The Productivity Commission (PC) has released a report regarding the feasibility of incorporating a legislated model for extending GST to low value imported goods (less than $1,000). Domestic retailers have historically claimed that exempting foreign goods from GST creates an unbalanced market, with concerns amplified by the growth of online commerce. The Government has recently legislated to apply GST to low value imported goods from July 2018 by using a streamlined collection model which places responsibility for tax assessment, collection and remittance on foreign suppliers.
The current legislated model is based on a vendor collection model, which requires major businesses generally based overseas to register for and collect GST on low value goods sent from overseas to consumers in Australia. Offshore supplies of low value imported goods (outside of alcohol and tobacco products) will be deemed a domestic supply and subject to the GST. Some suppliers can also opt for ‘limited registration’ rather than ‘full registration’, especially if their supplies are only connected to Australia because of the legislated model.
Throughout the report, the PC also considered the viability of alternate models using technological solutions. For example, the report discussed the feasibility of using ‘purchaser’ and ‘financial intermediary’ collection models. Specifically, new technology-based purchaser models could enhance traceability of purchasers by using image scanning and data storage technology to enable tax authorities to identify when GST is due. Other potential advantages include avoiding delays in delivery associated with border collection and addressing the issue of fraud in undervaluing imported goods.
Despite these potential advantages, the PC considered that the lack of evidence on operational risks provided by these models means it is too early to judge their viability. However, the PC stated that upon review of the current legislated model in 5 years’ time, they would assess the experience of other jurisdictions in adopting a technology-based purchaser model. There may, therefore, be scope for fintech solutions in GST collection in the future.