Foreign sellers set to see “significant” costs under new low-value GST laws

Foreign sellers set to see “significant” costs under new low-value GST laws

The Productivity Commission gives the new GST laws the nod, while flagging “significant" compliance costs and“modest” revenue

The Federal Government’s Productivity Commission has suggested that Australia’s new GST laws for low-value imported goods is likely to hit online sellers with “significant" compliance costs while collecting “modest” revenue.

The new legislation, Treasury Laws Amendment (GST Low Value Goods) Bill 2017, was passed by Parliament in June, after being stalled in the Senate on 19 June with the introduction of a new amendment calling for the tax measures to apply from 1 July 2018 instead of 1 July 2017, as it initially appeared in the legislation.

The legislation will see online retailers compelled to collect Goods and Services Tax (GST) from Australian customers on overseas purchases worth less than $1000.

The new legislation amends the law to extend GST to low value imports of physical goods imported by consumers, a large proportion of which fall into the IT and technology categories.

Suppliers with an Australian turnover of $75,000 or more in a 12 month period are required to register and charge GST under the plan.

An additional amendment during its passage through Parliament mandated a Productivity Commission inquiry into the impact of the changes.

The resulting report was sent to the Government on 31 October, then tabled in Parliament and publicly released on 9 November 2017.

Among the conclusions the Productivity Commission outlined in its overview of the report is that, “foreign suppliers will incur significant costs in complying with the legislated model and, as under any collection model, consumers will face higher prices”.

It should be noted that the legislation treats the operator of an electronic distribution platform (EDP) as the supplier of low value goods if the goods are purchased through the platform by consumers and brought into Australia with the assistance of either the supplier or the operator.

At the same time, the Productivity Commission said that, “the revenue collected is likely to be modest and will depend on the rate of compliance, for which no precise estimates are possible”.

Regardless, the Productivity Commission said that although there is an argument to be made for potentially delaying the implementation of the legislated model, “to provide more time for technological changes to play out”, the Government should proceed with its rollout as planned.

“Nonetheless, the Commission considers there is insufficient basis to recommend delaying the implementation schedule, given the Australian Parliament’s decision to apply the GST to low value imported goods,” it stated. “Waiting for better alternatives will not necessarily prove fruitful. Nor would implementation now preclude change later.”

The Commission also suggested that as it stands the legislated model of collection “should improve tax neutrality between imported and domestically retailed low value goods, and avoid major disruption for consumers when importing goods”.

Certainly, the Productivity Commission’s report has been welcomed by the Government, with the country’s Treasurer, Scott Morrison, saying that the new laws are a “win for Australian retailers”.

The report confirms the Government’s approach is the most practical and achievable option and provides industry with certainty,” Morrison said in a statement.

“The legislation complements the Government’s other tax integrity measures that ensure foreign businesses pay the right amount of Australian tax, such as the Diverted Profits Tax and applying GST to digital goods and services purchased from offshore websites,” he said.

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