At Simple Global, we strive to help our clients by making international ecommerce as simple as possible. It’s not rocket science, but let’s face it—for the average online merchant, it can be a challenge to keep up with all the rules, regulations, and procedures involved in shipping goods from one country to another, with the most recent being the 2018 Australia Tax Change.
To help you navigate the ins and outs of the new regulation, we’ve put together this handy guide highlighting the 2018 Australia Tax change.
Australian GST: What Is It?
The Australian Goods and Services Tax (GST) is a consumption tax charged by the Australian Taxation Office (ATO) on consumer goods and services connected with Australia. Most goods and services are subject to this tax, but there are some exceptions, such as fresh food and certain financial services. The rate of the tax is 10%.
The ATO is updating its rules regarding GST on low-valued goods imported by consumers into Australia. If you sell goods internationally, specifically to Australia, it’s important that you understand the new rules and how they will affect your business.
Previously, most goods with a value equal to or less than 1,000 Australian dollars (A$1,000) imported into Australia did not incur a GST. Goods over A$1,000.00 were (and still are) taxed at the border.
Starting July 1, when you sell goods with a value equal to or less than A$1,000 to a consumer in Australia, and you meet or exceed the registration turnover threshold (see below) you (or another party involved in the sale, such as a marketplace—we’ll get to that later) must add the amount of the tax to the price and collect it on behalf of the ATO. You must keep a record of the taxes collected, report them to the ATO, and pay them quarterly.
You do not have to collect taxes on shipments with a value over A$1,000, or on shipments of tobacco products or alcoholic beverages, since these taxes will be collected at the border by the Australian authorities.
Requirements and Exceptions
As with any rule there are exceptions, and in certain circumstances you may not be required to report or collect GST.
A$75,000.00 is considered the registration turnover threshold for GST. This means that if your business has a turnover (revenue) of A$75,000.00 or more from sales to Australia during a 12 month period, you must register for GST, and are responsible for collecting the tax from your Australian customers. Furthermore, you must include documentation with these shipments (i.e., receipts and customs documents) showing that GST has been paid.
You do not count sales towards your GST turnover if they are not connected with Australia. This includes sales that GST does not apply to under the new law because the purchaser is not a consumer or because the goods are not low-value goods.
If you meet the threshold and are therefore required to register for GST, you can learn more here. If your business makes less than A$75,000.00 from sales to Australia, you do not have to register or collect GST.
Even if you are required to register, there are exceptions to when you have to collect GST from your customers:
- As stated above, you don’t have to collect GST if the sale value of the goods is over A$1,000, or if the goods are alcohol or tobacco products.
- If you are shipping multiple items of less than A$1,000 value, but together they exceed A$1,000 in value, you don’t have to collect GST if the items are shipped together in the same consignment.
- Finally, if you are selling products to a business for business use, you don’t need to collect GST. Note: You can be sure the buyer is a business not subject to GST if the buyer provides an Australian business number (ABN) and a statement that they are registered for GST.
For more details on when you are required to collect GST, click here.
Who Collects the GST?
Under the new law, the party responsible for collecting GST isn’t necessarily the seller. Depending on the circumstances, it could be any of these three parties:
- The merchant who sells the goods (for example, you)
- An operator of an electronic distribution platform (EDP), such as an online marketplace through which merchants sell goods
- A re-deliverer that helps to bring goods to Australia
An EDP is a marketplace, such as Amazon FBA or eBay. If you sell through these or similar platforms, you may not be responsible for collecting GST. The operator of the marketplace is instead the responsible party.
A re-deliverer is a package forwarding service, like myMallBox. If a consumer in Australia orders a product from a merchant in the U.S. and sends the package to a re-deliverer, and the re-deliverer then forwards the package to the customer in Australia, the re-deliverer is responsible for charging GST. This, of course, is only the case if the re-deliverer meets the registration turnover threshold for GST.
How Is GST Calculated?
The GST rate in Australia is currently 10%. When calculating GST, you must include any shipping or insurance charges as part of the value. When you pay GST to the ATO, the amount you will pay is 1/11 of the total amount you charged the customer, including GST.
For example, Dittmer’s Shoe Store, located in the United States, sells a pair of shoes to Julie in Australia. The shoes cost A$75.00, with A$20.00 in shipping fees, and A$5.00 for insurance, bringing the total cost of the shoes to A$100.00. The GST is 10%, or A$10.00.
Dittmer’s will charge Julie the equivalent of 110 Australian dollars for the shoes. When they submit GST payment to Australia for this sale, they will submit 1/11 of A$110.00, or A$10.00.
For a re-deliverer, the GST is calculated a little differently. The GST a re-deliverer must charge equals:
- 10% of the amount paid by the customer for the goods, plus
- 1/11th of the amount the customer pays for the re-deliverer’s services to get the goods to Australia. This applies to all services charged by the re-deliverer, including international transport services and insurance for the transport of the goods.
For example, Jack, who lives in Australia, buys a basketball from Regional Sporting Goods in the USA for the equivalent of 25 Australian dollars. Since Regional Sporting Goods doesn’t ship to Australia, Jack sends the ball to his U.S. address at myMallBox.
MyMallBox charges Jack A$15.00 in shipping and handling fees to send the ball to his home in Australia. Therefore, the GST on the ball would be A$3.86. Broken down, that is $2.50 (10% of the cost of the ball, A$25) plus $1.36 (1/11 of A$15.00).
How Do You Pay GST?
Assuming you meet or exceed the registration turnover threshold, you must register with the Australian Taxation Office for GST. Then, quarterly, you must submit GST payments by credit card or international bank transfer (SWIFT).
For information on how to do this, as well as other requirements and Australia Tax Change information visit this webpage.
What if You Don’t Pay?
If you are required to register for and pay GST and fail to do so, the Australian government can impose severe penalties. Some actions they might take include:
- Automatically registering you for GST
- Imposing an additional 75% administrative penalty
- intercepting funds from Australia that are destined for you
- registering the debt in a court in your country
- requesting the taxation authority in your country to recover the debt on their behalf
For more details on the ATO’s policies on non-compliance, including how they identify it and how they help companies who are facing difficulties complying with the law, click here.
For further information, including definitions of terms and more examples, please visit the website for the Australian Taxation Office.