If you’re an online retailer shipping orders to Australian customers, you may want to listen up. Commencing this month, Australian Goods and Services Tax (GST) now extends to encompass low-value imported goods, which may impact your international orders. Luckily, we are here to help by breaking everything down below. We will also be on hand to advise how existing and new clients can get registered and comply with new regulations.
What is changing?
Previously, all shipments with a combined cost of shipping and value of shipment below AUS$1,000 were classed as low-value goods, and were exempt from GST or Duty Tax. Imports with a value exceeding this amount were exclusively liable to pay.
However, this law has now been changed. All shipments imported into Australia are now liable to pay GST, at a rate of 10% against shipping costs and the good’s value. This is to be paid quarterly by retailers to the Australian Tax Office (ATO). This process is universal to postal, courier and direct entry shipping solutions. It is assumed that in the value declared from the shipper, the cost of shipping has been included in this declared value – it is unnecessary to declare a separate value for cost of shipping. The law change is exclusive to GST only, as the Duty Tax threshold is still being retained at AUS$1,000. Businesses that meet the actual or anticipated sales threshold of AUS$75,000 over the next twelve months (excluding B2B sales) will need to register now.
Why is it happening?
This change comes as a result of Australian efforts to modernize its tax laws in keeping with an increase in new business models and eCommerce sites, and the consequential change to the digital economy. This change will also ensure that both Australian and foreign low-value goods receive the same treatment when sold to Australian consumers, essentially guaranteeing fair play.
How does this affect me?
Electronic distribution platforms, such as online marketplaces, merchants selling goods, and re-deliverers (such as an overseas mailbox or shopping service that aid goods to be shipped to Australia) can all be liable to register for GST. However, only one entity is required to charge GST on a sale. There are varying circumstances regarding which of these parties must register to theATO for GST:
If you are a merchant selling through an Electronic Distribution Platform (EDP), the EDP will be considered the supplier, and is responsible for GST on the sale.
Similarly, you, the merchant, will not be liable if your Australian (B2B) customer has provided you with their Australian Business Number (ABN) and stated that they are GST registered.
In addition, if either the EDP operator or the merchant are responsible for GST on the sale, the re-deliverer will not be liable to register.
There is a selection of imported goods that are exempt from Goods and Services Tax, including the importation of money, alcohol and tobacco. You can find the complete and official list here.
Our duty to you
As a third-party logistics provider, our international freight services provide the shipping of your orders into many countries, including Australia. If you are marketing and selling to Australia by outsourcing your fulfilment with us, you must, as the retailer, register for GST with the Australian Tax Office.
When submitting data regarding your orders via the Electronic Data Interchange (EDI), our duty is to submit your ARN (Australian Reference Number) or ABN (Australian Business Number), and to declare you, the retailer, as the ‘Shipper’ in the EDI.
How do I register?
It is relatively quick and straightforward to register your business for GST. This is done using a simplified online process specifically designed for non-residents and international businesses. Registering by this method will create an ARN instead of an ABN and prevents the ability to claim input tax credits and GST credits.
Alternatively, you can register through Australia’s standard domestic GST system online, by form or over the phone. This is a slightly more complex method, as it is necessary to apply for an ABN- an 11-digit identification number- before registering. It can therefore take over 28 days to register for GST through this option.
To register, or for more information, the ATO website breaks it down further here.
From there on out, there are a few things that you, the retailer, must make sure that you comply with regarding all shipments to Australia.
Invoices/receipts to customers need to break down the GST component and display your GBT registration number (ARN).
If selling B2B, the ABN number of the B2B buyer must be displayed on the receipt.
Keep records for five years.
Lodge specified forms quarterly.
Pay GST in Australian Dollars to the ATO on a quarterly basis.
GST must be included within the price of the low value imported goods.
What are the penalties?
The ATO is highly active in supporting international businesses to ensure that they achieve compliance. They use the following categories to classify these businesses, with relevant penalties incurred from the 1st July 2018 onwards.
Fully Compliant and Mostly Compliant (small difficulties complying). The ATO will contact businesses to check mistakes and resolve issues or possible misunderstandings, with no penalties incurred until June 2019.
Partly Compliant (registered but not paying GST) and Incompliant (no effort made to comply). Here, the ATO has the right to implement a number of actions, including imposing an additional 75% administrative fine, intercepting Australian funds that are intended for the business, and registering the debt to the taxation authority in your country.
With these possible penalties in mind, it is crucial to make sure that your business is in order following this change. fulfilmentcrowd offer dedicated fulfilment experts to our clients, who will be on hand to advise and guide our eligible clients in the right direction following this change. Alternatively, if you are unsure about anything you have just read, you can contact the Australian Tax Office through AustraliaGST@ato.gov.au or +61 2 6216 1111.
Are you hoping to expand your business internationally and need to outsource your fulfilment? At fulfilmentcrowd, we offer a rounded package of order fulfilment software and services to rapidly grow the capacity of your business, while giving you back your free time.
by Liz Churm on 30/07/2018