Thursday, 16 February 2017
Treasury Laws Amendment (GST Low Value Goods) Bill 2017; Second Reading
That this bill be now read a second time.
This bill being introduced today is an important part of the government's commitment to creating a fairer tax system, supporting our small businesses and creating a level playing field for all Australian businesses.
The bill fulfils the government's commitment to extend the application of GST to low-value goods imported by Australian consumers from 1 July 2017. It also gives effect to the agreement of the Council of Australian Governments in 2015 to extend GST to low-value imported goods.
These changes are about ensuring that Australian businesses, particularly small retailers, do not continue to be unfairly disadvantaged by the current GST exemption that applies to imports of low-value goods.
Importantly, this bill also tackles the growing risk that the current arrangements pose to the integrity of the GST base. With the continued growth and normalisation of cross-border shopping, we cannot afford to simply ignore the impact of these outdated arrangements on the tax system.
As a result of the reforms being introduced today, low-value goods imported by consumers will face the same tax regime as goods that are sourced domestically. This is how a fair and modern tax system should work and I am proud that Australia is taking the lead in this respect.
Under the current GST law, GST will generally apply to supplies of goods within Australia regardless of the value of the goods. However, supplies of goods located outside of Australia will generally not be subject to GST. Further, while the importation of goods is generally subject to GST, a $1,000 low-value threshold exemption applies.
The GST low-value threshold exemption disadvantages Australian businesses and jobs, and poses a growing risk to the integrity of the GST base, with the continued growth in online shopping.
The government, with the support of the states and territories, is absolutely committed to applying the GST to low-value goods imported for consumption into Australia by 1 July 2017. It will stop the unfair and distortionary benefit enjoyed by foreign sellers since the introduction of the GST in 2000.
Under these new arrangements, imported goods with a customs value of $1,000 or under will have GST collected at the point of sale, using a vendor registration model. Under this model, overseas vendors that have an Australian turnover of $75,000 or more will be required to register for, collect and remit GST on low-value goods supplied to consumers in Australia as well as any other taxable supplies they make.
This measure will also apply to online marketplaces—also called 'electronic distribution platforms' or EDPs in the bill. Online marketplaces that assist in the importation of goods into Australia will essentially be treated as a 'supplier' under this measure, and be required to register for, collect and remit GST.
Including online marketplaces ensures that only a limited number of entities need to collect the GST, rather than the multitude of small, individual vendors making supplies through these online marketplaces that compete with Australian retailers here in Australia. This represents the most efficient system for collecting GST and limits the costs of compliance.
This measure also extends to 'redeliverers'. Redeliverers are often used by Australian consumers in cases where the overseas retailers do not deliver to Australia. The redeliverers provide offshore mailbox or shopping services in relation to the goods and then assist with their delivery into Australia. Redeliverers will be affected by this measure where the actual supplier would not be liable for GST because of a lack of knowledge about the ultimate destination of the supply, due to involvement of a redeliverer. In such cases, the redeliverer is the entity that is best placed to know the status of the goods and the location to which they are delivered.
A simplified online GST registration system will also be available for nonresident suppliers of goods. This simplified registration system will help nonresidents comply with these new rules.
In August 2015, the Council on Federal Financial Relations agreed to the vendor registration model, commencing 1 July 2017. The government has also consulted extensively on the design of the registration model. Public consultation on the draft legislation was also undertaken last year.
These changes build on the government's 2015-16 budget measure—which is now law—to apply the GST to digital products and other services imported by consumers from 1 July 2017, also using a vendor registration model.
We now live in a world where online cross-border shopping is a normal and often daily activity for many Australians. This reform to Australia's GST is a significant world first, but it is consistent with the direction of international tax policy in this area.
It is only a matter of time until others jurisdictions follow suit. In 2015, the OECD examined and reported on options to move away from cost-intensive border collection processes, including for low-value goods. Australia's reforms align with the most effective elements of that report to deliver a new reality for taxation of trade in Australia.
The European Union also announced late last year that it too will reform its treatment of imported low-value goods. They too recognise that there can be no substantive reform without a key focus on the taxation of goods by the supplier at the point of sale.
With this bill, Australia is leading the way in delivering a GST model that is fit for our modern world and our modern global economy. Importantly, this measure will finally stop the unfair and distortionary GST low-value exemption enjoyed by foreign sellers since the introduction of the GST in 2000 and establish a level playing field for our domestic retailers here in Australia and protect the integrity of our GST base.
Full details of the measure are contained in the explanatory memorandum.