In July 2018, a major change in Australian tax regulation took place requiring businesses earning more than $75,000 AUD per year to charge a 10% Goods and Services Tax (GST) on ‘low value items’ (under $1,000) imported by consumers. This was a move by the Australian Government to ensure that all Australian businesses, particularly small retailers, were not unfairly disadvantaged by the likes of Amazon and eBay, who could sell goods without attracting GST. The change was intended to ‘level the playing field’ between Australian and international retailers.
Stating that the tax was unfair – and that delivery companies should handle the tax collection rather than stores – Amazon responded by announcing that they would not ship overseas goods to Australian customers. Instead, Australians were re-routed to the Australian website, amazon.com.au (launched in December 2017), which blocked them from the U.S. and other international Amazon sites, cutting them off from buying millions of products.
Customer response was swift, not to mention angry. And while Amazon claimed that they needed time to put the necessary infrastructure in place, eBay managed to work things out in their systems in time for the 1 July deadline (despite some initial grumbling of their own).
A sudden – and timely – shift
However, just in time for the U.S. Black Friday sales in late November 2018, Amazon announced that it would stop blocking Australians from shopping on the U.S. site, allowing the purchase millions of ‘eligible products’ (those shipped by Amazon itself). Although, they still needed more time to set up the framework needed to lift the block on their other international sites.
Their claim – that they had listened to customer feedback and responded – showed the power of the consumer in today’s online marketplace . . . but also the power of sales during the holiday season. (In fact, some suggested that Amazon ‘conveniently’ announced the change just in time for the biggest shopping weekend of the year and took advantage of the free publicity that went along with the announcement.)
What the change means for your business
If your business imports online goods or services, the GST change affects you, too. Overseas vendors with Australian sales that are subject to the new GST rules must:
- register with the Australian Taxation Office (ATO)
- charge and collect GST on sales of low value imported goods to consumers (unless they are GST-free or sales of alcoholic beverages and tobacco products)
- lodge returns with the ATO and make payments to them
- ensure certain information is included in the customs documents for the goods.
As an Australian business, there is one area where you have an advantage over the giant that is Amazon. There is a scheme where your business can defer the tax and if you’re registered with the ATO, you may be able to claim a credit for any tax paid on goods you import.
In order to be eligible for the deferred GST scheme, you must:
- have an ABN
- be registered for GST
- lodge your activity statements online each month
- make activity statement payments electronically.
If you are affected by the GST change and would like to understand your responsibilities and how you can manage your tax situation better, contact our team to speak with one of our tax professionals.