GST does not currently apply when goods are imported into Australia if they have a customs value of $1,000 or less and the supplier is not registered or required to be registered for GST. Arguably this places Australian retailers / suppliers at a competitive disadvantage compared with foreign suppliers that are not required to be registered for GST and creates a risk to the integrity of the GST system. In the 2016/17 Federal Budget the Government announced plans to remove the $1,000 exemption for certain supplies of low value goods to Australian consumers. Treasury has now released exposure draft legislation and explanatory materials relating to the new rules. From 1 July 2017 foreign suppliers and goods forwarders will be required to register for GST in Australia if their GST turnover is at least $75,000 per year.
The rules will be amended to ensure that a supply is treated as being connected with the indirect tax zone (i.e., Australia) if it is a supply of low value goods to a consumer that involves the goods being brought to Australia with the assistance of the supplier. Someone will be treated as a consumer if they are not registered for GST or they do not acquire the goods solely or partly for the purpose of an enterprise that is carried on in Australia. If the recipient is registered for GST and acquires the goods partly for a creditable purpose may be subject to the reverse charge provisions contained within the GST system. While the Government is still working on the details of the new rules, this is something that should be discussed with any clients who could potentially be impacted by the changes, particularly foreign businesses that deal with Australian consumers. These businesses will need to start making arrangements to ensure that they comply with the new rules and understand the practical implications for their business operations.