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  • 13. GST administration by the Department of Home Affairs

    Home Affairs’ role is to manage 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.

    Highlights for 2019–20 include:

    • $4.2 billion GST collected and $32.2 billion deferred GST on imported goods
    • four million import declarations and self-assessed clearance declarations cleared
    • 1.4 million export declarations cleared
    • 765,818 Tourist Refund Scheme (TRS) claims administered, 98.4% of which were approved, resulting in refunds of $197.6 million of GST and WET to travellers.

    Compliance program

    Home Affairs employs an intelligence led, risk-based approach to the import and export of goods. This includes:

    • The General Monitoring Program – provides capability to assess risk for goods crossing Australia’s border and monitors the accuracy of cargo reports and import and export declarations submitted to Home Affairs. This approach, 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.

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

    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 the release of goods from customs control.

    For 2019–20, Home Affairs compliance activities identified a total of $109.6 million in GST understatements.

    Figure 13: Compliance activities (GST understatements)

    2019–20 109.6 million. 2018–19 91.5 million. 2017–18 31.1 million. 2016–17 54.3 million. 2015–16 54.3 million.

    GST understatements include voluntary disclosures. Fluctuations in the number and value of voluntary disclosures 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 continues to engage with industry to enhance 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 meets on multiple occasions each year. 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.

    With the emergence of COVID-19, the ABF supported enhanced screening and inspection measures for import and export cargo across air and sea cargo streams. A particular focus was to secure and facilitate legitimate trade of medical supplies. ABF Trade Compliance swiftly redirected capabilities to identify and target those importing counterfeit COVID-19 test kits, hydroxychloroquine and faulty personal protection equipment.

    Trade enforcement remains a focus for the ABF, as it underpins the strength and international competitiveness of the Australian economy. It also protects Australian businesses and industry by ensuring a level playing field. The ABF continues to target those involved in revenue evasion. For example, a single project targeting the misreporting of GST food exemptions has resulted in GST revenue paid (or deferred) totalling $61.3 million.

    Tourist Refund Scheme

    Home Affairs is responsible for the effective and efficient administration of the TRS on behalf of the government, under the delegation of the Commissioner of Taxation. Home Affairs manages the scheme, including verification of claims, through the ABF. Home Affairs’ functions include processing TRS claims and undertaking compliance activity.

    In 2019–20, the ABF processed 765,818 TRS claims, with 748,688 applications approved. This resulted in the payment of $197.6 million in claims to travellers. The ABF rejected 1.6% of applications, worth $1.8 million. In 2018–19, the TRS received over one million claims, totalling $256.8 million in refunds.

    Since 2012–13, the ABF has approved an increasing annual number of GST refunds under the TRS, reflecting continued growth in tourism and travellers to Australia availing themselves of the scheme. We attribute the reduced number of TRS claims for 2019–20 to the impacts of COVID-19 travel restrictions. The significance of these restrictions was not fully seen in this reporting period, due to international travellers leaving Australia and continuing to make TRS claims.

    The ABF continues to work with the ATO to implement the recommendations in the 2018–19 ANAO audit of the TRS. The objective of the audit was to examine and assess whether the TRS was being effectively administered, with appropriate risk management.

    The ATO and Home affairs are managing several projects to meet the three recommendations from the ANAO audit:

    Table 11: ANAO recommendations and outcomes

    Recommendations

    Outcomes

    The ATO and Home Affairs to improve their TRS risk management by jointly risk assessing the TRS, to identify all risks and appropriate treatments, and review the assessment annually.

    Finalised with the completion of a joint risk assessment.

    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.
     

    Delayed due to COVID-19 travel restrictions, diversion of resources and governing committees’ focus.

    The ATO and Home Affairs implement and embed the developed data analysis tools into business practices.

    Delayed due to COVID-19 travel restrictions, diversion of resources and governing committees’ focus.

      Last modified: 30 Aug 2021QC 64820