Australian retailers have recently campaigned for the government
to remove the exemptions that allow certain imported goods to be
exempt from customs duty and import GST.
Importing goods free of customs duty and import GST
Under the current rules, most consignments valued at less than
$1,000 can be imported into Australia free of customs duty and
import GST. The thresholds are different for tobacco and alcohol,
unaccompanied personal effects, and goods brought into Australia as
part of passengers' luggage.
Australian retailers are complaining that the exemptions allow
online retail sellers to benefit from an unfair (untaxed) playing
field where goods are shipped directly from overseas suppliers to
The campaign has been resisted by Australian consumer groups. In
addition, the government and the opposition have reiterated the
original policy behind the low value threshold, which was to ensure
that tax is collected in a cost-effective manner. The cost of
collecting customs duty and import GST on each low value parcel is
seen to be more than the value of the tax collected.
Increased compliance activity
The government is not likely to remove the exemptions. However,
the Minister for Home Affairs has announced that compliance
activity will be increased to ensure the current exemptions are not
For example, the practice of splitting transactions into
multiple consignments, so that each consignment is under the $1,000
threshold, will be examined. Splitting transactions is not
effective where the goods are sent on the same ship or aircraft.
Customs will aggregate the transactions in these circumstances.
While there are no general anti-avoidance provisions under
Australia's Customs Act, there are anti-avoidance provisions
under the GST Act, which may be used to levy import GST on the
imported goods in cases of transaction splitting.
Overseas suppliers staying overseas
Overseas suppliers also need to be careful not to create a
taxable presence in Australia by "carrying on an
enterprise" here. The goods may still be imported free of
import GST, but there will be no cost advantage if the overseas
supplier is required to register and pay GST in Australia because
it has an enterprise in Australia.
The rules for whether a business has a presence in Australia for
GST purposes are much wider than the income tax permanent
For suppliers sending tangible goods into Australia, care needs
to be taken to ensure that an overseas supplier does not fall
within the GST net as a result of carrying on business:
at a place in Australia, including by maintaining a
distribution point in Australia; and
through a local agent (even if the local agent does not have
the power to contract on behalf of the overseas supplier).
An Australian subsidiary may provide support services to an
overseas supplier without the overseas supplier becoming subject to
GST and income tax in Australia provided the services are clearly
defined and the agreements carefully structured.
For suppliers selling intangibles, such as downloads of music,
applications, games and content, it is important to consider
whether there is "substantial equipment", such as a
server, creating a taxable presence in Australia.
Cooper Grace Ward was named Best Australian Law Firm in the BRW
Client Choice Awards 2010 - Revenue < $50m. Joint Best
Australian Law Firm in the BRW Client Choice Awards 2009 - Revenue
The firm has also been named as the fastest growing law firm in
Australia for 2009 by The Australian.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
The income tax treatment of any property lease incentive will vary, depending on the nature of the inducement provided.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).