The Government has introduced legislation to impose goods and services tax (GST) on supplies of imported goods worth less than $1,000. The measures are scheduled to commence on 1 July 2017.

The Treasury Laws Amendment (GST Low Value Goods) Bill 2017 was introduced into the House of Representatives on 16 February 2017.

Context and background

GST is imposed on goods that are subject to taxable importation. The importer pays the GST in this case. Currently, goods brought into Australia from overseas that are valued at less than the $1,000 threshold do not attract duty or GST. This is because they are low-value goods, a category that Australian taxation law specifies as non-taxable importations. Additionally, goods brought into Australia by a supplier from overseas fall outside the current definition of "connected with Australia" in s 9-25 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), which means their supply is not captured by the Act's Div 9 rules. The combined effect of these factors is that consumers can buy low-value goods from overseas, for example by ordering them online from an international store, without the transaction being subject to GST.

The low-value goods GST measures use a very similar approach (and similar terminology) to the "Netflix tax" legislation enacted by the Tax and Superannuation Laws Amendment (2016 Measures No. 1) Act 2016. The system proposed in the GST Low Value Goods Bill moves the GST payment responsibility from the customer to the overseas supplier. This means, if the Bill is passed, that overseas suppliers would be required to register for and pay Australian GST if their GST turnover exceeds $75,000. This system aims to overcome the logistical problems involved in making customers pay GST.

Alternatively, the GST liability for low-value imported goods may fall to the operator of an electronic distribution platform (EDP) – as is the case for the Netflix tax – or to goods forwarders (transport and freight companies), which are described as "redeliverers" in the Bill. The latter consideration does not apply to digital supplies like Netflix, as no physical movement of goods is required.

Note: the GST legislation refers to the "indirect tax zone", rather than "Australia". This is the same as the term "Australia", except that it excludes the areas where GST does not apply (such as the external territories).

Broad overview

Broadly, the GST Low Value Goods Bill sets out the following measures which, if the Bill is passed, will come into effect from 1 July 2017:

  • GST will be imposed on supplies of goods valued at $1,000 or less at the time of supply to Australia, if those goods are purchased by "consumers" and brought to Australia with the assistance of the supplier (ie the vendor); 
  • only supplies made to private consumers will be affected – importations by businesses will not be subject to these rules; 
  • the GST liability will rest with the vendor, but may extend to the operator of an EDP (if the sale is made through that platform) or the redeliverer; 
  • supplies will be subject to GST regardless of their small value – for example, even a supply worth $10 will be caught by the rules; 
  • GST will be calculated in the usual manner, imposed at a rate of 10% on the value of the supply; 
  • there is scope for GST to be imposed on the end consumer by reverse charge should they claim to be a business (so that the overseas supplier charges no GST) but then use the goods wholly or partly for private purposes; 
  • non-resident suppliers will be offered a limited registration option; and 
  • such importations will be deemed non-taxable to prevent double taxation (ie for the purposes of customs entry).

These rules would largely be contained in new Subdiv 84-C of the GST Act, entitled "offshore supplies of low value goods".

Note: The GST Low Value Goods Bill introduced on 16 February 2017 does not include changes to the Customs Act 1901 (Customs Act) or any related legislation.

What goods are subject to the proposed measures?

Three general requirements must be met for goods to become subject to GST under the low-value importation rules.

Firstly, the goods must be brought into Australia and the vendor must assist in arranging their delivery to Australia. If the vendor does not, the entity that does deliver the goods (the redeliverer) may instead be liable for the GST.

The second requirement is that the goods are of low value (worth $1,000 or less) based on their customs value. If the value is more than $1,000, the goods will remain subject to the ordinary importation rules currently in place. The customs value is determined as though the goods were exported at the time the consideration for the supply was first agreed upon, rather than at the time the goods were exported/imported into Australia or considered by a customs official. There is also scope for the Commissioner of Taxation to develop alternative exchange rate calculation methods (by legislative instrument), rather than using the fixed process mandated by the Customs Act.

Also, see below (under the heading "Other matters") for information about the Bill's treatment of a single supply involving multiple goods; for example, the purchase of a product costing less than $1,000 as well as a product costing more than $1,000.

The third requirement is that the entity to which the goods are supplied (the purchaser/customer) must use the goods in a private capacity (the Bill defines this as a "consumer"). In other words, genuine business purchases will not be subject to GST under the low-value importation rules. This third requirement will extend mostly to purchasers who are not registered or required to be registered for GST, but also includes purchases where a registered entity acquires certain goods solely for private purposes. This generally reflects the approach taken for the Netflix tax – under those rules, no GST liability arises if the consumer is otherwise entitled to an input tax credit for the acquisition.

If these three requirements are satisfied, the goods supply will be connected with Australia for the purposes of s 9-25 of the GST Act, and therefore potentially subject to GST (proposed s 9-25(3A) of the GST Act).

Who is proposed to be liable for GST?

The supplier will be liable for GST, providing that its GST turnover is in excess of $75,000. The GST turnover is determined by reference to its Australian sales only. For example, if an overseas vendor has turnover of $1 million per annum, but that turnover only includes sales of $50,000 to Australia, it will not be required to register and so will not be liable for GST on any of its sales.

If the vendor does not assist in delivery of the goods to Australia, it will not be liable for GST. If delivery is handled by a redeliverer, then that entity will be liable for GST on the supply (providing, of course, that the redeliverer's Australian GST turnover exceeds $75,000). The explanatory memorandum to the GST Low Value Goods Bill indicates this provision intends to capture the services of a class of businesses often referred to as mail, post and package forwarders, or redeliverers, which assist purchasers to obtain goods from foreign suppliers.

Finally, if the sale of low-value goods is made through an EDP, then responsibility for the GST on the supply is shifted to the EDP operator. The most obvious examples of EDPs are the App Store and Google Play. This provision reflects the approach taken in the Netflix legislation.

The limited registration option will be available for all categories of suppliers.

There is scope for a customer to reverse-charge GST if it acquires low-value imported goods partly for private purposes and partly for business purposes. Additionally, if a customer falsely represents that it is acquiring goods for a business purpose (and so no GST is imposed), it may also have to reverse-charge the GST liability (and will be subject to penalties).

Other matters

As already noted, a consumer may sometimes purchase several goods as part of one supply. In such a case, the low-value goods test applies to each of the several goods supplied. Two obvious scenarios arise from this provision.

Firstly, where several goods valued under $1,000 are bought together and delivered together and the total value is in excess of $1,000, each product will be treated as a supply of low-value goods, regardless of the total value of the supply.

Secondly, where individual goods have a value below $1,000 but goods with a value above $1,000 are also purchased, the part of the supply that has a value of more than $1,000 is treated as not a supply of low-value goods. The explanatory memorandum to the GST Low Value Goods Bill provides an example where a consumer buys a dress valued at $1,300 from a supplier in the United Kingdom, as well as a shirt valued at $200. The sale of the dress and the sale of the shirt are treated as separate supplies, despite the items being purchased in a single transaction.

This approach could pose something of a logistical nightmare. When goods arrive at customs, likely in a single parcel, part of the contents will have to be carved out as a supply on which the vendor has paid GST and part will require GST to be imposed on the purchaser.

Other points of note:

  • Under the current rules, international transport services are GST-free. The transport costs are factored into the goods' value when they are imported for home consumption, and the importer pays GST upon their entry to Australia. Under the new rules, such costs will not be GST-free. GST will be applied to the value of the goods supplied and any other costs included as part of the supply of goods (eg transport and insurance).
  • Tax invoices and adjustment notes will not be required for an offshore supply of low-value goods to a consumer. This is sensible, as by definition consumers will not be able to claim input tax credits.
  • The new rules include a safe harbour for overseas suppliers. A supply will not be connected with Australia if, at the time the consideration for the supply is set, the supplier (or the entity liable for the GST) reasonably believes that the goods will be imported as a taxable importation.
  • As well applying for goods ordered online (or by telephone), the new rules will apply where a consumer buys goods in person in a store overseas and makes an arrangement with the vendor's assistance for the goods to be brought to Australia.
  • Tobacco, tobacco products and alcoholic beverages are specifically excluded from the definition of "goods" for the purposes of the low-value goods rules.

Source: Treasury Laws Amendment (GST Low Value Goods) Bill 2017, 16 February 2017,;page=0;query=BillId%3Ar5819%20Recstruct%3Abillhome.

Draft ATO guideline

The ATO released Draft Law Companion Guideline LCG 2017/D2 on 24 February 2017. It discusses the amendments proposed in the GST Low Value Goods Bill.

The Draft Guideline discusses:

  • how to calculate the GST payable on a supply of low-value goods;
  • the rules to prevent double taxation of goods, and to correct errors or deal with changes in the GST treatment of a supply; and
  • how the rules interact with other rules under which supplies are connected with Australia.

The ATO intends to issue separate guidance about determining which entity is responsible for GST on supplies of low-value imported goods. This is expected to address issues such as when an EDP operator or redeliverer will be responsible for GST – and the rules where more than one EDP operator or redeliverer is involved in the supply.

The Draft Guideline draws heavily on the explanatory memorandum to the GST Low Value Goods Bill. It also offers additional examples and covers the following important details.

Currency conversion

Under proposed s 84-79(4)(e) of the GST Act, there will be two ways to work out the equivalent value in Australian currency of goods sold in a foreign currency:

  • under the provisions in s 161J of the Customs Act; or
  • in a manner determined by the Commissioner of Taxation.

The ATO is creating a draft legislative instrument which specifies that the Australian dollar amount to be used in working out a customs value can be calculated using the relevant Reserve Bank of Australia currency exchange rate for the date the price of the goods is first agreed upon.

Supplies not connected with Australia

Even if a supply satisfies the requirements for a supply of low-value goods, the supply will not be connected with Australia under proposed s 84-83 of the GST Act if:

  • the supplier has taken reasonable steps to obtain information about whether the goods will be imported as a taxable importation; and
  • after taking these steps, the supplier reasonably believes the goods will be imported as a taxable importation.

The Draft Guideline provides some helpful examples to illustrate the test's two elements (reasonable belief and reasonable steps).

Australian consumer law requirements

Generally speaking, Australian consumer law requires retailers to provide prices inclusive of GST, where GST is applicable. However, it may be difficult for offshore suppliers to be certain whether a supply of goods will be liable for Australian GST. To address this, the Draft Guideline states that if it is initially considered less likely that GST will apply to Australian recipients, a supplier can display a message that notes the potential for additional taxes to apply.

However, when an offshore supplier is aware that they are offering low-value goods for sale into Australia to consumers, the price displayed should be GST-inclusive. This would be the case where the supplier's website advertises consumer goods in Australian dollars and/or uses a "" domain name, or where location services show a goods recipient is in Australia.

Supplies of low-value goods not subject to GST at the border

Under s 42-15 of the GST Act, an importation of goods will be a non-taxable one to the extent that:

  • the supply is an offshore, taxable supply of low-value goods (under s 9-5);
  • the supply is connected with Australia only because the new provisions apply to it; and
  • before the time when a taxable importation would have been made, notification that the supply is taxable is provided to the Comptroller-General of Customs in the approved form.

The requirement to notify Customs for the purposes of s 42-15 will presumably be met where the relevant fields are completed on the import declaration for the goods.

To switch off the taxable importation, notification will need to be provided by the time at which the taxable importation would otherwise have been made. Using the terms in the customs legislation, this means the notification must be provided before goods are delivered into home consumption in accordance with an authority to deal, by including the information in the import declaration or in an amended import declaration.

Supplies incorrectly treated as taxable supplies

If the supplier (or entity treated as the supplier) discovers that the supply should not have been a taxable one, because of information about the nature of the goods or about the recipient, an adjustment event will arise.

If the supplier has already included the GST payable on such a supply in its assessed net amount in a return, the amount will be "excess GST" for the purposes of Div 142 of the GST Act. This applies so that an amount of excess GST is only refundable to the supplier if either it has not been passed on to the recipient or the recipient has been reimbursed for the excess GST passed on. Once a reimbursement is made to the recipient, the supply ceases to be a taxable one and the supplier can make a decreasing adjustment.

If the excess GST has not been passed on to the recipient, s 142-10 does not apply and the supplier may request an amended assessment or claim a refund in a later tax period (if the conditions set out in Legislative Determination GSTE 2013/1 are satisfied).

Source: ATO, Draft Law Companion Guideline LCG 2017/D2, 24 February 2017,