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Low-value import tax a win for small businesses

by Samuel Williamson

2 min read

The Australian Government has proposed changes to tax legislation that will see goods and services tax (GST) applied to low-value goods – that is, goods with a customs value of $1,000 or less – imported directly into Australia.

Vendors, electronic distribution platforms and goods forwarders will all need to account for GST on sales of low-value goods to consumers in Australia if they meet all other requirements for registration.

We’ve provided a simple guide below that will be useful during the EOFY period.

How does it work?

The low-value import tax only applies to overseas vendors who sell to Australian consumers, and have an Australian annual turnover of $75,000. If they do, they will need to register for, report, and pay GST. For Australians wanting to buy products from offshore sellers, you may be charged an extra 10% on your purchase.

If you’re an overseas business that meets these criteria, you can choose to register for GST under either the existing full GST registration system or the simplified GST system for non-residents. You will only need to register once, even if you supply more than one type of goods or service. If you’d prefer to register under the full GST registration, you’ll be entitled to an Australian Business Number (ABN) and will be able to claim input tax credits.

Once you’re registered, you’ll need to pay GST to the Australian Taxation Office (ATO) on a quarterly basis. To understand more about your tax obligations in Australia, consider speaking to an Australian accounting professional. Accounting software, like QuickBooks Online, can simplify the process too – automatically tracking and calculating your GST for you.

What if my business buys goods from overseas vendors?

If you’re an Australian business registered for GST, and you rely on supplies from overseas vendors to help you operate, don’t worry, you won’t be affected. The vendor should prompt you to provide your ABN to confirm your purchases are business related.

Once supplied, the vendor should put the transaction through as a normal business sale, ensuring GST isn’t charged. If you’re not registered for GST, you will be charged the tax in the same way you would if you purchased it from a domestic supplier.

Does it affect my Australian outlet, website, or call centre?

If the goods you sell are already subject to GST, then you don’t need to do anything.

The new GST legislation ensures that Australian businesses aren’t disadvantaged compared to their overseas competitors. Once the law comes into effect, the online retailers you may have been competing with, like eBay and Amazon, will face the same 10% charge you do.

Is it fair?

Some major online retailers are contesting the tax, but the legislation is in line with guidelines set out by the Organisation for Economic Co-operation and Development (OECD).

It recommends that consumption should be taxed in the destination of the country of imported goods and services. It’s expected to be a vital shot in the arm for Aussie small businesses, helping them grow, expand, and create more jobs.

When does it come into effect?

A recent Senate inquiry into the government’s plan has delayed the implementation of the tax from July 1, 2017, to July 1, 2018. So, shoppers will have a 12-month reprieve from paying the 10% tax on products purchased from overseas, and offshore vendors will have another year to prepare for the change.

Learn everything you need to know about small business accounting here.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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