GST to apply to certain low value imported goods from 1 July 2018
From 1 July 2018, Goods and Services Tax (GST) will apply to certain supplies of low value goods (AUD1,000 and under) purchased by consumers and imported into Australia, following the passage through Parliament of the Treasury Laws Amendment (GST Low Value Goods) Bill 2017 with amendments that were successfully made by the Opposition. The Bill, as originally proposed by the Government, was amended to delay the start date to 1 July 2018 (instead of 1 July 2017). Although this gives affected entities additional time to establish systems in readiness for the new rules, the amendments also require the Productivity Commission to conduct an inquiry to review the effectiveness of the new rules and whether other models for collecting GST would be more suitable, which may add an element of uncertainty in the short-term.
In addition, to support the application of the new rules the Australian Taxation Office (ATO) has issued draft Law Companion Guideline LCG 2017/D5, which discusses the instances when a ‘redeliverer’ – an entity who assists in bringing goods to Australia by providing an offshore mailbox service or a personal shopping service – is responsible for the GST on a supply of low value imported goods. According to the draft guideline, a ‘redeliverer’ will only be responsible for GST on an offshore supply of low value goods when neither the merchant, nor an electronic distribution platform operator assists in bringing the goods to Australia. Comments can be made to the ATO on the draft guideline by 10 July 2017.
For background information on the upcoming changes to GST, refer to PwC Australia’s TaxTalk Alert.
Reminder: new rules for Australian GST on cross-border supplies
From 1 July 2017, ‘inbound intangible supplies’ made by non-resident suppliers to Australian consumers will attract GST.
To support the application of these rules, the ATO has finalised GST Ruling GSTR 2017/1 which deals with the making of cross-border supplies to Australian consumers. This Ruling, which was previously released in draft as GSTR 2016/D1, is relevant to overseas-based suppliers making supplies of services, digital products or rights to Australian consumers that use or enjoy those supplies in Australia.
For further information about these new rules, refer to PwC Australia’s TaxTalk Alert.
GST on supplies through electronic distribution platforms
The ATO has issued for comment by 10 July 2017 draft Law Companion Guideline LCG 2017/D4 which explains how the GST will apply to supplies made through electronic distribution platforms. When finalised, this Guideline will apply to:
· supplies of digital services and digital products, in working out net amounts for tax periods starting on or after 1 July 2017 (as relevant under the new cross-border rules noted above), and
· offshore supplies of low value goods that are covered by the measures to be enacted by the Treasury Laws Amendment (GST Low Value Goods) Bill 2017 (as discussed earlier).
GST administration performance agreement
The ATO has released the GST administration performance agreement which outlines the accountability and performance arrangements between the ATO and the Council on Federal Financial Relations (the Council). As agreed between the ATO and the Council, the ATO’s (and its agents’) administration of GST will be monitored by the GST Administration Sub-Committee, and the agreed GST administration costs will be paid by the States and Territories.
GST and customer owned banking institutions
The ATO has released a consultation paper on GST and customer owned banking institutions. The paper sought comments on a proposed approach regarding the apportionment of input tax credits for partly creditable acquisitions for customer owned banking institutions. Specifically, it is proposed that from 1 July 2017, where a customer owned banking institution makes partly creditable acquisitions (excluding acquisitions that are solely related to taxable, input taxed or GST-free supplies), the Commissioner of Taxation will accept, as a matter of practical administration, that the extent of the creditable purpose for all of the partly creditable acquisitions is 18 per cent.