To date, GST at the rate of 10% only applies to the importation of goods in Australia with a value of AU$1,000 or more. This means that online sales of goods made by off-shore vendors are generally not subject to GST when made to Australian consumers.

The Australian Treasurer recently released a statement that the Australian States and Territories have agreed to broaden the Australian GST to cover overseas online transactions of goods under AU$1,000. 

The proposal broadly relies on a vendor registration model as a method of collecting the GST and will remove the existing threshold for goods to zero. 

This change goes hand-in-hand with recent proposals to impose GST on sales of digital products and services generally by off-shore vendors (the draft legislation for digital products is currently being developed).

Impact on off-shore vendors

The change may require off-shore vendors to register, collect and report GST. The Australian Treasurer noted that “overseas suppliers will be the ones who charge, collect and remit the GST for digital and physical products. As is the case in Australia, only vendors with an Australian turnover of AU$75,000 will need to register and charge the GST”. 

For off-shore vendors, this also means that contracts for sales into Australia (whether it be for goods or intangibles) may need to contain appropriate wording allowing them to “gross-up” the purchase price on account of the GST. Such provisions are currently standard in onshore sales contracts. 

Timing

Draft legislation has not yet been released. The Treasurer announced that the Government will draft legislation for the application of the new arrangements effective from 1 July 2017.