Until 1 July 2018, a GST and customs duty exemption generally applies to goods imported in a consignment with a customs value of no more than $1,000. The exemption — referred to as the “low value threshold” (LVT) — does not apply to alcoholic beverages, tobacco products or goods that are the accompanied or unaccompanied effects of passengers or crew of a ship or aircraft. If the goods arrived by sea or air, a self-assessed clearance declaration has to be made before customs clearance. This does not apply to goods arriving by post.
New rule from 1 July 2018
The $1,000 exemption is to be abolished, effective for tax periods commencing on or after 1 July 2018, and is to be replaced by a new system imposing GST at the point of sale. The commencement date was originally intended to be 1 July 2017, but this was deferred for a year in order to have the Productivity Commission enquire into the practicality and likely effectiveness of the change. The Commission’s report concluded that the new system “should improve neutrality between imported and domestically retailed low value goods, and avoid major disruption for consumers when importing goods. However, the revenue collected is likely to be modest and will depend on the rate of compliance, for which no precise estimates are possible. Foreign suppliers will incur significant costs in complying with the legislated model and, as under any collection model, consumers will face higher prices …. [Given the] current limitations of alternatives, the legislated model in the most feasible at this time”
The new rule is intended to provide competitive neutrality for domestic retailers that have historically been at a disadvantage against foreign retailers, who have been able to sell equivalent goods online to Australian customers exclusive of GST.
Exception where there is a taxable importation
A supply is not connected with Australia, and therefore not caught by the low value rules, if the supplier has taken reasonable steps to obtain information about whether the supply will be a “taxable importation” and reasonably believes that the supply will be a taxable importation. In such a case, the normal rules for taxable importations apply and GST will be paid at the border.
Under customs law, a supply is a taxable importation if goods are included in a consignment with a customs value exceeding $1,000. Goods are considered to be in the same consignment if they are (1) sent by international mail from one person to another, or (2) sent by air or sea cargo, from one person to another, where the goods are all transported to Australia in the same ship or aircraft. This means that if the combined customs value of the goods in one consignment exceeds $1,000, the supply is a taxable importation, even if individual items in the consignment are low value items and they were ordered at the same time. However, it is up to the supplier to establish this. If the supplier knows that the goods will be consigned separately or is uncertain whether the goods will be sent together, then the low value rules may apply.
Taking “reasonable steps” generally requires the supplier to seek to obtain information, whether directly or by setting up business systems and processes, about how the goods are to be consigned.
Where a redeliverer is treated as the supplier, the reasonable belief must be held at the time it assists in bringing the goods into Australia. Where the operator of a distribution platform is the supplier, the belief must be held at the last time the consideration for the supply changes prior to export.
Various other rules are designed to ensure that if there is a supply of low value goods that is subject to GST, the importation will be non-taxable. Provisions also govern the payment of refunds where the supply has incorrectly been treated as a taxable supply.