• Federal Budget 2016 - Individuals

GST and customs duty reforms

Introduction

The Government has recommitted to implementing its August 2015 proposal to extend the GST to low value goods imported by consumers from 1 July 2017. 

The Government also announced a number of minor changes to simplify the GST for small businesses, and customs duties for importers.

Low value import threshold

Currently, GST is not imposed on the importation of goods into Australia which have a customs value of $1,000 or less. Historically, this exemption has been justified by the Government on the basis that the administrative cost of calculating the GST and customs duty on importation of these low value goods exceeds the revenue benefit.

However, following concern from local industry, in August 2015 the Government (in agreement with State and Territory Governments) announced that this exemption would be eliminated from 1 July 2017.

In the Budget the Government has recommitted to this decision. In particular, the Government confirmed that overseas suppliers that have an Australia turnover of $75,000 or more will be required to register and remit GST for low value imported and supplied to Australian consumers. This is a similar model of implementation to that which the Government has introduced into Parliament for intangible supplies to Australian consumers (the so-called Netflix Tax).

Small business reforms

The Government also announced three minor changes to simplify the GST for small businesses. The Government has proposed:

  • Extending the option to account on a cash basis to businesses with an annual turnover of less than $10 million from 1 July 2016
  • Allowing businesses with an annual turnover of less than $10 million to pay ‘GST instalments’ as determined by the Australian Taxation Office from 1 July 201
  • Allowing businesses with an annual turnover of less than $10 million to use simplified BAS reporting from 1 July 2017 (following a trial in the 2016-17 financial year).

Australian Trusted Trader Programme for Customs Duty

The Government has confirmed it will provide $69.9 million over four years to deliver on this initiative which will provide trade facilitation benefits to businesses with strong security practices and a history of compliant behaviour. In particular, the Government confirmed in the Budget that trusted businesses may be able to access trade benefits such as:

  • Reduced levels of inspections
  • Reduced reporting requirements
  • Expedited border clearance
  • Deferral of customs duty to be reported on a monthly basis rather on consignment basis from 2018.

BDO Comment

The reforms proposed by the Government will benefit many Australian businesses.

However, overall the Government has let short-term political pressures push it to abandon any real GST reforms which could have fundamentally strengthened the Australian taxation system.

The GST (like all value added taxes) is regularly confirmed as an efficient business tax, which if it was used to replace inefficient state taxes (such as stamp duties and payroll taxes) would greatly help Australian businesses. However, this reality is ignored in the political debate and Australian businesses continue to be left in a world of inefficient and complex state taxation.