Draft Law Companion Guideline for planned changes to GST on low value imported goods

On 16 February 2017, the Government introduced Treasury Laws Amendment (GST Low Value Goods) Bill 2017 (the Bill) to Parliament that proposes to extend the GST Act and ensure that GST is payable to low value goods that are purchased or imported by consumers in Australia from 1 July 2017.

The following reforms were proposed in the Bill:

  • make supplies of goods valued at $1,000 or less at the time of supply connected with indirect tax zone (ITZ) if the goods are purchased by consumers and are imported to the ITZ with the assistance of the supplier
  • treat the operator of an electronic distribution platform (EDP) as the supplier of low value goods if the goods are purchased through EDP by consumers and brought to the ITZ with the assistance of either the supplier or the operator
  • treat redeliverers as the suppliers of low value goods if the goods are delivered outside the ITZ as part of the supply and the redeliverer assists with their delivery into the ITZ as part of, broadly, a shopping or mailbox service that it provides under an arrangement with the consumer
  • allow non-resident suppliers of low value goods that are connected with the ITZ only because of these amendments to elect to be limited registration entities and
  • prevent double taxation by making importations of goods non-taxable importations if the supply of the goods is a taxable supply only as a result of these amendments and notice is provided in the approved form.

The ATO has released draft Law Companion Guideline LCG 2017/D2 on how the proposed amendments would apply to determine when a supply of low value goods is connected with Australia.

The effect of the proposed change:

  • From 1 July 2017, an overseas entity with an Australian turnover over $75,000 will need to register for, collect and pay GST on goods up to $1,000 that they sell to consumers in Australia.
  • An entity registered for GST and purchases low value imported goods for its overseas business will need to provide its ABN at the time of purchases so it will not be charged GST. If its business is not registered for GST, it will be regarded as a consumer and unable to recover the GST charged by its overseas business.

Draft Law Companion Guideline for super changes

The ATO has realised the final version of the following three Law Companion Guidelines to support the superannuation reforms imposed:

  • LCG 2016/8 Superannuation reform: Transfer balance cap and transition-to-retirement: transitional CGT relief for superannuation funds.

    This guideline provides guidance on the transitional CGT relief available for superannuation funds due to the transfer balance cap and transition-to-retirement reforms commencing on 1 July 2017.

  • LCG2016/9 Superannuation reform: Transfer balance cap.

    This guideline provides clarifications on how the transfer balance cap (set at $1.6 million for the 2017-18 financial year) operates for account-based superannuation income stream products.

  • LCG 2016/11 Superannuation reform: Concessional contributions – Defined benefit interest and constitutionally protected funds.

    This guideline provides clarifications on how the changes to the calculation of concessional contributions and excess concessional contributions apply to contributions and amounts allocated by superannuation providers for the financial years commencing on or after 1 July 2017.

Cases

UNSW Global Pty Ltd v Chief Commissioner of State Revenue [2016] NSWSC 1852

This case involves UNSW Global Pty Ltd seeking a review of decision of the Chief Commissioner of State Revenue (CCSR) to assess it as liable to payroll tax as an “employment agency’ pursuant to the employment agency provisions of the Pay-roll Tax Act 1971 (1971 Act) and Payroll Tax Act 2007 (2007 Act).

UNSW Global Pty Ltd is wholly owned by University of New South Wales which sourced experts for client work such as written reports, laboratory testing and training. It was held by White J that the payments made by UNSW Global Pty Ltd to expert consultants for work they performed for the benefit of its clients were not taxable wages.

It was held that the employment agency contract provisions were intended to apply to arrangements where the employment agent provided individuals who would comprise, or who would be added to, the workforce of the client for the conduct of the client’s business. Whether the service provider operates as an individual or through an interposed entity, or as a genuine independent contractor, did not matter for this purpose while the work performed by the experts was provided for the benefit of the client, it was not carried out in the client’s business and was therefore not subject to payroll tax under the employment agency contract provisions.

CCSR lodged an appeal by CCSR against this decision on 20 January 2017.

In March 2017, the NSW Office of State Revenue (OSR) advised that the CCSR’s appeal the decision will not be proceeding. It is a win for taxpayers as it limits the Commissioner’s powers in applying the agency provisions to organisations that provide outsourcing options.