Eighteen years after the GST was first introduced, there has been significant debate on what should and shouldn’t be exempted.
After a long and high-profile campaign, the states have agreed to remove the GST from female sanitary products.
Another recent GST change that didn’t quite get the same level of publicity were changes to how GST is applied to low-value imports.
Our tax accountant explains what’s changed
Before the current financial year (2018-2019 for readers from the future), GST was only charged on imported goods greater than $1,000 in value.
If you frequently shop online, you’ll have benefited first-hand from this loophole.
Whether it was a jacket, DVD box set, or new book, prior to July 2018 each of these would have been completely GST-free if they were imported from overseas.
Those days have come to an end, with pressure from retailers meaning that goods worth less than $1,000 (low-value imported goods or LVIG in ATO-speak) are now subject to GST.
This is just one change to GST rules intended to bring online shopping in line with bricks-and-mortar retailers.
What this means for buyers: will this make online shopping more expensive?
Unfortunately, yes, we’re afraid buying from overseas is going to be a tad more expensive from here on out. Under the new changes, GST is charged at the point of sale.
If you’re buying from an overseas website, take careful note of whether or not GST is already included in the sale price. This is especially important if the seller is based overseas.
And if the seller doesn’t make any mention of GST, you might still need to pay up anyway.
Prior to delivery, you’ll be contacted to pay 10% GST – refuse, and your purchase will be returned.
Will this affect how I do business?
Under the previous scheme, when GST was charged on high-value goods, it was charged at the border.
Unlike high-value imports, LVIG are taxed at the point of sale. If you’re a reseller or importer, that means GST is collected on your end of things.
If you run your own ecommerce platform, the responsibility of collecting GST on behalf of the government falls on you, the seller.
Basically, treat it as a regular domestic sale and not an importation. To accommodate for this change, you might have to look at:
- Classifying goods, customers and place of origin
- Updating your pricing information
- Changing your ecommerce platform (if you run your own)
- Improving your import documentation
If you sell via a third-party platform or website, things become a bit murkier.
Amazon remits GST on behalf of sellers, meaning you won’t have to change much on your end. In contrast, eBay is hands-off, leaving GST collection to individual sellers.
The only way to be sure is to check your website’s terms and conditions to learn whether they collect on your behalf.
How this affects non-GST registered businesses
As a business owner, you’ll no doubt be aware that any business that makes a turnover greater than $75,000 a year is required to register for GST.
However, if you’re not a GST-registered business or based overseas, the customer will still be contacted to pay GST in addition to a processing fee prior to delivery.
Should they refuse, the goods will be returned at your expense.
Are there any exceptions to this new GST rule?
Yes: the new law only applies to the sale of LVIG to consumers.
Business customers, on the other hand? That’s a different story.
If you’re buying as a business importing something for business purposes, you won’t be required to pay GST, and vice versa if you sell to other businesses.
Furthermore, if you’re buying everything in one big purchase and shipping it over in the same consignment, you may be exempted if it exceed $1,000 in value. In these cases, the rules for high-value imports apply.
Get help from a small business accountant in Melbourne
Make no mistake, your tax obligations can be confusing. That’s why it’s important to have your small business taxation looked after by a tax professional.
Since 1966, Bruce Edmunds & Associates has helped small and medium businesses wrap their heads around their tax obligations.
In addition to tracking your GST obligations and regularly lodging statements for the ATO, we can also fill out tax returns come EOFY.
Our certified Melbourne tax accountants provide a huge range of services for businesses across the city, Bayside, and southeast.
Call our team on (03) 9589 5488 or fill in this inquiry form to find out how we can remove the stress of tax accounting for your business.