Bills Digest No. 107, 2016–17
PDF version [617KB]
Research Branch
Parliamentary Library
13 June 2017
Contents
Purpose of the Bill
Background
Introduction
Current and proposed approaches
Current arrangements
Proposed arrangements
Rulings and guidelines
Committee consideration
Senate Standing Committees on
Economics
Position of major interest groups
Amazon
ASOS
Australia Post
Australian Retailers Association
Conference of Asia Pacific Express
Carriers
DHL Express
eBay
FedEx Express
LVIG Industry Group Secretariat
(Alibaba, eBay and Etsy)
Retail Council
Shopping Centre Council of Australia
The American Chamber of Commerce in
Australia
The Tax Institute
Enforcement difficulties
Limited implementation period
Principal objections to the Bill
TNT Australia
UPS
Summary
Financial implications
Statement of Compatibility with Human
Rights
Parliamentary Joint Committee on
Human Rights
Key provisions
Amendments to the A New Tax System
(Goods and Services Tax) Act 1999
Amendments to the Taxation
Administration Act 1953
Transitional provisions
Commencement of amendments
Key issues
Date introduced: 16
February 2017
House: House of
Representatives
Portfolio: Treasury
Commencement: The
Bill will commence on the first 1 January, 1 April, 1 July or 1 October
to occur after the day the Act receives Royal Assent.
Item 65 of Schedule 1 to the Bill provides, in
essence, that the amendments will generally apply to supplies where the
invoice is issued or payment is received on or after 1 July 2017.
Links: The links to the Bill,
its Explanatory Memorandum and second reading speech can be found on the Bill’s
homepage, or through the Australian
Parliament website.
When Bills have been passed and have received Royal Assent,
they become Acts, which can be found at the Federal Register of Legislation
website.
All hyperlinks in this Bills Digest are correct as
at June 2017.
Purpose of the Bill
The purpose of the Treasury
Laws Amendment (GST Low Value Goods) Bill 2017 (the Bill) is to:
- amend
the A New Tax
System (Goods and Services Tax) Act 1999 (GST Act) to
ensure that goods and services tax (GST) is payable on certain supplies of low
value goods that are purchased by consumers and imported into Australia from 1
July 2017, effectively extending the application of GST to those goods
- amend
the Taxation
Administration Act 1953 (TAA) to extend the administrative
penalties for failing to provide information and notices as required, and
making false or misleading statements, to situations associated with the
amendments made by the Bill to the GST Act.
Background
Introduction
The GST regime commenced on 1 July 2000 following the
enactment of the GST Act.[1]
GST applies to most goods and services, although there are exceptions, including
those related to food and health. GST is imposed at the rate of 10 per cent on
the final selling price and is included in the price paid by the purchaser to a
supplier registered for GST. Suppliers are usually entitled to a credit, called
an input tax credit, for the GST included in goods and services they purchase
in the course of running their business. In this way, GST is effectively levied
only on the final consumer of goods and services subject to GST.
Since the introduction of the GST, the digital economy has
grown significantly.[2]
As part of this expansion, more Australian consumers are obtaining goods and
services from overseas businesses. This includes standard consumer goods such
as clothing and newer services such as digital streaming services. Differences
in the GST treatment of imported goods and services, and those provided within
Australia, have led to integrity and equity concerns.[3]
The Government responded to these concerns though the Tax and
Superannuation Laws Amendment (2016 Measures No. 1) Act 2016 (the
2016 Act), which introduced measures to apply GST to digital products and
services imported by Australian consumers. The 2016 Act aimed to ensure
that Australian businesses selling digital products and services were not
disadvantaged relative to overseas businesses that sell equivalent products in
Australia. [4]
For more information on the 2016 Act, please refer to the Bills
Digest for the originating Bill.[5]
In a similar vein, the current Bill proposes to amend the GST
Act to provide that GST is payable on certain supplies of low value goods
that are purchased by consumers and imported into Australia from 1 July 2017. The
Government considers that Australian businesses, especially small retailers,
are ‘unfairly disadvantaged’ by the current GST exemption for low value
imported goods valued at $1,000 or less.[6]
This measure was announced in the 2016–2017 Federal Budget
handed down on 3 May 2016, and the Bill introduced into Parliament on 16
February 2017.[7]
Preceding the introduction of the Bill, the Government
released exposure draft legislation and associated explanatory material on 4
November 2016, and invited submissions from interested parties by 2 December 2016.[8]
The submissions have not been made available.
The Intergovernmental
Agreement on Federal Financial Relations requires that any change to
the base or rate of GST can only be made by unanimous agreement of the states
and territories.[9]
At the Council of Australian Governments (COAG) Australian
Leaders Retreat on 22 July 2015, agreement was given to broaden the GST to
cover overseas online transactions of physical goods under $1,000.[10] Announcing the release of
the exposure draft legislation on 4 November 2016, the Treasurer stated
that the Council on Federal Financial Relations had provided in-principle agreement
to this change on 21 August 2015.[11]
Current and proposed approaches
Current arrangements
Under the current law, GST generally applies to supplies
of goods within Australia regardless of the value of the goods.[12]
Goods that are imported into the indirect tax zone by the
supplier are also generally subject to GST.[13]
(As set out in the Explanatory Memorandum, the indirect tax zone, or ITZ,
is ‘broadly, Australia, excluding those geographic areas where the GST does not
apply, such as the external Territories’).[14]
However, a $1,000 low value threshold exemption applies, so that GST is not
payable on imported goods that are valued at less than this amount.[15]
Proposed arrangements
Under the proposed amendments, imported goods with a
customs value of $1,000 or less will have GST collected at the point of sale,
using what is referred to as a vendor registration model.[16]
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.[17]
The Bill recognises certain types of business arrangements
that have arisen to facilitate internet-driven commerce. These arrangements
include electronic distribution platforms and redeliverers. Broadly, an electronic
distribution platform (EDP) is a service delivered by
electronic communication (including a website or an internet portal) that
allows sellers to make supplies available to end-users. Examples of EDPs
include eBay and Etsy. A redeliverer is, broadly, a business that
has an arrangement with the intended recipient of the goods to assist with the
delivery of foreign goods. Redeliverers may be used, for example, if a foreign
store does not deliver to Australia. As set out in the Explanatory Memorandum:
... redeliverers can make or help arrange the initial purchase
(including by acting as a personal shopper), provide a mailing address for
delivery in the relevant jurisdiction, make arrangements for any required
storage and deliver the goods or arrange for their delivery to the consumer. [18]
As explored under ‘Position of major interest groups’
below, some stakeholders consider that the vendor registration model is not
optimal and have proposed a logistics model instead.[19]
Under the logistics model, GST would be collected by logistics
companies on all parcels that they deliver. It is these companies that would be
responsible for the collection and remittance of the GST, being those
responsible for and able to physically monitor the movement of goods. According
to KPMG, ‘it is very likely that the collection rate under a Logistics Model
will be higher than under a hybrid Vendor Model’.[20]
Rulings and guidelines
On 24 February 2017, the ATO released a draft Law
Companion Guideline LCG 2017/D2 to describe
how the Commissioner will apply the law in the Bill when it comes into effect.
[21]
The draft guideline discusses when a supply of low value
goods will be connected with the indirect tax zone (ITZ) because of the
proposed amendments.[22]
The draft guideline also 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
- how
the rules interact with other rules under which supplies are connected with the
ITZ.[23]
These issues are discussed in more detail in the ‘Key
issues and provisions’ section of this Digest.
Committee consideration
Senate Standing Committees on Economics
The Bill was referred to the Senate Economics Legislation
Committee on 23 March 2017 for inquiry. Details of the inquiry and the report,
which was tabled on 9 May 2017, can be found on the inquiry
home page.[24]
The Committee received 34 submissions, some of which are
explored in the section below entitled ‘Position of major interest groups’. Online
access to all submissions can be found on the inquiry
submissions page.[25]
The Committee recommended that the Bill be passed, but
that the implementation date be delayed to 1 July 2018.[26]
The Committee also urged the Government to note the
concerns raised in paragraph 2.78 of the report, which relates to the GST
collection model proposed. Paragraph 2.78 reads as follows:
While alternative models have been suggested, the Committee
does not have sufficient information before it to form the view that any of
these models is preferable to the one envisaged in the Bill. It also notes the
OECD's work in the area and that the OECD analysis, while not arriving at a
specific recommendation, is consistent with the proposed model. The Committee
suggests that Treasury better articulate the rationale for its chosen model.[27]
Labor Senators issued a Dissenting report and made a
number of recommendations, including that the Senate should not pass the Bill.
Whilst they agree in principle with collecting GST on low value imports, they
do not believe the GST collection model proposed in the Bill is workable.[28]
Labor Senators recommended that the Government:
... complete a full review within one year, with engagement
from all stakeholders. The review should include an analysis and comparison of
alternative implementation models.[29]
Labor recommended that any revised legislation should have
a start date of 1 July 2018.[30]
Senator Nick Xenophon made some additional comments,
mainly relating to the GST collection model to be used. His team believes that
the logistics model (explained above) would be more likely to level the playing
field between Australian and overseas retailers and improve the position of
small business in Australia.[31]
The Nick Xenophon Team reserves its final position so that it can undertake
further consultation with stakeholders. If the Senate decides to pass this Bill,
the Nick Xenophon Team agrees with the recommendation that it be implemented
from 1 July 2018. [32]
Position of major interest groups
As set out above, 34 submissions were made to the Senate Economics
Legislation Committee. Some of these submissions are discussed below.
Amazon
Amazon made a comprehensive submission to the Committee in
which it made the following points:
- Amazon
supports the reduction of the GST threshold on low value imported goods to zero,
thereby subjecting those goods to GST and providing a level playing field
- Amazon
does not support the proposed collection model and recommends the Logistics
Model[33]
be considered instead. Amazon believes that the Logistics Model would leverage
the existing capabilities of Australian-based logistics providers such as
Australia Post, express carriers and freight forwarders, to collect and remit
GST on low value imported goods
- Amazon
believes the Bill fails to level the playing field between Australian
businesses and offshore suppliers as it imposes an administrative burden on sellers
and electronic distribution platforms which will create an inherent
disincentive for them to comply. It is estimated that there are approximately
1,100 foreign low value imported goods suppliers that would have to register
for GST under the Bill in any given week. The model to be implemented by the
Bill does not provide for efficient mechanisms to detect failure to register by
these offshore suppliers, who operate in multiple overseas jurisdictions. In
addition, there are significant questions around enforceability. This will
inevitably result in a large proportion of vendors either failing or choosing
not to register, and large volumes of low value imported goods entering Australia
without being subject to GST
- Amazon
believes the Bill introduces market distortions and disincentives, ultimately
harming consumers. It argues that the Bill will create rather than remove
distortions in pricing due to its lack of efficient mechanisms to require
registration of vendors, detect non-compliance and ensure collection of GST on
goods as they enter Australia. While compliant sellers and electronic
distribution platforms will charge GST, noncompliant sellers and electronic
distribution platforms will be able to ship parcels to Australia at prices that
appear more attractive to the consumer, with low risk of detection. Amazon
argues that this incentivises consumers to buy from less reputable overseas
vendors, at increased risk
- Amazon
states that the model to be implemented by the Bill is ill considered and
untested. When the Australian Government’s Low Value Parcel Processing
Taskforce (Taskforce) considered GST collection models in detail in 2012, it
opted for the Logistics Model.[34]
Amazon states that this is consistent with the OECD’s 2015 test card of
collection models, which identified the Logistics Model as the strongest of all
the potential approaches.[35]
Amazon recommends that this model be considered for implementation, rather than
the model proposed in the Bill
- Amazon
is not certain that courts in foreign jurisdictions would recognise and enforce
an Australian judgment for failure to remit GST under the new law.[36]
In short, Amazon recommends that the Bill should not be passed.[37]
ASOS
According to its website,
ASOS is a global fashion destination that sells over ‘80,000 branded and
own-brand products through localised mobile and web experiences, delivering
from [our] fulfilment centres in the UK, US, Europe and China to almost every
country in the world’.[38]
ASOS’s concerns with the Bill include:
- complexity
and uncertainty leading to compliance difficulties, which could have a negative
impact on both the success of the legislation and the Australian consumer
- that
there should be a level playing field for all retailers so that this
legislation does not just impact those with a high profile
- too
little time between the finalisation of the legislation and the proposed
commencement date. The start date does not take into account the significant
changes to business processes and systems that will be required and
- that
it may lead to various other impracticalities and unfairness depending on the
circumstances.[39]
Australia Post
Australia Post supports the vendor registration model (VRM)
as proposed in the Bill, which it believes would place relatively less burden
on its infrastructure, processing times and costs of doing business compared to
the ‘Transporter Model’ promoted by a number of large international e-commerce
platform operators.[40]
Under the Transporter Model, Australia Post would be
required to physically collect GST at the border. As a result, additional
resourcing, administration, new infrastructure and systems would be required to
be put in place, which Australia Post claims would cost it approximately $900
million per annum. In fact, it claims that any proposal involving a model that
requires the collection of GST at the border is likely to render the Australia
Post mail and parcels business unviable.[41]
Australia Post advocates a delayed implementation date of
1 July 2018 for the amendments contained in the Bill.[42]
Australian Retailers Association
The Australian Retailers Association (ARA) expressed its broad
support for the policy measure introduced by the Bill and views the vendor
registration model (VRM) as having advantages over other GST collection models
with respect to low value imported goods.[43]
The ARA’s main concern relates to how the new laws will be
implemented and enforced. It also expressed concern about the limited period of
time for implementation of the measure.[44]
Conference of Asia Pacific Express Carriers
The Conference of Asia Pacific Express Carriers
(Australia) Limited (CAPEC) is an industry association representing the
interests of four integrated air express parcel delivery companies, namely DHL
Express, Federal Express, TNT, and UPS.[45]
CAPEC supports the vendor registration model (VRM) whereby the overseas supplier
collects GST at the point of sale, which is then remitted to the ATO directly.
However, it does not support the obligation proposed by
the current Bill, which requires additional vendor registration information to
be captured and reported by CAPEC members. CAPEC’s view is that the information
flow should be between the overseas vendor and the ATO directly.
CAPEC’s concerns include:
- a
disparity of treatment between CAPEC members and Australia Post, whereby
Australia Post is not subject to the same regulatory burden and will thereby
gain a competitive advantage. Furthermore, it contends that such an advantage
is contrary to the Competition Principles Agreement (CPA) entered into by the
Council of Australian Governments (COAG) in 1995, which addresses competitive
neutrality across Australia with respect to government business enterprises.[46]
CAPEC is also concerned that an increasing amount of low value goods will enter
the ITZ via the postal stream without having been subject to GST as overseas
vendors may choose the postal stream to bypass vendor registration number (VRN)
and other regulatory reporting requirements
- the
requirement for CAPEC members to capture the VRN at the Air Cargo Report Self
Assessed Clearance (ACR-SAC) level is highly problematic in terms of its
practical application. CAPEC states that the required IT system changes will ‘take
several years to complete and come at a significant cost’.[47]
CAPEC argues that, given that its members will not be involved in the
collection of GST revenue, the requirement to capture and report VRNs is
superfluous and highly inefficient. As an alternative, CAPEC suggests that
either vendors collect and report the required data or the existing data
provided by the ACR-SAC be used
- the
limited period of time for implementation of the measure.[48]
DHL Express
DHL Express (Australia) Pty Ltd (DHL) is a member of CAPEC
and its submission substantially reflects that of CAPEC. [49]
eBay
eBay Australia and New Zealand (eBay) considers that the
proposed legislation is complex, inconsistent, and unworkable.[50] More particularly, eBay’s
concerns include:
- that
tax liability varies depending upon the goods’ value; seller turnover; whether
the sale is via an e‑commerce platform or direct sale; or delivered by
way of a courier, postal company or re-packaging business
- the
Bill seeks to utilise, in a modified form, legislation designed for overseas
supplies of intangible property.[51]
eBay considers that the distribution of software or an application by its owner
or licensed distributor is quite different to the purchase of a physical good
in another country and applying rules designed for intangible property is
incompatible with tangible property
- that
the legislation introduces separate categories and treatment of taxable goods,
and foreign businesses would be expected to learn the rate, thresholds and
exemptions of another country, which eBay thinks is unlikely
- that
there are two systems running in tandem. For goods over AUD$1,000 the system
would not apply. These goods will be untaxed at the point of sale and Customs
will intercept them when, or if, they are detected
- that
the legislation is unclear on disaggregation. Separate goods in one box or
parcel would appear to attract both tax treatments. The higher value good would
enter Australia untaxed, while the low value good should have been taxed at the
point of sale
- that
the liability for the tax varies depending on logistics arrangements. Postal
companies are not liable unless the parcel comes via a re-packaging business.[52]
Other concerns include:
- that
small overseas sellers will not continue selling via online marketplaces,
because they will lose the benefit of the AUD$75,000 threshold
- that
the new regime will not likely be enforceable. The Bill seeks to require
foreign businesses to keep a rolling calculation of their sales to Australian
buyers, and if those sales exceed AUD$75,000 per annum, to then register with a
foreign taxation authority. They are asked to discern if their buyers are
Australian, and charge them ten per cent more, but only when the value of the
transaction is below AUD$1,000. The legislation relies on foreign businesses
investing in systems to enable them to levy taxes, in specific circumstances,
and voluntarily send money to a foreign government when there is no effective
way to force them to do so
- that
the complexity of the task of implementing the measures introduced by the Bill
has been vastly underestimated and the proposed 1 July 2017 commencement date
is completely unrealistic for business, and even for the Government itself.[53]
eBay suggests an alternative approach utilising a
Logistics Model as follows:
- all
parcels ordinarily arrive at a small number of Customs points, via a small
number of international logistics companies, one of which is the
government-owned Australia Post. These companies can require buyers to declare
whether a good is new and to nominate a value of the good as part of the
pricing of parcel delivery to Australia. This system does not require parcels
to be stopped, other than for routine auditing. It captures all goods,
regardless of whether they were purchased via a platform or from a dot.com.
eBay consider such a model to be practical and enforceable, capable of raising genuine
revenue and fair. eBay also considers that, unlike other proposals, this would
level the playing field.[54]
FedEx Express
FedEx Express (Australia) Pty Ltd (FedEx) is a member of
the Conference of Asia Pacific Express Carriers (Australia) Limited (CAPEC) and
its submission substantially reflects that of CAPEC, discussed above.[55]
LVIG Industry Group Secretariat (Alibaba, eBay and
Etsy)
The LVIG Industry Group Secretariat (LVIG) is an industry
group comprising the Alibaba Group, eBay Inc. and Etsy.[56]
LVIG’s concerns include:
- ineffective
compliance and enforcement capability
- that
small businesses operating through third party electronic distribution
platforms (EDP) would be put at a disadvantage compared to larger businesses as
the GST turnover threshold is determined at the EDP level rather than on the
individual seller’s turnover.
LVIG also opposes the vendor registration model,
suggesting the Logistics Model would be more appropriate.[57]
Retail Council
The Retail Council supports
the Bill, satisfied that it gives effect to the Council’s long-running advocacy
for the GST to apply to low value imported goods purchased by Australian consumers.[58]
Shopping Centre Council of Australia
The Shopping Centre Council of Australia supports the
policy measure and the Bill in general, including the 1 July 2017
commencement date.[59]
The American Chamber of Commerce in Australia
The American Chamber of Commerce in Australia opposes the
Bill, considering it to be ‘anti-consumer and anti‑free trade in nature’.[60] Its concerns
include:
- difficulties
in the effective enforcement of the measure and
- the
limited period of time for implementation of the measure.[61]
The Tax Institute
Central to the concerns of The Tax Institute (TTI) are:
- difficulties
in the effective enforcement of the measure
- the
limited period of time for implementation of the measure.[62]
Enforcement difficulties
TTI is concerned that the amendments do not provide sufficient
powers of enforcement of the law, nor sufficiently address voluntary compliance
by the range of overseas suppliers, either due to a lack of awareness or by
deliberate intent.
Contributing factors that may lead to low compliance rates
include:
- the
limited registration option may not be preferred by overseas entities as they
will not be able to access input tax credits under that option. This may result
in overseas entities seeking to register under the ‘ordinary rules’, which TTI considers
to be extremely time consuming, complicated by the possibility of entities of
types unfamiliar to Australia seeking to register
- the
new provisions are technically complex
- TTI
is of the view that in the absence of education and effective enforcement, and
given the other factors mentioned above, that it is unlikely there will be high
levels of voluntary compliance from all but the larger and better known
overseas suppliers with worldwide reputations.[63]
Limited implementation period
TTI believes that there is very little time for overseas suppliers,
particularly the larger ones, to get systems in place in time to accommodate
the new changes after they become law.
TTI also considers that the short timeframe in which to
implement the new rules is not only unrealistic, but also likely to largely
remove the goodwill of overseas suppliers that might otherwise be relied on for
voluntary compliance.[64]
Principal objections to the Bill
In the TaxVine member newsletter of 21 April 2017,[65]
TTI stated that the main thrust of the position it proposed to advocate at the
Senate Economics Legislation Committee hearing on 21 April 2017 was as follows:
- ‘the
time frame to introduction is way too short and the start date should be
delayed to 1 January 2018’
- ‘compliance
is going to be a big issue with smaller offshore suppliers being unlikely to
comply’ and
- ‘the
position of electronic distribution platforms such as eBay and Amazon will be
untenable if the Bill goes through as currently drafted.’[66]
With respect
to the last point TTI says:
Essentially where an electronic distribution platform is
used, the proposal is to shift the liability to the GST away from the vendor of
the underlying product to the EDP. This means that the EDP will be liable for
GST of 1/11th of the amount paid to the vendor if no GST had been paid at the
time of the transaction. This is an absurd result for the likes of eBay and
Amazon who will be liable for tax on monies they never received.[67]
TNT Australia
TNT Australia
Pty Ltd is a subsidiary of FedEx Corporation and a member of the Conference of
Asia Pacific Express Carriers (CAPEC), and its submission substantially
reflects that of CAPEC, discussed above.[68]
UPS
UPS Pty Ltd
is a member of Conference of Asia Pacific Express Carriers (Australia) Limited
(CAPEC) and its submission substantially reflects that of CAPEC, discussed
above.[69]
Summary
Not surprisingly, stakeholders have generally approached
the Bill’s efficacy from their own particular perspective. Australian retailers
favour the Bill, overseas sellers and electronic distribution platform
operators oppose the Bill and international express couriers object to
additional information capture and reporting requirements. The views of The Tax
Institute, on the other hand, appear to be more impartial.
Relatively common concerns are:
- the
short timeframe for implementing the measures contained in the Bill
- the
complexity of the legislation, including the obligations imposed on those
affected and
- questions
around the Bill’s effective enforceability, voluntary or otherwise.
Financial implications
The Financial Impact Statement in the Explanatory
Memorandum to the Bill states that the measure introduced by the Bill is
estimated to result in a gain to GST revenue of $300 million over the period to
2019–20.[70]
Statement of Compatibility
with Human Rights
As required under Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the
Bill’s compatibility with the human rights and freedoms recognised or declared
in the international instruments listed in section 3 of that Act. The
Government considers that the Bill is compatible.[71]
Parliamentary Joint Committee on Human Rights
The Parliamentary Joint Committee on Human Rights considers
that the Bill does not raise human rights concerns.[72]
Key provisions
Amendments to the A New Tax System (Goods and
Services Tax) Act 1999
The Explanatory
Memorandum to
the Bill provides a detailed explanation of the Bill’s provisions.[73]
A summary of the changes is provided here.
As explained briefly in the ‘Background’ section of this
Digest, currently GST generally applies to:
- supplies
of goods within Australia regardless of the value of the goods
- goods
that are imported into the indirect tax zone (ITZ) by
the supplier and are valued above the $1,000 low value threshold exemption.[74]
Under the amendments proposed by the Bill, imported goods
with a customs value of $1,000 or less will have GST collected at the point of
sale, using what is referred to as a vendor registration model.[75]
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.[76]
This GST treatment is achieved by providing that a
‘supply’[77]
of ‘goods’[78]
will be ‘connected with the ITZ’,[79]
(broadly Australia excluding the external territories), if:
- the
supply is an ‘offshore supply of low value goods’ and
- the
recipient acquires the supply as a ‘consumer’.[80]
However, the supply will not be connected with the ITZ if,
at the time the ‘consideration’[81]
(broadly the agreed price) for the supply is set, the supplier (or the entity
that is treated as being the supplier for the purposes of the GST law), after
taking reasonable steps, reasonably believes the goods will be imported as a
‘taxable importation’.[82]
A supply of goods is an offshore supply of low value
goods if the goods are brought into the ITZ with the assistance of the
supplier (or an entity treated as being the supplier)[83]
and the ‘customs value’[84]
of the goods, at the time when the consideration for the supply was first
agreed, would have been $1,000 or less had they been exported at that time.[85]
However, supplies of tobacco, tobacco products or alcoholic beverages are never
supplies of low value goods.[86]
These goods are always taxable importations under the existing rules, so GST
will be collected through customs processes.[87]
A consumer[88]
refers to a recipient of a supply that is not registered for GST or, if
registered for GST, does not acquire the goods solely or partly for the
purposes of a business that the recipient carries on in the ITZ.[89]
Broadly, the proposed amendments will:
-
make supplies of goods valued at
$1,000 or less at the time of supply connected with the ITZ if the goods are,
broadly, purchased by consumers and are brought to the ITZ with the assistance
of the supplier[90]
-
treat the operator of an ‘electronic
distribution platform’ (EDP) [91]
as the supplier of low value goods if the goods are purchased through the
platform by consumers and brought to the ITZ with the assistance of either the
supplier or the operator[92]
- treat ‘redeliverers’[93]
as the suppliers of low value goods if the goods are delivered outside the ITZ
as part of the supply and the redeliverer assists with their delivery into the
ITZ as part of, broadly, a shopping or mailbox service that it provides under
an arrangement with the consumer[94]
-
allow non-resident suppliers of low
value goods that are connected with the ITZ only because of these amendments to
elect to be ‘limited registration entities’.[95]
A limited registration entity is able to access simplified registration and
reporting requirements, but its acquisitions are never ‘creditable
acquisitions’ [which means that input tax credits are not available] and it
cannot obtain an Australian Business Number (ABN)[96]
- prevent double taxation by making
importations of goods non-taxable importations if the supply of the goods is a
taxable supply only as a result of these amendments and the importer notifies
the Comptroller-General of Customs, by the time the importation would have been
subject to GST, [97]
that the supply was a taxable supply.[98]
Amendments to the Taxation Administration Act 1953
Section 284-75 of the Taxation Administration Act 1953
(TAA) sets out administrative penalties for providing false or
misleading information under taxation law.[99]
Items 61 and 62 of the Bill amend section 284-75 to extend this
penalty to situations where a false or misleading statement is made in relation
to whether or not a supply is connected with the ITZ because it is a supply of
low value goods.
Section 288-45 of the TAA provides an administrative
penalty for failure to provide invoices or notices required under taxation law.
Item 63 amends this section to apply the administrative penalty to suppliers
who do not provide recipients with notice, in the approved from, of the GST
payable on a supply of low value goods, as required by proposed section
84-89 of the GST Act, at item 38 of the Bill.
Item 64 inserts proposed section 288-46 into
the TAA, to penalise offshore suppliers of low value goods who do not
provide the information required under proposed section 84-93 of the GST
Act, at item 38 of the Bill. (The required information is the
supplier’s registration number, the recipient’s ABN (if relevant) and the
extent to which the supply is being treated as taxable.)
Transitional provisions
Item 66 of
Schedule 1 to the Bill is a transitional provision providing that an
election to be a limited registration entity made under former subsection
84-140(2) of the GST Act will continue to be effective for the purposes
of proposed subsection 146-5(2), inserted by item 49 of the Bill.
Section 84-140 will be repealed by item 42 of Schedule 1 to the Bill.
Commencement of amendments
Clause 2
of the Bill provides that the Bill will commence on the first 1 January, 1
April, 1 July or 1 October to occur after the day the Act receives Royal
Assent.
Item 65 of
Schedule 1 to the Bill provides, in essence, that the amendments will generally
apply to supplies where the invoice is issued or payment is received after 1
July 2017, and will not apply to supplies relating to earlier tax periods, even
if the goods do not reach the recipient until a later date.[100]
Key issues
Submissions to the Senate Economics Legislation Committee identified
the following areas of concern for stakeholders:
- the
short time period in which the Bill is to take effect has received substantial
criticism.[101]
This concern was accepted by the Committee, which recommended a delayed
implementation date of 1 July 2018[102]
- the
new provisions in combination with the existing legislation introduce a certain
amount of complexity for those affected, which may impact negatively on
voluntary compliance[103]
- jurisdictional
issues may arise in attempting to impose obligations on non‑residents in
a foreign country, leading to difficulties with enforcement with could undermine
the purpose of the Bill[104]
and
-
the vendor registration model proposed in the Bill is criticised
by stakeholders, some of whom have recommended that a logistics model be applied
instead.[105]
[1]. Background
information on the GST is set out in the Bills Digest: B Bennett, A
New Tax System (Goods and Services Tax) Bill 1998, Bills digest, 97,
1998–99, Department of the Parliamentary Library, Canberra, 1999.
[2]. The
digital economy has been defined as ‘The global network of economic and social
activities that are enabled by information and communications technologies,
such as the internet, mobile and sensor networks’: Department of Broadband,
Communications and the Digital Economy, Australia's
digital economy: future directions: final report , Canberra, 2009, p.
2.
[3]. See
for example, R Millar, ‘The
"Netflix tax" - coming to a country near you’, The
Conversation, 22 April 2015; Retail Council, Submission
to Senate Economics Legislation Committee, Inquiry into Treasury Laws
Amendment (GST Low Value Goods) Bill 2017 [Provisions], 3 April 2017.
[4]. S
Morrison, ‘Second
reading speech: Tax and Superannuation Laws Amendment (2016 Measures No. 1)
Bill 2016’, House of Representatives, Debates, 10 February 2016, pp.
1158–1161.
[5]. K
Sanyal, Tax
and Superannuation Laws Amendment (2016 Measures No. 1) Bill 2016,
Bills digest, 116, 2015–16, Parliamentary Library, Canberra, 2016.
[6]. S
Morrison, ‘Second
reading speech: Treasury Laws Amendment (GST Low Value Goods) Bill 2017’,
House of Representatives, Debates, 16 February 2017, pp.
1278–1279.
[7]. Australian
Government, Budget
measures: budget paper no. 2: 2016–17, 2016, p. 19.
[8]. Australian
Government, ‘Applying
GST to Low Value Goods Imported by Consumers: exposure draft’, Treasury
website, 4 November 2016.
[9]. Council
of Australian Governments (COAG), Intergovernmental Agreement on Federal Financial Relations,
2011.
[10]. J
Hockey (Treasurer), ‘Statement:
Council on Federal Financial Relations Tax Reform Workshop’, media release,
21 August 2015.
[11]. S
Morrison (Treasurer), ‘Exposure
draft: GST on low value imported goods’, media release, 4 November 2016.
[12]. Section
7-1, GST Act. S Morrison ‘Second
reading speech: Treasury Laws Amendment (GST Low Value Goods) Bill 2017’,
House of Representatives, Debates, 16 February 2017, p. 1278.
[13]. Section
7-1 and subsection 9-25(3); definitions of import and indirect
tax zone in section 195-1 of the GST Act.
[14]. Explanatory
Memorandum, Treasury Laws Amendment (GST Low Value Goods) Bill 2017, p. 5.
[15]. Sections
13-5(1), 13-10, and 42-5(1) of the GST Act, and item 26 in Schedule 4 to
the Customs
Tariff Act 1995; CCH, ‘Australian GST guide commentary’, paragraph
100-046, CCH IntelliConnect electronic resource.
[16]. Sections
23-5, GST Act.
[17]. S
Morrison. ‘Second
reading speech: Treasury Laws Amendment (GST Low Value Goods) Bill 2017’
House of Representatives, Debates, 16 February 2017, pp.
1278–1279.
[18]. Explanatory
Memorandum, Treasury Laws Amendment (GST Low Value Goods) Bill 2017, p. 29.
[19]. Amazon,
Submission
to Senate Economics Legislation Committee, Inquiry into Treasury Laws
Amendment (GST Low Value Goods) Bill 2017 [Provisions], 10 April 2017, p.
5.
[20]. Amazon,
Submission
to Senate Economics Legislation Committee, Inquiry into Treasury Laws
Amendment (GST Low Value Goods) Bill 2017 [Provisions], 10 April 2017,
Appendix D, p. 4.
[21]. ATO,
‘Law
companion guideline: GST on low value imported goods’, LCG 2017/D2, ATO
website, 24 February 2017.
[22]. CCH,
‘Draft guideline: GST on low value imported goods’, Australian GST guide
commentary, paragraph 100-047, CCH IntelliConnect database.
[23]. Ibid.
[24]. Senate
Economics Legislation Committee, Inquiry
into the Treasury Laws Amendment (GST Low Value Goods) Bill 2017 [Provisions].
[25]. Senate
Economics Legislation Committee, Submissions,
Inquiry into the Treasury Laws Amendment (GST Low Value Goods) Bill 2017.
[26]. Senate
Economics Legislation Committee, Treasury
Laws Amendment (GST Low Value Goods) Bill 2017 [Provisions], Report,
May 2017, p. ix.
[27]. Ibid.,
p. 23.
[28]. Ibid.
[29]. Ibid.
[30]. Ibid.
[31]. Ibid.,
p. 25.
[32]. Ibid.,
p. 28.
[33]. Discussed
in the ‘Background – Current and proposed approaches’ section.
[34]. The
Treasury, Low
Value Parcel Processing Taskforce - Final Report, 6 September 2012.
[35]. Ibid.
[36]. Amazon,
Submission
to Senate Economics Legislation Committee, Inquiry into Treasury Laws
Amendment (GST Low Value Goods) Bill 2017 [Provisions], 10 April 2017, pp.
5–6.
[37]. Ibid.,
p. 6.
[38]. ASOS.com
Limited (ASOS), ‘About ASOS’, ASOS
website.
[39]. C
Cazzolli (ASOS Head of Trading AU & NZ), Submission
to Senate Economics Legislation Committee, Inquiry into Treasury Laws
Amendment (GST Low Value Goods) Bill 2017 [Provisions], 3 April 2017
[40]. Australia
Post, Submission
to Senate Economics Legislation Committee, Inquiry into Treasury Laws
Amendment (GST Low Value Goods) Bill 2017 [Provisions], April 2017.
[41]. Ibid.,
pp. 2–3.
[42]. Ibid.,
p. 3.
[43]. Australian
Retailers Association, Submission
to Senate Economics Legislation Committee, Inquiry into Treasury Laws
Amendment (GST Low Value Goods) Bill 2017 [Provisions], 10 April 2017.
[44]. Ibid.,
p. 6.
[45]. Conference
of Asia Pacific Express Carriers (Australia) Limited, Submission
to Senate Economics Legislation Committee, Inquiry into Treasury Laws
Amendment (GST Low Value Goods) Bill 2017 [Provisions], 8 April 2017.
[46]. Council
of Australian Governments (COAG), Competition
Principles Agreement, 11 April 1995, as amended to 13 April 2007.
[47]. Conference
of Asia Pacific Express Carriers (Australia) Limited, Submission
to Senate Economics Legislation Committee, op. cit., p. 4.
[48]. Ibid.,
p. 7.
[49]. DHL
Express (Australia) Pty Ltd, Submission
to Senate Economics Legislation Committee, Inquiry into Treasury Laws
Amendment (GST Low Value Goods) Bill 2017 [Provisions], 10 April 2017.
[50]. eBay
Australia and New Zealand, Submission
to Senate Economics Legislation Committee, Inquiry into Treasury Laws
Amendment (GST Low Value Goods) Bill 2017 [Provisions], 10 April 2017.
[51]. The
legislation to which eBay is referring is the Tax and
Superannuation Laws Amendment (2016 Measures No. 1) Act 2016, which is
discussed in the ‘Background’ section of this Digest.
[52]. Ibid.,
pp. 2–4.
[53]. Ibid.,
pp. 2–3.
[54]. Ibid.,
p. 6.
[55]. FedEx
Express (Australia) Pty Ltd, Submission
to Senate Economics Legislation Committee, Inquiry into Treasury Laws
Amendment (GST Low Value Goods) Bill 2017 [Provisions], 10 April 2017.
[56]. LVIG
Group Secretariat, Submission
to Senate Economics Legislation Committee, Inquiry into Treasury Laws
Amendment (GST Low Value Goods) Bill 2017 [Provisions], 12 April 2017.
[57]. Ibid.,
p. 3.
[58]. Retail
Council, Submission
to Senate Economics Legislation Committee, Inquiry into Treasury Laws
Amendment (GST Low Value Goods) Bill 2017 [Provisions], 3 April 2017.
[59]. Shopping
Centre Council of Australia, Submission
to Senate Economics Legislation Committee, Inquiry into Treasury Laws Amendment
(GST Low Value Goods) Bill 2017 [Provisions], 10 April 2017.
[60]. The
American Chamber of Commerce in Australia, Submission
to Senate Economics Legislation Committee, Inquiry into Treasury Laws
Amendment (GST Low Value Goods) Bill 2017 [Provisions], 10 April 2017., p.
2.
[61]. Ibid.
[62]. The
Tax Institute, Submission
to Senate Economics Legislation Committee, Inquiry into Treasury Laws
Amendment (GST Low Value Goods) Bill 2017 [Provisions], 6 April 2017.
[63]. Ibid.,
pp. 2–3.
[64]. Ibid.,
pp. 4–5.
[65]. B
Deutsch, ‘Senior Tax Counsel’s report’, TaxVine
newsletter, The Tax Institute, 21 April 2017.
[66]. Ibid.
‘Electronic distribution platforms’ (EDPs) are explained under ‘Current and
proposed approaches’ in the ‘Background’ section of this Digest.
[67]. Ibid.
[68]. TNT
Australia Pty Ltd, Submission
to Senate Economics Legislation Committee, Inquiry into Treasury Laws
Amendment (GST Low Value Goods) Bill 2017 [Provisions], 7 April 2017.
[69]. UPS
Pty Ltd, Submission
to Senate Economics Legislation Committee, Inquiry into Treasury Laws
Amendment (GST Low Value Goods) Bill 2017 [Provisions], 7 April 2017.
[70]. Explanatory
Memorandum, Treasury Laws Amendment (GST Low Value Goods) Bill 2017, op.
cit., p. 3.
[71]. Ibid.,
pp. 48–49.
[72]. Parliamentary
Joint Committee on Human Rights, Report,
2, 2017, The Senate, Canberra, 21 March 2017, p. 57.
[73]. Explanatory
Memorandum, Treasury Laws Amendment (GST Low Value Goods) Bill 2017, op.
cit.
[74]. Section
7-1 and subsection 9-25(3); definitions of import and indirect
tax zone in section 195-1 of the GST Act. As discussed above,
the indirect tax zone (ITZ) is, broadly, Australia, excluding the areas where
GST does not apply, such as the external territories.
[75]. Sections
23-5, GST Act.
[76]. S
Morrison. ‘Second
reading speech: Treasury Laws Amendment (GST Low Value Goods) Bill 2017’
House of Representatives, Debates, 16 February 2017, pp.
1278–1279.
[77]. Supply
has the meaning given by section 9-10, GST Act [Section 195-1, GST
Act].
[78]. Goods
means any form of tangible personal property [Section 195-1, GST Act].
[79]. Connected
with the indirect tax zone, in relation to a supply, has the meaning
given by sections 9-25, 85-5 and 126-27 of the GST Act, and proposed
section 84-75, at item 38 of the Bill. Indirect tax zone
means ‘Australia’ (as defined at section 960-505 of the Income Tax
Assessment Act 1997), but does not include any of the following:
(a) the external Territories;
(b) an offshore area for the purpose of
the Offshore Petroleum and Greenhouse Gas Storage Act 2006;
(c) the Joint Petroleum Development Area
(within the meaning of the Petroleum (Timor Sea Treaty) Act 2003);
other than an installation (within the
meaning of the Customs Act 1901) that is deemed by section 5C of the Customs
Act 1901 to be part of Australia and that is located in an offshore area or
the Joint Petroleum Development Area. [Section 195-1, GST Act].
[80]. See
below for explanations of these terms.
[81]. Consideration,
for a supply or acquisition, means any consideration (including payment),
within the meaning given by sections 9-15 and 9-17 of the GST Act, in
connection with the supply or acquisition [section 195-1, GST Act].
[82]. Taxable
importation has the meaning given by subsections 13-5(1) and 114-5(1), GST
Act [Section 195-1, GST Act]; CCH, ‘Australian GST guide
commentary’, op. cit., paragraph 100-046.
[83]. Proposed
section 84-77 of the GST Act, at item 38 of the Bill.
[84]. Customs
value, in relation to goods, means the customs value of the goods for
the purposes of Division 2 of Part VIII of the Customs Act 1901 [section
195-1, GST Act].
[85]. Proposed
paragraph 84-79(3)(a) and proposed subsection 84-79(4) of the GST
Act, at item 38 of the Bill.
[86]. Proposed
paragraph 84-79(3)(b), at item 38 of the Bill; CCH, Australian
GST Guide Commentary, op. cit., paragraph 100-046.
[87]. Explanatory
Memorandum, Treasury Laws Amendment (GST Low Value Goods) Bill 2017, op.
cit., p. 17.
[88]. Consumer
has the meaning given by proposed subsection 84-75(2) at item 38
of the Bill.
[89]. CCH,
Australian GST guide commentary, op. cit., paragraph 100-046.
[90]. Proposed
section 84-75 of the GST Act, at item 38 of the Bill.
[91]. Electronic
distribution platform has the meaning given by section 84-70 of the GST
Act. EDPs are explained under ‘Current and proposed approaches’ in the
‘Background’ section of this Digest.
[92]. Proposed
subsections 84-77(2) and 84-81(3) of the GST Act, at item
38 of the Bill.
[93]. Redeliverer,
of a ‘supply of low value goods’, has the meaning given by proposed
subsection 84-77(4) of the GST Act, at item 38 of the Bill.
Further information on redeliverers is set out under ‘Current and proposed
approaches’ in the ‘Background’ section of this Digest.
[94]. Proposed
subsections 84-77(3), 84-77(4) and 84-81(4) to (6), at item 38
of the Bill.
[95]. Proposed
section 146-5 of the GST Act, at item 49 of the Bill; limited
registration entity has the meaning given by section 84-140 of the GST
Act [Section 195-1, GST Act].
[96]. Proposed
Division 146 of the GST Act, at item 49 of the Bill.
[97]. Proposed
section 42-15 of the GST Act, at item 19 of the Bill.
[98]. CCH,
‘Australian GST Guide Commentary’, op. cit., paragraph 100-046.
[99]. Taxation
Administration Act 1953.
[100]. Explanatory
Memorandum, Treasury Laws Amendment (GST Low Value Goods) Bill 2017, op.
cit., p. 47.
[101]. See,
for example the Submissions
to the Senate Economics Legislation Committee Inquiry into Treasury Laws
Amendment (GST Low Value Goods) Bill 2017 [Provisions] by ASOS, Australia
Post, the Australian Retailers Association, CAPEC, eBay, the American Chamber
of Commerce in Australia and The Tax Institute. For more information, see the
‘Position of major interest groups’ section of this Digest.
[102]. Senate
Economics Legislation Committee, Treasury
Laws Amendment (GST Low Value Goods) Bill 2017 [Provisions], Report,
May 2017, p. ix.
[103]. See
Submissions
to the Committee by, for example, Amazon, ASOS, eBay, the LVIG Industry Group and
The Tax Institute.
[104]. See
Submissions
to the Committee by, for example, Amazon, ASOS, eBay, the LVIG Industry Group, the American Chamber of Commerce in Australia
and The Tax Institute.
[105]. See
Submissions
to the Committee by, for example, Amazon, eBay, the LVIG Industry Group and The
Tax Institute. For a brief explanation of these models, see ‘Current and
proposed approaches’ in the ‘Background’ section of this Digest.
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