Edited version of private advice

Authorisation Number: 1051908957909

Date of advice: 8 November 2021

Ruling

Subject: GST and supply of low value goods

Question 1

If the GST turnover of the redeliverer is below AUD$75,000, will the liability to pay goods and services tax (GST) on the supply of the goods to the purchaser arise at the time the purchaser acquires the services of the redeliverer?

Answer

The redeliverer will not have a GST liability for the supplies made to the purchaser where their GST turnover is below AUD$75,000 as they are not required to be registered for GST and therefore the supply is outside the scope of GST.

However, where the redeliverer chooses to register for GST, they will be liable to pay GST on the supply of goods and services made to the purchaser when the purchaser acquires the services of the redeliverer.

Question 2

If the GST turnover of the redeliverer is above AUD$75,000 and is registered for GST, will the liability to pay GST on the supply of goods and services made to the purchaser arise when the purchaser acquires the services of the redeliverer?

Answer

Yes. The liability to pay GST on the supply of the goods and services to the purchaser will arise at the time the purchaser acquires the services of the redeliverer if the redeliver's GST turnover is above AUD$75,000 and the redeliverer is registered for GST.

Relevant facts and circumstances

The entity (the redeliverer) wants to start a business of providing redelivery service.

An individual (the purchaser) in Australia will place an online order for goods from a supplier overseas who does not deliver goods to Australia.

The average price of an order will be less than AUD$1,000.

The purchaser is not registered for GST.

The purchaser will buy the goods for private purposes.

When ordering online, the purchaser will indicate to the supplier that the goods will be picked up from the supplier's premises.

The purchaser will finalise the order by making an online payment and will obtain an invoice/receipt from the supplier.

The purchaser will then acquire the services to collect the goods from the supplier's premises.

The purchaser will give the redeliverer details of the purchase.

The redeliverer will charge delivery fee and service fee and will give the purchaser a tax invoice.

The redeliverer will contact the supplier's representatives to collect the goods from the supplier's premises and deliver them to the premises owned by a shipping agent arranged by the redeliverer for consolidation.

Each fortnight or month, the redeliverer will instruct the shipping agent to send all the goods collected from the supplier's premises to the redeliverer's address in Australia.

Where the total customs value of the goods in a consignment is more than AUD$1,000 the redeliverer will be responsible for clearing the goods through Customs and will pay the GST and duty on the importation.

Once the goods have arrived in Australia, the redeliverer will deliver them to the purchaser.

There is no arrangement between the purchaser and the redeliverer prior to purchasing the goods. The size of order and nature is such that there is no pattern of purchase to have such an arrangement.

There is no prior arrangement between the supplier overseas and the redeliver to collect and deliver goods to any purchaser in Australia.

The redeliverer is currently not registered for GST.

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 23-5

A New Tax System (Goods and Services Tax ) Act 1999 section 84-77

A New Tax System (Goods and Services Tax ) Act 1999 section 84-81

A New Tax System (Goods and Services Tax ) Act 1999 section 84-91

Reasons for decisions

Who is the supplier of the goods purchased by the Australian customers and imported into Australia?

The A New Tax System (Goods and Services Tax) Act 1999 (GST Act) has special rules regarding supplies of redelivery services.

From the information given the redeliverer will be supplying redelivery services to Australian customers by collecting and organising the delivery of the goods purchased by the Australian customers from overseas suppliers. Relevant to the redeliverer's supply is subdivision 84-C of the GST Act which is about offshore supplies of low value goods.

Subsection 84-79(3) of the GST Act provides that a low value goods is goods that have a customs value of AUD$1,000 or less and the goods are not tobacco, tobacco products or alcoholic beverages.

The price of the goods that the Australian customer (purchaser) is purchasing would be around less than AUD$1,000 and in this instance would be low value goods under subsection 84-79(3) of the GST Act.

Subsection 84-77(3) of the GST Act provides that a supply of low value goods is an offshore supply of low value goods if

(a)  the supply involves the goods being delivered to a place outside the indirect tax zone; and

(b)  a redeliverer delivers the goods into the indirect tax zone, or procures, arranges, or facilitates the delivery of the goods into the indirect tax zone.

As the supply of the low value goods to the purchaser will involve the goods being delivered to a place outside Australia and the redeliverer will arrange the delivery of the goods to Australia, the supply of the goods is an offshore supply of low value goods under subsection 84-77(3) of the GST Act.

Under subsection 84-81(4) of the GST Act, if a supply of goods is an offshore supply of low value goodsbecause of subsection 84-77(3), the redeliverer is taken, for the purposes of the GST Act:

(a)  as being the supplier of, and as making, the supply; and

(b)  as having made the supply for the consideration for which it was made; and

(c)   as having made the supply in the course or furtherance of an enterprise that the redeliverer carries on.

In accordance with subsection 84-81(4) of the GST Act, the redeliverer will be taken as the supplier of the offshore supply of low value goods made to the Australian purchasers. The next step is to consider the GST status of the supplies made by the redeliver to the Australian purchasers.

GST status of supplies made by the redeliverer

Taxable supplies give rise to liability to pay GST.

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 the indirect tax zone; 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.

(* denotes a term defined under section 195-1 of the GST Act)

Paragraphs 9-5(a) and 9-5 (b) will be satisfied as the redeliverer will make the supply for consideration and the supply will be made through an enterprise that the redeliverer carries on.

Paragraph 9-5 (c) of the GST Act

Under subsection 84-75(1) of the GST Act a supply of low value goods is connected with Australia if :

•         the supply is an offshore supply of low value goods;

•         the low value goods are brought to Australia with the assistance of the supplier; and

•         the recipient of the supply is a consumer.

A consumer is defined under subsection 84-75(2) of the GST Act as:

•         an entity who is not registered for GST; or

•         an entity who is registered for GST and the entity does not acquire the thing supplied solely or partly for the purpose of the enterprise that the entity carries on in Australia.

Section 84-86 of the GST Act provides that if the supplier reasonably believes that the goods purchased by the purchaser will be imported as a taxable importation when the goods arrive to Australia (that is the total customs value of the goods would exceed AUD$1,000 and shipped in one consignment to Australia and the supplier does not import the goods), the supply will not be connected with Australia.

Under section 84-79 of the GST Act each of the goods supplied that individually has a customs value of AUD$1,000 or less will form part of a supply for low value goods even if the total customs value of the transaction exceeds AUD$1,000. This is because when many goods could be bought in one transaction, but they may not necessarily be sent to Australia in one consignment or import.

From the facts given, the Australian purchasers are not registered for GST and the purchases are for private use. Thus, the redeliverer's offshore supply of low value goods will be made to consumers under subsection 84-75(2) of the GST Act and will therefore be connected with Australia under subsection 84-75(1) of the GST Act.

Paragraph 9-5 c) of the GST Act is therefore satisfied.

Paragraph 9-5(d) of the GST Act

Under section 23-5 of the GST Act an entity is required to register for GST if the entity is carrying on an enterprise and the GST annual turnover for the enterprise meets the GST registration threshold which currently is AUD$75,000 (AUD$150,000 for non-profit organisation).

Where the entity is not required to register for GST the entity can choose to register for GST.

If the value of the redeliverer's sales of low value imported goods (plus any other sales that the redeliver makes that are connected with Australia) will be less than AUD$75,000 in a 12-month period, the redeliverer will not need to register for GST and cannot collect GST.

However, the redeliverer can choose to register for GST. If the redeliverer chooses to register for GST, the supplies to the consumer will be taxable supplies and the redeliverer will need to collect GST for the taxable supplies.

If the value of the redeliverer's sales of low value imported goods (plus any other sales that the redeliverer makes that are connected with Australia) will be AUD$75,000 or more in a 12-month period, the redeliverer will need to register for GST and collect GST for the taxable supplies.

The '12-month period' is either the current month and sales for the previous 11 months, or the current month and the projected sales for the next 11 months

Special rules for calculation of GST for supplies made by re-deliverers

Where a redeliverer is registered or required to be registered for GST, they will need to work out the amount of GST on:

•         the taxable supply of low value imported goods they have made to consumers; and

•         the taxable supply of services made to the consumers.

Under subsection 84-91(1) of the GST Act the GST payable by the redeliverer to the taxable sale of low value imported goods to consumer is 10% of the total amount the consumer paid for the goods.

Under subsection 38-355(3) of the GST Act a supply of international transport is not GST-free if it relates to a taxable supply of goods and the redeliverer is treated as the supplier of the goods. Thus, the redeliverer's services are taxed in the same way as the low value goods, that is the redeliverer is also liable for GST on the amount paid for their taxable supply of services by the consumer. The amount paid for the services includes amounts charged by the redeliverer for international transport.

Below is an example of how the calculation of GST is done for supplies made by a redeliverer.

Example

Jia wants to purchase a coat for the equivalent of A$200 from Clancy's, a store in the United States. Clancy's does not ship its products to Australia.

Jia contacts Take-it-Home Co to help her bring the coat to Australia. Take-it-Home Co provides her with an address in the United States. Jia buys the coat from Clancy's, which ships the coat to this United States address. Take-it-Home Co then arranges for the coat to be shipped to Australia.

Take-it-Home Co is registered for GST and charges Jia A$44, including A$4 GST, for the services it provided to bring the goods to Australia. It also charges Jia A$20 in GST on the coat, which is 10% of the amount Jia paid to Clancy's. Take-it-Home Co returns A$24 in GST to the ATO.

For more information refer to the following publications:

•         Fact sheet information for redeliverers at https://www.ato.gov.au/Business/International-tax-for-business/GST-on-low-value-imported-goods/Information-for-re-deliverers/

•         Law Companion Ruling LCR 2018/3: when is a redeliverer responsible for GST on a supply of low value imported goods at https://www.ato.gov.au/law/view/document?DocID=COG/LCR20183/NAT/ATO/00001

•         Law Companion Ruling LCR 2018/1L GST on low value imported goods at https://www.ato.gov.au/law/view/document?docid=%22COG%2FLCR20181%2FNAT%2FATO%2F00001%22

Accordingly, if the redeliverer is registered for GST, they will calculate the GST liability for supplies made to the purchaser as follows:

•         10% of the amount the purchaser paid for the goods; plus

•         10% of the GST exclusive value of the amount the purchaser paid for the services including international transport services and insurance for the transport of the goods. This is equal to 1/11 of the GST inclusive price charged to the purchaser.