On 23 March 2017, the Senate referred the provisions of the Treasury
Laws Amendment (GST Low Value Goods) Bill 2017 (the bill) to the Economics
Legislation Committee for inquiry and report by 9 May 2017.
Conduct of the inquiry
The committee advertised the inquiry on its website. It also wrote to
relevant stakeholders and interested parties inviting submissions by 10 April
2017. The committee received 34 submissions, which are listed at Appendix 1.
The committee held a public hearing in Melbourne on 21 April 2017. The
names of witnesses who appeared at the hearing are at Appendix 2.
The committee thanks all individuals and organisations that contributed
to the inquiry.
Hansard references throughout this document relate to the Proof Hansard.
Please note that page numbering may differ between the proof and final Hansard.
Overview of the bill
At present, goods with a value of less than $1000 are exempted from
Goods and Services Tax (GST), when imported directly by consumers into Australia.
The bill seeks to apply GST to those goods, with effect from 1 July 2017. This
would, on the face of it, bring their tax treatment into line with goods
The bill applies GST by requiring the suppliers of those goods,
including vendors, freight forwarders and electronic distribution platforms, to
register for GST, and to remit the appropriate tax to the Australian Taxation
The measure was announced in the 2016–17 Budget. It is a complementary
measure to the extension of GST to digital products and other imported services,
which was announced in the 2015–16 Budget and which will commence on
1 July 2017.
The measure enacted by the bill is estimated to result in an increase in
GST revenue over the forward estimates of $300 million.
Background and consultation
The low value threshold, set in 1985 at $1000 and not indexed, is
prescribed under the Customs Act 1901.
It sets a level below which imported goods (with some exceptions such as
alcohol and tobacco) are exempt from a number of processing and tax
requirements, including GST.
This creates a price advantage for goods imported directly from overseas
retailers over goods supplied locally, since the locally supplied goods incur
With the advent of online shopping, many local
bricks-and-mortar retailers faced a new competitive threat. Meanwhile, online
shopping made purchasing from overseas through sites like Amazon.com much
easier, so consumers began importing more goods directly. This led retailers to
claim that the failure to levy GST on low value imports was putting them at a
significant competitive disadvantage. For example, the National Retail
Association's submission to the 2013 National Commission of Audit was entitled Protecting
the Integrity of the GST System, and dealt almost exclusively with this
The following figures are not authoritative. They are included merely to
give an indication of the order of magnitude of the changes involved.
While precise data is not available, Australian Bureau of Statistics
(ABS) figures suggest that retail sales have increased by about 11 per cent
Online sales appear to have increased by nearly 40 per cent since
They now represent approximately 7 per cent of retail sales; but the rate of
increase appears to be slowing.
The Australian Bureau of Statistics increased its 'low value threshold
adjustment' (by which it adjusts its estimate of total imports for the national
accounts) by 13 per cent between 2013–14 and 2015–16.
It is now $7.6 billion, compared with a total value of annual retail sales
of about $300 billion.
Thus, while online sales overall have increased rapidly, the proportion
that are low value imports is actually modest. However, it is plausible that low
value imports will continue to increase, especially as the rate of increase in
the last few years was probably dampened by the depreciation of the Australian
The need to protect the GST base and the desirability of a level playing
field for Australian based retailers have established a case for extending GST
to low value imports.
Australia's threshold of $1000 is relatively high: thresholds for GST or
value-added tax (VAT) in similar countries are C$20 for personal imports and
C$60 for gifts in Canada, £15
for personal imports and £39
for gifts in the United Kingdom, and NZ$60 in New Zealand. The United States
threshold appears to be US$800 for customs duty; note that consumption taxes are more
complex, as they are levied by individual states.
Other countries are looking at the treatment of low value items. The
OECD, after many years of work, published International
VAT/GST Guidelines which dealt with the issue in November 2015.
Most OECD countries have implemented or announced measures to
collect the VAT on the ever-rising volume of online sales by offshore sellers
in line with the International VAT/GST Guidelines and the [OECD Base Erosion
and Profit Shifting] Action 1 Report on Addressing the Tax Challenges of the Digital
There have been several analyses of the issue in Australia. The
Productivity Commission (PC) examined it in its report on the retail industry
in 2011. It noted that there were advantages of tax neutrality in collecting
GST and any relevant duty on all imports. It looked at various changes to the
low value threshold including complete abolition of it. Its discussion
envisaged that collection of the GST on low value imports would involve
separate handling of each parcel. The PC concluded that the advantages of tax
neutrality and any increase in revenue would be far outweighed by the costs of
collection. It suggested that further examination of the handling of parcels
was needed before a solution could be found.
In response to the PC, the Government established the Low Value Parcel
Processing Taskforce. It recommended, among other things, that there no longer
be a single threshold for customs and GST; that the GST threshold be lowered
(but the Taskforce did not recommend a specific value); and that simplified
collection methods, not including transport costs, be devised. It also
recommended (Recommendation 4.3):
To streamline revenue collection, legislative arrangements
could be amended to enable and encourage appropriately regulated overseas
suppliers to collect GST from purchasers of low value goods at the time of
The Taskforce envisaged a gradual introduction of any changes. It saw
the possibilities of using electronic data provided by suppliers, but still
appeared to be thinking in terms of individual parcels.
In the 2015–16 Budget, the Government announced a measure to collect GST
on cross-border supplies of digital products and services. Legislation has been
passed and the change will take effect from 1 July 2017.
A Commonwealth-State Leaders Retreat agreed in July 2015 to extend the
GST to cross-border supplies of low value goods. The Commonwealth put forward
its proposed way of doing this:
At the meeting the Commonwealth Treasurer put forward a
proposal that relies on a vendor registration model as a method of collecting
the GST for the states and territories. As goods would not be stopped at the
border, administering a vendor registration model would have a relatively low
The Commonwealth also recommended that the existing threshold
for the GST liability be reduced to zero, in line with the GST collection for
other products and services. The states and territories have unanimously agreed
to this in principle.
In November 2016, the Government released an exposure draft, explanatory
memorandum and further information for the proposed legislation.
The responses to the consultation documents have not been published.
Several submitters and witnesses to the inquiry have complained that
consultation has been inadequate. Some have asserted that they were not aware
of the specific model that the Government was adopting until the publication of
the exposure draft in November 2016. This statement by Ms Kristen Foster of
eBay is more or less typical:
We have been watching and monitoring this issue since the
COAG decision of 2015... [It] was based on a low value threshold and moving it to
zero. It did not come up with a policy option of an electronic distribution
platform model or a collection model whereby marketplaces would need to
collect. The vendor registration model was announced in the federal budget last
year in a couple of sentences. When we read that we thought: 'vendor, seller;
not eBay'. When we saw the draft bill at the end of last year we saw that there
were electronic distribution platforms included in that, so we had a few
questions around that.
To be very honest and very frank with the committee, the
first we actually saw of the final bill was when it was introduced into the
House of Representatives.
The bill simplifies some of the issues by requiring suppliers, rather
than customers, to be responsible for the GST, as foreshadowed by the
Treasurer. Suppliers with sales into Australia of over $75,000 will be required
to register for GST and remit the tax to the Australian Taxation Office. In
many cases the suppliers are not the vendors; rather, they are parcel delivery
companies or electronic trading platforms.
Unusually, the bill and explanatory memorandum are not accompanied by a
Regulation Impact Statement. An official of the Department of the Treasury conceded
that it had been found to be a breach of the Office of Best Practice
Regulation's guidelines. She explained that there had been a great deal of
preliminary work on the issue.
Another witness, however, pointed out that most of that work had concluded that
the measure was not worth pursuing.
Content of the bill
The A New Tax System (Goods and Services Tax) Act 1999 defines as
taxable supplies goods which are 'connected to the indirect tax zone (ITZ)' (which
roughly means Australia, excluding the external territories). At present, goods
which are purchased overseas by an Australian consumer are not 'connected to
At present, goods with a value at the time of purchase which is below
the low value threshold defined in the Customs Act are specified as non-taxable.
The bill does not change the low value threshold specified in the
The bill works by defining these goods that were previously excluded
(that is, goods supplied direct to consumers from offshore and valued at $1000
or less) as supplies of goods 'connected with the ITZ' (and therefore subject
to GST) if they are brought to the ITZ with the assistance of the supplier.
The bill further defines 'redeliverers' as suppliers. They include
entities which provide offshore mail or shopping services in relation to the
goods, take delivery or arrange the delivery outside the ITZ, and assist the
recipient to bring the goods to the ITZ. The operator of an electronic
distribution platform through which a supply is made is also a supplier.
An entity is treated as a supplier only if it has some involvement in
the delivery of the goods, as part of making the supply. This is intended to
ensure that the entity is liable only when it has knowledge and involvement
that make it appropriate.
Suppliers who supply goods in the ITZ valued at more than $75,000 (or
$150,000 for non-profit entities), which is the same as the Australian
threshold, are liable to register for GST.
Goods purchased overseas and brought to Australia by the consumer are
not to be taxed. But goods purchased overseas where the vendor arranges for
them to be delivered to Australia will be taxed.
Because of the way the change is to be made, low value goods will still
be treated differently from goods whose value is above the threshold.
The bill makes provision for valuations in the light of changing
exchange rates and bundling of goods of various values. These are described in detail
in the Explanatory Memorandum.
The new rules apply only to delivery of goods to consumers. Supplies to
businesses are unaffected. Suppliers (including redeliverers) are expected to
collect the ABN of a recipient that is claiming to be a business.
There is a protection for a supplier who, after seeking information, believes that
the goods are a taxable importation, that is, they are not covered by the
current bill. There are also further mechanisms to prevent double taxation.
Redeliverers become liable for the GST because they assist in delivery
of the goods into the ITZ. This broadens the application of the GST, by
catching entities who are not vendors. How the order is made—online, or in
person overseas—is not relevant.
The logic is that an overseas supplier may deliver goods outside the ITZ
to an entity which will assist in their delivery to Australia. In this case the
supplier has no connection with Australia and it would not be reasonable to
apply GST to the supplier. Rather, the redeliverer who provides offshore mail
or shopping services and assists in arranging delivery of the goods will be
connected with the ITZ and liable for GST (if their supplies into Australia
exceed the $75,000 threshold).
To avoid paying GST on goods which have already been taxed, the
redeliverer will be required to supply the ABN or vendor registration number of
A supplier delivering goods to an entity that is registered for the GST
will not charge GST. However, the goods could be for consumption rather than
for use in the business that is registered for GST. In that case, the recipient
of the goods is liable for GST, which is 'reverse charged'.
Electronic distribution platforms such as Ebay were brought into the GST
system when it was applied to digital services. This bill shifts liability for
GST from individual suppliers to the operators of the platform, because:
The operators of electronic distribution platforms are better
placed to comply with GST obligations because they are generally larger and
better resourced entities than individual suppliers.
The electronic distribution platform may be liable even though the
actual supplier delivers the goods to Australia.
There are simplified registration arrangements available to entities
with no or limited presence in Australia. Again, this is similar to the
arrangements for provision of digital products.
Previously, international transport services were GST free on the basis
that the cost of the transport would be included in the value of the goods for
purposes of GST. Where goods were of low value, transport costs were thus not taxed.
Schedule 1 to the bill extends GST to transport services in relation to low
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