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Australia marketplaces question new GST rules

  • Apr 21, 2017 | Richard Asquith

Australia marketplaces question new GST rules

As Australia prepares for the July 2017 imposition of 10% GST on consumer purchases below AUS$1,000 from foreign e-retailers, a number of major marketplaces have raised concerns about the new regime.

They believe GST should be collected by the postal services instead of the planned obligation for foreign retailers to register for GST and make regular filings and payments.  They also raised the worry of geo-blocking by Sellers to avoid Australian GST obligations.  The marketplaces estimate that compliance may be 30% or below by the targeted e-retailers.

Australia low-value package GST relief

Currently, B2C online sales by foreign retailers below the AUS$1,000 threshold are free from Australian Goods & Services Tax.  This limit was to reduce the administrative burden for the tax authorities of having to track and manage foreign GST compliance.  But with the explosive growth in online retail, the tax exemption has left Australian online and traditional retailers uncompetitive.  Australia is therefore to scrap the threshold from 1 July, and oblige non-resident retailers to register for GST if selling more than AUS$75,000 per annum.

Marketplaces express concerns

Several leading marketplaces, including Alibaba, Amazon, eBay and Etsy, have this week expressed concerns that foreign retailers are not prepared for the changes.  In hearings on Friday at the Senate Economics Committee, the marketplaces said obliging the Australian Post service to collect the GST would be more likely to succeed in terms of revenue targets.  The marketplaces believe enforcement of the rules on thousands of foreign sellers would be too challenging and expensive.  An estimate of only 30% or below compliance was discussed.

Several marketplaces raised the prospect of foreign Sellers imposing geo-blocking on sales to Australian consumers so that there would be no GST obligation.

The methodology for estimating the AUS$75,000 threshold was also challenged.  The estimate should be on the seller-level; but instead appears to be at the platform level drawing in most Sellers into the GST net.

The GST exemption on food may also create classification and compliance difficulties. For example, crackers are liable to GST but dried bread exempt.

EU to abolish low-value consignment stock VAT threshold

Australia would be one of the very few countries that will levy GST on all packages, no matter how small in value.  The EU currently has a VAT-free threshold around €22 per non-EU package.  However, it plans to withdraw this exemption too to level the playing field for EU-based retailers.  In addition, many non-EU retailers have manipulated the threshold by under declaring the value of the goods or misclassifying the goods.

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VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He is part of the European leadership team which won International Tax Review's 2020 Tax Technology Firm of the Year. Richard trained as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.