Australia: Review of GST and low-value imported goods

The Board of Taxation announced a review to assess the effectiveness of the low-value imported goods (LVIG) regime. 

The LVIG regime facilitates the application of goods and services tax (GST) on LVIGs—that is, imports with a customs value of $1,000* or less. The LVIG regime, when implemented in July 2018, was expected to be reviewed after two years to determine it was functioning s intended and to consider any international developments. 

Common issues under the LVIG regime include:

• Suppliers failing to identify their requirement to register and collect GST
• Difficulties in establishing the flow of information to determine that when third parties, such as freight forwarders are involved in the importation, declarations around the payment of GST for purposes of self-assessed clearances are accurate
• Determining that sufficient evidence is collected and retained to support the classification of the customer, as well as the classification of the goods themselves (in particular where they have been determined to be GST-free)
• Accurately calculating GST when the supply involves a mix of offshore and onshore goods or a mix of GST-free and taxable components

Background on LVIGs

Effective 1 July 2018, sales of LVIGs to Australian end-consumers (Australian residents that are not registered for GST) and that have a customs value of $1,000 or less at the time of sale became subject to GST. However, instead of GST applying at the border (which is consistent for higher value importations) the requirement to collect GST was imposed on the supplier, and at the time of sale. 

Businesses selling goods into Australia, therefore, are required to operate under a two-tier system, whereby GST on low value goods is applied on the sale of those goods, and GST on high value goods or consignments over $1,000 are taxed at the border. As a result of the implementation of these rules, entities that make or facilitate sales/delivery of LVIGs to Australian end-customers are required to register for GST purposes. This includes sellers, operators of online marketplaces and redelivers (entities that assist Australian consumers acquire goods from overseas). Registration is only required where Australian GST turnover meets or exceeds $75,000 (considered on a rolling 12-month basis), which includes the value of LVIGs sold or delivered. 

There is also a simplified GST registration and reporting system, which allows for quarterly reporting, however, does not provide any entitlement to GST input tax credits.

Review

The Board of Taxation review will specifically address, among other elements:

• The effectiveness of the LVIG regime with reference to its policy intent of the law, being that low value goods imported by consumers face the same tax regime as goods that are sourced domestically
• The effectiveness of the administration
• Industry compliance

A targeted external consultation process will take place as part of the review, which is due to completed in December 2021.

For more information, contact a KPMG trade professional in Australia:

Leonie Ferretter | +61 2 9455 9330 | lferretter@kpmg.com.au

^{*$=Australian dollar}