Edited version of your private ruling

Authorisation Number: 1012594791669

Ruling

Subject: GST and online sale of goods to Australian customers

Question

Will the online sale of goods by the partnership to Australian customers be subject to the goods and services tax (GST) where these goods are sent to the customers from overseas?

Advice

No, the online sale of goods by the partnership to Australian customers will not be subject to GST where these goods are sent to the customers from overseas because the supply of these goods will not be connected with Australia under section 9-25 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

Relevant fact

You are a partnership who is currently setting up an online business in Australia. You are not registered for GST.

You are aiming to run an international online store to sell a range of products made from a material from an overseas country. The material is to be shipped to your overseas manufacturer who will then assemble the products. Once assembled you anticipate that the products will be sent in bulk to a warehouse located outside Australia. The warehouse will be responsible for shipping each individual order received around the world to each corresponding customer. You will not be importing any of the goods into Australia.

You advised that you are aware that you do not have to charge GST for the online supplies made to international buyers.

You also advised that if any Australian customs duty has to be paid on the importation of the products it will be the Australian customer who will be responsible for this payment. You do not assemble or install the goods in Australia. You estimate the annual turnover of your online sales to customers worldwide (including Australian customers) may be above $75,000. You have not yet started selling goods online.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 9-5;

A New Tax System (Goods and Services Tax) Act 1999 Section 9-25;

A New Tax System (Goods and Services Tax) Act 1999 Division 188 and

A New Tax System (Goods and Services Tax) Act 1999 Section 195-1.

Reasons for decision

GST is payable on taxable supplies. Under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) an entity makes a taxable supply if:

(a) the entity makes the supply for consideration; and

(b) the supply is made in the course or furtherance of an enterprise that the entity carries on; and

(c) the supply is connected with Australia; and

(d) the entity is registered or required to be registered for GST.

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

For your supply of goods to the Australian customers to be a taxable supply all the requirements in section 9-5 of the GST Act must be satisfied.

Applying facts to section 9-5 of the GST Act

From the information received you will satisfy paragraphs 9-5(a) and 9-5(b) of the GST Act as you make the supply of the goods for consideration and the supply is made in the course of a business that you carry on in Australia.

There are no provisions in the GST Act or any other Acts for the supply of your goods to the Australian customers to be GST-free or input taxed.

What remains to be determined is whether your supply of the goods is connected with Australia under paragraph 9-5(c) of the GST Act and, whether you are required to be registered for GST under paragraph 9-5(d) of the GST Act since you currently are not registered for GST.

Paragraph 9-5(c) of the GST Act

Section 9-25 of the GST Act outlines when a supply is connected with Australia.

Subsection 9-25(3) of the GST Act discusses when a supply of goods that involves the goods being brought to Australia is connected with Australia and states:

Supplies of goods to Australia

(3) 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

(b) installs or assembles the goods in Australia.

Goods and Services Tax Ruling GSTR 2003/15 provides guidance on the importation of goods into Australia.

Paragraphs 72 and 73 of GSTR 2003/15 state:

72. For supplies of goods to Australia, paragraph 9-25(3)(a) provides that the supply is connected with Australia if the supplier imports the goods. A supplier imports goods where the supplier causes the goods to be brought to Australia to apply them to its own purposes and completes the customs formalities.

73. This is the case where a supplier causes the goods to be brought to Australia and enters the goods for home consumption, or for warehousing (within the meaning of the Customs Act). However, a supplier does not import goods where the customs formalities for the importation of the goods are completed by the entity that acquires the goods from the supplier.

In circumstances where there are several parties that cause the goods to be brought to Australia (for example seller and buyer) it is usual for the parties to agree which party takes responsibility for the completion of the customs entry formalities and entry of the goods for home consumption. It is this entity that imports the good.

For sales of goods that are to be imported into Australia that have a customs value at or below $1,000 (supply of low value goods into Australia), the fact sheet 'GST and imported goods' (available at www.ato.gov.au) discusses who is the importer of low value goods and states the following:

You are the importer of low value goods if both of the following apply:

• you have caused the goods to be brought to Australia for your own purposes

• you or your agent have completed the customs facilities or would be responsible for the customs formalities.

Generally you will be regarded the importer of goods when you order goods either via a website, phone, or in-store from an Australian retailer; you accept the retailer's terms and conditions to be responsible for any customs formalities; and the goods are sent from overseas to you in Australia.

You have caused goods to be brought to Australia if the goods were brought to Australia for application to your own purposes after importation.

You use goods for your own purposes if you sell, lease or hire the goods, use the goods as trading stock or use the goods in the manner consistent with their design or nature.

If goods are sent to Australia by international post, the addressee on the low value goods will generally be the entity that Customs and Border Protection is authorised to release those goods to. In this instance, the addressee will be the entity who would complete the customs formalities or be responsible to do so.

If low value goods are sent to Australia by air or sea cargo arrangements, the goods would generally be released to the ultimate consignee. A freight forwarder or logistics company would not normally be the ultimate consignee. The ultimate consignee would normally be the purchaser unless the seller nominates themselves as the ultimate consignee. In this instance, the ultimate consignee will be the entity who has completed the customs formalities or would be responsible for doing so.

Goods and Services Tax Ruling GSTR 2000/31 (available at www.ato.gov.au) explains when a supply is connected with Australia and paragraph 129 of GSTR 2000/31 states:

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.

From the facts given, your supply of goods will not be connected with Australia under subsection 9-25(3) of the GST Act as:

• you will not import the goods in Australia and do not install or assemble the goods in Australia

• the sale of the goods will occur before the goods are imported into Australia since it is on receipt of the orders and payments from the customers that the goods will be shipped to the customers.

• you further advised that the Australian customers will be the importers of the goods as they will take responsibility for the completion of the customs entry formalities (if any) when the goods arrive in Australia.

Accordingly, paragraph 9-5(c) of the GST Act will not be satisfied as the supply of goods to the Australian customers will not be connected with Australia since the requirements in subsection 9-25(3) of the GST Act will not be satisfied.

Paragraph 9-5(d) of the GST Act

Under section 23-5 of the GST Act, you are required to be registered if:

• you are carrying on an enterprise, and

• your GST turnover meets the registration turnover threshold (currently $75,000).

If your turnover does not meet the registration threshold, you are not required to be registered for GST. However, you may choose to register for GST if you are carrying on an enterprise.

GST turnover for GST registration requirements

You are required to work out your GST turnover to determine if you meet or exceed the registration turnover threshold.

Your GST turnover meets or exceeds your registration turnover threshold if either:

• your current GST turnover is $75,000 or more (excluding GST), or $150,000 for non-profit entities, and we are not satisfied that your projected GST turnover is below $75,000 or $150,000 (excluding GST); or

• your projected GST turnover is $75,000 ($150,000 for non-profit entities) or more (excluding GST).

Your 'current GST turnover' is the value of all supplies that you make, or are likely to make in the current month, plus all the supplies that you have made in the previous 11 months.

Your 'projected GST turnover' is the value of all supplies that you make, or are likely to make in the current month, plus all the supplies that you are likely to make in the next 11months.

The following supplies are excluded from the calculation of current GST turnover and projected GST turnover. Supplies:

• that are input taxed;

• that are not for consideration;

• not made in connection with an enterprise that you carry on;

• that are not connected with Australia;

• that are connected with Australia because all of the following apply

• the thing is neither done in Australia nor done through an enterprise or a permanent establishment that you carried on in Australia

• the thing is a right or option to acquire another thing

• the supply of the other thing would be connected with Australia

• (other than those mentioned above) of a right or option to use commercial accommodation in Australia where the supplies are not made in Australia and are made through an enterprise that the supplier does not carry on in Australia

• made from one member of a GST group to another member of that GST group.

For more information on GST turnover, refer to Goods and Services Tax Ruling GSTR 2001/7.

Based on the information given, you estimate the annual turnover of your online supply of goods to be above $75,000. In this instance, your online supply of goods to customer's worldwide (including Australian customers) will not be connected with Australia as the goods are not in Australia and are sent to the customers from overseas. Accordingly, the GST turnover of these supplies will not be included when calculating your annual GST turnover. If this is the only business activity that you are carrying on, you will not be required to be registered for GST.

Summary

Based on the facts given, the supply of goods to the Australian customers will not be a taxable supply under section 9-5 of the GST Act as all the requirements in section 9-5 of the GST Act will not be met. Accordingly, no GST will be payable on the online supply of goods to the Australian customers.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).