On 21 August 2015, the Federal and State Treasurers met as part of the Federal Government’s tax reform process. Following that meeting, the Federal Treasurer identified that each of the State and Territory governments have agreed to broaden the GST base by applying GST to all offshore sales into Australia from 1 July 2017.

Nature of GST proposal

Under the current law, inbound sales of goods into Australia valued at $1,000 or less are not subject to GST.

Following extensive discussions between the Federal Government and the Treasurers of each State and Territory, the governments of Australia have agreed to now apply GST to all taxable products and services sold by overseas vendors into the Australian market. If passed, this means that GST will now apply to all taxable supplies consumed in Australia, irrespective of the value of relevant goods or services.

Treasurer Hockey noted in his press release that this proposed change will “deliver competitive neutrality for Australian businesses”. The change has the unanimous support of all State and Territory Treasurers.

The consequence of the amendment is that inbound products and services will be subject to the same tax treatment as domestic products and services. The amendment will also align the GST treatment of imported goods and services with the application of the new GST rules regarding cross border supplies of digital products and services (which are proposed to come into effect from 1 July 2017).

The announcement came amidst ongoing discussions surrounding a broadening of the GST base. The Federal Government is seeking consensus from the State and Territory Ministers so as to enable GST reform to form part of the broader tax reform agenda. The options paper is to be released later this year prior to the Government White Paper leading into the next election.

Timing

The Federal Government has announced that draft legislation is expected to be introduced for public consultation shortly.

The change has been announced to apply from 1 July 2017.

However, in a press conference following the meeting of the Treasurers, Treasurer Hockey noted that, if possible, he would like to see the change brought in earlier.