GST changes coming 1 July 2018
Are you aware of the Goods and Services Tax (GST) changes coming this July? If you're not, don’t panic, below is a snapshot of things to come from 1 July 2018:
Low Value Imported Goods
For many years now, low value goods ($1,000 AUD or less) that are imported into Australia by consumers were not considered a taxable supply and incurred no GST. However, from 1 July 2018, those imported goods by consumers will now incur GST.
The collection of the GST will mean suppliers that turnover $75,000 per year or more will have to account for the GST on sales of low value goods to consumers in Australia.
The extension of the GST comes as a relief to Australian small businesses and medium retailers, and it also creates a much fairer market for those small and medium business whose direct competitors are online market places, such as eBay and the newly introduced to Australia, Amazon.
If you are a GST-registered business which imports low value goods for resale to consumers, then this extension of GST does not apply to your business and your business remains exempt.
Ahead of 1 July 2018, it may be prudent to ensure that your business has notified its GST registration status to its overseas suppliers.
Once the changes occur, regularly check your invoices when purchasing low value imported goods to minimise the chances of any double charge for GST (from the importer and to the consumer).
GST Collection on Property Purchases
In July 2018, we will see a new regime implemented which alters the way that GST is ultimately paid to the ATO on new residential premises purchases or subdivisions.
In most cases, the current process of GST payment resides with the Seller providing the Purchaser with a tax invoice for the payment of GST. From 1 July 2018, purchasers will be required to remit the applicable GST under the sale contact directly to the ATO as part of the settlement process rather than paying the GST amount direct to the Seller.
This change comes as some developers have failed to remit the GST to the ATO, however are still claiming their GST credits on costs associated with the contracts and development. The Australia Government now places a positive obligation on the purchasers under this new regime to remit the GST, cancelling out any side-stepping of GST payments.
It is expected that this new GST regime will be similar to how the new foreign resident capital gains tax withholding (CGT) regime operates, which commenced on 1 July 2017. Under that regime, sellers of land pay an amount equal to 12.5% of the purchase price to the Australian Tax Office (ATO) upon settlement of the purchase. The 12.5% amount may be withheld by the purchasers at settlement if the sellers were Australian residents and they failed to obtain a CGT clearance certificate prior to settlement.
If you or your business require any advice in relation to how these GST changes will affect your business, please contact a member of our Tax, Structures + Planning or Property + Commercial Teams on (07) 4688 2188.