New legislation will come in to effect on 1 July 2018, meaning that global suppliers, like Amazon, will be required to charge GST on some of the goods they sell to Australians.
It is this new law which has caused the online retailing giant to make the decision to ban Australians from purchasing goods from its international websites.
Goods and Services Tax, or GST, is the extra 10% that appears on the bottom of your receipt. It is a tax which applies to some goods and services purchased by Australian consumers such as technology, clothes and trade services. Currently, low value taxable goods that are imported from international online suppliers are GST free. But as a result of the Treasury Laws Amendment (GST Low Value Goods) Act 2017, this will no longer be the case.
Low value goods are those which have a customs value (purchase price minus the costs of importation) of less than $1,000.00. But from 1 July 2018, all online suppliers, including merchants operating an electronic distribution platform, like Amazon and EBay, and suppliers selling direct to Australia, will be required to charge GST on low value taxable goods.
So what does this mean for you? Well, the cost of buying the $700.00 designer dress from America you have had your eye on will be 10% more expensive. For example, before 1 July, the balance of your online shopping cart consisted of the purchase price of the dress and postage and handling (if any). After 1 July, an additional 10% will be charged, turning your $700.00 dress into $770.00, and the supplier will give the $70 to the Australian Tax Office.
Not all suppliers or all goods and services will be subject to GST under these amendments. There will be exceptions. Consumers can apply for an exemption if they are purchasing multiple goods with a combined customs value of over $1,000.00 which will be shipped together in one consignment. In this case, the GST will not be charged to the consumer at the checkout, but Australian Customs will charge the supplier at the border. GST also does not apply in some cases because the goods or services are GST free, such as some food items or input taxed supplies.
One of big issues being discussed in the media is that the impact of this change will exclude Australian consumers from the global online marketplace. We know local businesses are competing in an increasingly global market.
With these amendments, the Government appears to be supporting local businesses and encouraging Australians to buy Australian. Like Amazon, global businesses are entitled to make their own decisions in response to these changes, but it remains to be seen if other international suppliers will follow suit.
If you require advice or further information in relation to any of the matters discussed in this article, please contact our Corporate & Commercial team on 03 5273 5263.