Edited version of private ruling

Authorisation Number: 1011525106499

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Ruling

Subject: supply of goods in Australia

Questions

1. Do you make a taxable importation of goods when the goods are dispatched directly to your Australian customers from overseas?

Answer: No.

You do not make a taxable importation of goods when the goods are dispatched directly to their Australian customers from overseas.

2. Do you make a taxable supply of goods to Australian customers when the goods are dispatched directly to the customers from overseas?

Answer: No.

You do not make a taxable supply of goods to Australian customers when the goods are dispatched directly to the customers from overseas.

Relevant facts and circumstances

You are an online retailer based in Australia. You are registered for GST in Australia. You sell mainly brand named cameras, camcorders, lenses.

When you receive an order from your customers in Australia, you place an order with your overseas supplier. As part of your agreement between you and your supplier, your supplier sends the item on your behalf directly to your customers in Australia via the overseas supplier's courier.

You pay your overseas supplier for the item and charge your customers an amount which includes the cost of the item plus some extra money for your profit. This is called "Dropped shipping". Your customers do not know the identity of your overseas supplier.

Your Terms and Conditions state that the item ordered by your customers will be shipped after full payment is cleared. All sales are final. No refunds. Money back only in the case of defective items. In addition, it is stated that import duties, taxes and charges are not included in the item price or shipping charges. It is the customers' responsibility to pay these extra charges and they cannot claim these extra charges from you.

Your customers pay the GST on importation for items over the value of $1,000. The courier calls your customer prior to delivery of the item to collect the money for Customs duty. Items under $1000 do not attract Customs duty.

Reasons for decisions

A supply will be subject to GST where the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) are satisfied. Section 9-5 of the GST Act states:

You make a taxable supply if:

(a) you make the supply for *consideration; and

(b) the supply is made in the course or furtherance of an *enterprise that you *carry on; and

(c) the supply *is connected with Australia; and

(d) you are *registered or *required to be registered.

However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed.

Issue 1: Taxable importation:

Section 13-15 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states that GST is payable on a taxable importation. Taxable importation is defined under section 195-1 of the GST Act as follows:

taxable importation has the meaning given by subsections 13-5(1) and 114-5(1).

Section 13-5 of the GST Act states:

You make a taxable importation if:

(a) goods are imported; and

(b) you enter the goods for home consumption (within the meaning of the Customs Act 1901).

However, the importation is not a taxable importation to the extent that it is a *non-taxable importation.

Paragraph 226 of Goods and Services Tax Ruling GSTR 2003/15 states that:

226. In certain circumstances, goods are not entered for home consumption. For example, personal household effects of passengers and crew or low value consignments by post. Importations of these goods are not, therefore, taxable importations as defined in section 13-5. However, they are taxable importations by virtue of section 114-5 (provided the importation does not satisfy the requirements for a non-taxable importation).

Hence, under both subsections 13-5(1) and 114-5(1) of the GST Act, an import will not be a taxable importation if it is a non-taxable importation.

Non-taxable importation is defined under section 195-1 of the GST Act as follows:

non-taxable importation has the meaning given by section 13-10 and Division 42.

Footnote 81 in Paragraph 226 of GSTR 2003/15 provides that most low value postal consignments will satisfy the requirements of a non-taxable importation under Division 42 of the GST Act.

Most personal household effects and low value postal consignments will satisfy the requirements of a non-taxable importation under Division 42. See paragraphs 241 to 249 and Appendix B on non-taxable importations.

In addition, 'low-value goods' which have a customs value of less than $1,000 are non-taxable importations (According to the fact sheet: "GST and imported goods", which can be accessed on the ATO website in the business section.

According to the facts, some of the supplies of goods sent by post from overseas do not exceed the low value threshold of $1,000. Importations of these goods are non taxable importations. Hence the importation of the goods sent by post from overseas is a non-taxable importation under Division 114 of the GST Act.

In relation to the supplies of goods sent by post from overseas which exceeds the low value threshold of $1,000, your terms and conditions state that your customers pay the GST on importation, if any. For items over the value of $1,000, the courier calls your customer prior to delivery of the item to collect the money for Customs duty. This means the courier enters the goods for home consumption on your customers' behalf. It is your customers who make a taxable importation.

Therefore, you do not make a taxable importation of goods whether the goods are over or under the value of $1,000.

Issue 2: Taxable supply

Section 195-1 of the GST Act defines the term 'goods' to mean any form of tangible personal property. Cameras, camcorders and lenses meet the definition of goods in section 195-1 of the GST Act.

Section 9-5 of the GST Act states:

You make a taxable supply if:

(a) you make the supply for *consideration; and

(b) the supply is made in the course or furtherance of an *enterprise that you *carry on; and

(c) the supply *is connected with Australia; and

(d) you are *registered or *required to be registered.

However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed.

From the facts given, your supply of goods to Australian based customers satisfies all the requirements of paragraphs (a), (b) and (d) of section 9-5 of the GST Act, as follows:

(a) you make a supply of goods to Australian customers and in return receive consideration by way of payments;

(b) you make the supply in the course or furtherance of your business; and

(c) you are registered for GST in Australia.

Additionally, your supply of goods to Australian customers is not GST-free or input taxed. Therefore, the only thing that needs to be determined is whether paragraph 9-5(c) of the GST Act is satisfied. That is, whether your supply of goods to customers in Australia is connected with Australia. Where the supply is connected with Australia, the supply is a taxable supply.

Section 9-25 of the GST Act determines when a supply is connected with Australia. Goods and Services Tax Ruling GSTR 2000/31 (GSTR 2000/31) provides guidance on when supplies are connected with Australia.

The goods that are supplied to the Australian based customer are sourced from outside of Australia and delivered directly to the customer's nominated address in Australia.

Subsection 9-25(1) of the GST Act provides that:

Supplies of goods wholly within Australia

(1) A supply of goods is connected with Australia if the goods are delivered, or made available, in Australia to the *recipient of the supply.

Paragraph 9-25(3)(a) of the GST Act provides that:

Supplies of goods to Australia

(2) A supply of goods that involves the goods being brought to Australia is connected with Australia if the supplier either:

(a) imports the goods into Australia; or ..

GSTR 2000/31 in paragraph 129 further states that:

129. A supply of goods that involves the recipient importing the goods into Australia is not connected with Australia under subsection 9-25(1) as the goods are not delivered, or made available, in Australia to the recipient of the supply. Also, the supply of goods is not connected with Australia under paragraph 9-25(3)(a) because the supplier does not import the goods. However, the recipient importer will make a taxable importation.

We have established above that it is your customer who is the importer for the supply you make to the Australian customers.

Since the Australian customer (recipient) is the importer, neither subsection 9-25(1) nor paragraph 9-25(3(a) of the GST Act has any application and therefore your supply of goods is not connected with Australia.

Hence the supply by you to your Australian based customers is not a taxable supply as paragraph 9-5(c) of the GST Act is not satisfied.

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