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30 May 2018

GST on Imported Low Value Goods

If you are importing low value goods after the 1st July 2018 you need to be aware of the new Goods and Service Tax (GST) collection process.

GST on imported goods over AUD$1000 (Higher Value Goods) has been applied for some time by the Australian Tax Office (ATO), where these higher value goods have been stopped by customs until the payment of GST and other duties have been made by the importer.  This also applies to all Goods that are classified as tobacco product or alcoholic beverage regardless of the value.

However as at the 1st of July 2018, GST will apply to consignments of Low Value Goods (LVG) to the value of AUD$1000 or less.  

What does this mean to you and your business

While the tax laws can be complex and somewhat confusing for the average business person, this article has been created to provide a basic understanding associated with GST on low value imported goods.

A little background to start with.  The ATO has been keen to crack down on oversea businesses avoiding the payment of GST on sales created in Australia. In recent times you may have noticed that GST now applies to your monthly Electronic Distribution Platform (EDP) service invoices from Google, Apple etc. The same is now being applied to low value imported goods that are typically processed through a mail delivery service.

To implement the collection of GST on LVG, a number of changes had to be made so that the Australian Government can keep tabs on the collective value of goods imported by each overseas supplier and if GST has been applied at time of purchase to avoid double taxing. To facilitate this the Integrated Cargo System (ICS) has been changed to record the suppliers ABN or Vendor ID, GST codes etc on the Self-Assessed Clearance (SAC) declarations.

How it will work and documentation.  Overseas suppliers doing more than AUD$75,000 of trade into Australia will need to register with the ATO for GST. In effect, these suppliers will need to quote to the Australia purchaser, a cost price including GST if registered for GST.

When you purchase such LVG items from registered GST suppliers, the parcel will be considered as a domestic sales and not an importation.  So in-effect, the main consideration is that you have a GST credit on business related goods and any cost / price adjustment.

Your supplier will need to include an invoice that clearly shows any GST paid in the purchase price.  

The twist in all of this is that while GST is normally an ATO jurisdiction, on importation it is the jurisdiction of the Australia Custom Services (Home Affairs) to collect. This means that if the overseas supplier is under the $75,000 GST threshold or not registered for GST, Customs may request the importer to pay GST before goods are release.  In addition, Customs may question the value of the goods and request the importer to pay any additional GST and duties that may apply. (See the CV link below for Customs Valuation)

Shipment by post of LVG - Goods that arrive by mail and have a declared or assessed to be LVG will not incur duty, taxes beyond the GST paid or other charges, unless they are alcoholic beverages or tobacco products. Once cleared by Customs, these goods will be delivered to the importer by Australia Post.  The same applies to DHL, FedEx etc as it does with Australia Post
Other Shipment Methods of LVG - If your goods are not being forward from the port of entry, other fees may apply such as port fees to remove the supplied goods from shipping containers and arranging freight forwarding. These fees are determined by private stevedore and freight handling operators.
Online Sales of LVG - Suppliers, including merchants, electronic distribution platform operators and re-deliverers including on-line marketplaces like eBay and Amazon will need to register with the ATO, collect GST at the point of sale and remit that GST to the ATO.

Non LVG or Goods with a value of AUD$1000

Shipment with a value over AUD$1000 (See notes on Custom Value below) will be held by Customs until payment of GST, Duty and other fees are covered by the importer. The Importer will receive notification of the arrival of the goods and details to process payment. It is important that all Customs required information is provided to ensure goods are promptly released and forwarded. Some importers will engage the services of a Freight Forwarding and Customs Clearance Agent to process the relevant documentation and fees.

The majority of goods will attract a 5% duty rate depending on the goods and any free trade agreements. GST is applied on the value of the Goods (aka the Customs Value - CV) + Duty + Transport and Insurance (T&I).

If the Customs value CV of imported Goods = AUD$1,500.00
Then the Customs Duty @ 5% of the AUD$1,500 CV = AUD$75.00
Assuming the international transport and insurance T&I = AUD$125.00
Then the Value of the Taxable Import (VoTI) = CV + Duty + T&I = AUD$1,700.00
GST = 10% of the VoTI = 10% x AUD$1,700 = AUD$170.00
Therefore the Total Duty plus GST payable = AUD$245.00
Further details :
PDF on CV - Valuation Of Imported GoodsCustomers contacted 1300 558 099
ATO GST for Low Value Imported Goods