are usually shipped. It can also include knowledge that a supplier has business processes that allow them to know if the goods purchased will be consigned in the one shipment with a customs value exceeding A$1,000.


Identifying Australian consumer

  • A "consumer" in this context refers to a recipient of a supply that is not registered for GST or if the recipient is registered for GST, it does not acquire the goods solely or partly for the purposes of an enterprise that the recipient carries on in the ITZ. The supplier has the evidentiary burden to satisfy itself that it is supplying to a "consumer".
  • Consistent with the changes in relation to cross border supplies of things other than goods or real property to Australian consumers (applying from 1 July 2017), suppliers can confirm that an entity is not a consumer by requesting that GST registered businesses provide their Australian Business Number (ABN) and declare that they do not acquire the goods solely or partly for the purposes of an enterprise they carry on in the ITZ. Penalties apply to entities that misrepresent their status for the purposes of avoiding GST applying to a supply to them.
  • Entities acquiring goods that are registered or required to be registered for GST and acquire low value goods where the acquisition would not be fully creditable, may be subject to a reverse charge.


Supply of low value good through an electronic distribution platform

  • Special rules will apply where the low value goods are supplied through an electronic distribution platform (e.g. a marketplace), to shift the GST responsibility to the operator of the platform (rather than the supplier of the good). In this respect, where goods are sold through an electronic distribution platform, the operator of the platform is treated as:
    - the supplier of the supply;
    - having made the supply for the consideration for which it was made; and
    - having made the supply in the course or furtherance of an enterprise the operator carries on.
  • This is consistent with the electronic distribution platform rules applying as part of the changes to the cross border supplies of things other than goods and real property to Australian consumers, coming into effect from 1 July 2017 (read our previous alert on these changes, here). However, unlike inbound intangible consumer supplies, supplies of goods via an electronic distribution platform, need not be made by means of electronic communication.
  • The amendments also make a minor amendment to clarify the scope of the electronic distribution platform rules previously enacted. In particular, there is a requirement that the entity must not set the terms and conditions under which the supply is made. There was some potential ambiguity about the degree of influence an entity must have over the terms and conditions in order to prevent this condition being satisfied. The amendments revise the language of this requirement, making it clear that an entity must not, whether directly or indirectly, set any of the terms and conditions.


Special rules for goods forwarders

  • If a supply of low value goods is acquired by a consumer and brought to the ITZ with the assistance of a goods forwarder, then the supply is treated as connected with the ITZ and responsibility for any GST liability in relation to the supply becomes the responsibility of the goods forwarder.
  • Where more than one entity meets the requirements to be a goods forwarder in relation to a supply, priority rules apply to ensure that only one goods forwarder is treated as the supplier for each supply.
  • The priority rules provide that the first entity that has entered into an arrangement with the recipient in relation to the supply is treated as the goods forwarder that has the GST obligations for that supply. If no goods forwarder has entered into an arrangement with the recipient, then the goods forwarder that first entered into an arrangement with an associate of the recipient relating to the supply will be treated as the supplier. If there is no such entity, then the first goods forwarder to enter into an arrangement for the activities that make them a goods forwarder is treated as the supplier.
  • In the event that none of the above priority rules are satisfied, the goods forwarder that is treated as the supplier is the entity determined in accordance with the rules specified by the Commissioner by legislative instrument.


Administrative elements 

  • A non-resident can elect to be a "limited registration" entity in order to simplify the compliance requirements. Again, this is consistent with the recent changes to cross border supplies of things other than goods or real property to Australian consumers.
  • Limited registration entities have simplified registration and reporting requirements. However, they are not entitled to make creditable acquisitions; are not entitled to hold an ABN and do not have their registration recorded on the Australian Business Register. Additionally, they must have a quarterly tax period regardless of their turnover and are not able to elect to have monthly tax periods or have the Commissioner determine their tax period and must not elect to pay GST by installments.
  • To ensure that GST does not apply twice to low value goods that are subsequently imported to the ITZ, importations of goods will be non-taxable importations if a supply of the goods are taxable at the time of the supply and the importer notifies the Commissioner of Taxation in the approved form at the time of the importation that the supply was taxable. Further clarification will be needed as to the approved form and the procedures for this process.



The proposed changes are another step by the Australian Government to ensure that GST applies with respect to the destination principle, taxing final consumption by Australian consumers. The media statement accompanying the draft legislation notes that “Australia will be the first country to apply GST to the importation of low value goods using a vendor collection model, with jurisdictions such as the European Union moving in the same direction”.

As these rules are the first of their kind, we anticipate there are many elements requiring further clarification, in particular with respect to the transitional rules and how suppliers are to determine the applicability of GST where a sale is made before commencement of the new rules, but the importation made after 1 July 2017.

Interested parties are invited to comment on the exposure draft legislation and explanatory material. Closing date for submissions is Friday, 2 December 2016.

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