GST on LVT to advance – but detail on the model yet to be determined

20 June 2017

Further to my recent update on the progress of the proposed Bill to levy GST on low value goods imports (under $1,000) (LVT), it now appears that the anticipated ‘deal’ in the Senate was done to allow the Bill to pass the Senate.

The deal is generally comprised in the resolution of the Senate to pass the Bill subject to:

  1. deferral of the commencement date until 1 July 2018
  2. referral of the proposed ‘model’ for levying and collection of the GST to the Productivity Commission (PC) for report

The referral to the PC is contained in the Schedule of amendments from the Senate, and the first part of the referral reads:

By the day after this section commences, the Productivity Minister must, under Part 3 of the Productivity Commission Act 1998, refer to the Productivity Commission for inquiry the matter of the amendments to this Act made by the amending Act, including: (a) the effectiveness of the amendments; and (b) whether models for collecting goods and services tax in relation to *offshore supplies of low value goods other than the amendments might be suitable (including evaluation of the effects of the models on Australian small businesses and *consumers); and (c) any other aspect the Productivity Commission considers relevant to the implementation of the amendments

The referral requires the PC to report by 31 October 2017 and while details are not yet on the PC website there seems to be a view that submissions will need to be made before the end of August and hearings will take place shortly after that.

Readers will note that the referral includes recommendations on the ‘model’ for collecting the GST on offshore supplies of goods. The model in the Bill at the moment is the ‘vendor registration’ model which would effectively require overseas vendors, electronic distribution platforms, forwarders and ‘re-deliverers’ caught by the Bill to report the transactions, collect the GST and remit it to the ATO, with some needing to register here for GST. Readers may also recall that many of those parties have objected strongly to that model and preferred a ‘logistics’ model where the party delivering the goods need to collect and remit the GST. Unsurprisingly, Australia Post has objected to the logistics model on the basis that it would be doing most of the collections and the cost would fall to it, which it claimed would make its delivery service ‘unviable’.

It will be interesting to see the submissions to be made to the PC and the ultimate recommendation of the PC, taking into account that there was no Regulatory Impact Statement provided with the Bill (against Government guidelines) and that it was admitted that compliance levels with the vendor model would only start around at 20% and reach a maximum of 50%. The PC is heavily focussed on economic effectiveness of regulation and there is a real risk that the ultimate ‘model’ may be different to that in the Bill. 

Whichever way the Bill proceeds, assuming the Senate amendments will be accepted by the House of Representatives, the focus will then turn to the PC inquiry and the politics of determining the model to be adopted, to be followed by frantic work on implementation. Hopefully the uncertainty can be resolved quickly to allow the new regulation to be adopted and implemented with a minimum of difficulty. However, even then, I would hope that there would be a moratorium against penalties and interest for inadvertent non-compliance for at least 12 months. It would seem unfair to introduce a new and complex regulation at short notice and then start penalties and interest on inadvertent non-compliance straight away. It would also run contrary to the ‘de-regulation’ agenda of the Government which endeavours to reduce ‘red tape’. The regime may also confuse some of our trading partners who are in the course of increasing their low value threshold as opposed to reducing it to zero.

Stay tuned for developments and, as always, if pain persists, see your lawyer!

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