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  • GST administration by the Department of Home Affairs

    The Department of Home Affairs (Home Affairs) is responsible for managing compliance with Australia’s import and export framework, and to control, detect, deter and address illicit trade behaviours.

    The Home Affairs portfolio, including the Australian Border Force (ABF), is responsible for collecting customs duty and tax – including GST, luxury car tax (LCT) and wine equalisation tax (WET) – on imported goods at the border. Home Affairs also administers the deferral of GST on imported goods for registered importers under the GST Deferral Scheme.

    Home Affairs works collaboratively with partner agencies, including the ATO, to ensure all revenue liabilities are payable and collected on imported goods.

    Compliance program

    Home Affairs employs an intelligence-led, risk-based approach to the import and export of goods. The General Monitoring Programme (GMP) provides capability to assess risk for goods crossing Australia’s borders. The GMP monitors the accuracy of cargo reports and import and export declarations submitted to Home Affairs. This, coupled with the use of risk profiles in the import and export environments, gives an oversight of risk and assists in allocating resources in line with priorities. The Integrated Cargo System facilitates the clearance of imported cargo and applies revenue payment obligations.

    The Home Affairs Pre-Clearance Intervention (PCI) and Post-Transaction Verification (PTV) functions support the management of a wide range of border risks, including revenue leakage. Revenue leakage can occur through:

    • undervaluation
    • misclassification and non-declaration of goods
    • false claims for GST exemptions
    • preferential treatment under free trade agreements
    • duty refunds and concessions.

    Home Affairs conducts PCI activities before releasing goods from customs control. Home Affairs also conducts PTV activities, such as audits, after goods are released from customs control.

    For 2018–19, Home Affairs compliance activities identified a total of $91.5 million in GST understatements.

    Figure 17: GST understatements

    This graph shows GST understatements for the last four financial years. 2015–16 $54.3m, 2016–17 $54.3m, 2017–18 $31.1m, 2018¬–19 $91.5m.

    See also:

    Home Affairs identified a significant variation in GST understatements for the period July to December 2018 (reported from January to June 2019). This variation was due entirely to voluntary disclosures.

    Voluntary disclosures rely on self-reporting. Fluctuations in the number and value between quarters are common. Reported values are not indicative of seasonal trends or operational tempo, and are not a predictor of future trends. The level of disclosures demonstrates industry awareness of the ability to voluntarily self-report errors to correct information and pay duties owed.

    Home Affairs engages with industry to encourage compliant behaviour through forums such as the Trade and Goods Compliance Advisory Group (CAG). CAG is a collaborative forum for industry that Home Affairs and the ABF use to recommend solutions to trade and goods compliance issues. CAG met four times during 2018–19. Engagement with this stakeholder group contributes to increasing voluntary compliance.

    Home Affairs and the ABF continue to deploy measures to detect and deter serious revenue non-compliance, including complex fraud.

    In 2018–19, Home Affairs had a particular focus on:

    • undervaluation
    • misuse of origin and concessions and misclassification
    • links to serious organised fraud and other crimes.

    Tourist Refund Scheme

    The number of GST refunds approved under the Tourist Refund Scheme (TRS) has increased significantly since 2012–13. This can be attributed to increased passenger growth and a regulation change in April 2013 that extended the eligibility criteria (a).

    The TRS received over one million claims (1,070,633) in 2018–19. Ninety-seven percent of these claims were approved, resulting in refunds of $256.8 million of GST and WET. The scale of TRS refunds is increasing with the continued growth in tourism and travellers to Australia availing themselves of the scheme. Compliance activities resulted in the rejection of refund claims with a GST value of $2.45 million.

    Home Affairs receives funding from the ATO to administer the TRS. The funding facilitates internal controls and procedures, to ensure framework integrity. The cost to administer the TRS functions has for a number of years exceeded the financial amount received through the ATO, with an increasing divergence.

    In 2018–19, the Australian National Audit Office (ANAO) audited the TRS. The objective of the audit was to examine and assess whether the TRS was being effectively administered, with appropriate risk management.

    The ANAO examined:

    • ATO and Home Affairs governance systems and procedures that support the effective administration of the TRS.
    • Whether the ATO and Home Affairs have established suitable controls to identify and mitigate delivery risks.

    The ANAO draft report identified areas for implementing improved guidelines, and made three recommendations that are being addressed.

    The three recommendations are:

    1. The ATO and Home Affairs improve their TRS risk management by jointly risk assessing the TRS, to identify all risk and appropriate treatments. Review the assessment annually (Note: The ATO has undertaken TRS risk assessments since 2014).
    2. Quantify revenue leakage attributed to Australians returning goods for which a TRS refund was received. The report recommended that the ATO, Home Affairs and Treasury:  
      • jointly develop a methodology for estimating this revenue leakage
      • conduct an exercise to measure non-compliance and revenue leakage
      • report the results of the exercise to government, to provide greater assurance of the level and nature of non-compliance.
    3. The ATO and Home Affairs implement and embed into business practices the data analysis tools they have already developed.

    The ATO and Home affairs will continue to work together to implement the ANAO's recommendations.

    NOTES:(a) The acquisition may consist of one or more acquisitions from the same registered entity for which the acquirer holds one or more tax invoices, with each acquisition to be accompanied by a tax invoice.
      Last modified: 01 Jul 2020QC 61031