Sarah A. Hinchliffe, College of William & Mary, Mason School of Business 

Tips

• Australians are spending approximately $16 billion a year on online purchases -- $4 billion of that is estimated to go to overseas sites.
• Purchases under $1000 -- which would account for the vast majority of those transactions – currently do not attract the Goods and Services Tax (GST).
• Duty and/or taxes on certain goods (for example, tobacco, tobacco products and alcohol) with a value of under AUD1,000 are still payable.

Introduction

Online shopping by Australians is on the rise, with a significant portion of Australian purchases online being from Australian retailers. Australians spent around $15.7 billion from 1 January to August 2014 purchasing goods online from both international and Australian retailers. The taxation implications for clients and solicitors for such purchases (whether goods be tangible or intangible), however, are often overlooked.

This article highlights certain key points and tax traps that solicitors should advise clients based in Australia who may import and/or export goods, services and intangibles.

Take-away points

• GST is applied to both taxable importations and taxable supplies at a rate of 10%.
• The low value threshold exempts certain eligible imports that are below $1,000 from GST.
• Consumers traveling overseas may be entitled to a refund of GST on purchases made within 30 days of travel that exceeds $300 in one transaction under the Tourist Refund Scheme.

The future of GST and the internet...

Will the LVT change? Perhaps in the future. The majority of imported items below the LVT are quite low in value (many are less than $100). To collect GST on items below the LVT would require additional processing. The cost of this additional processing depends on the level at which a new threshold would apply -- whether at zero, or some value between zero and $1,000.

The Australian Government has indicated that it will not change the GST base or rate prior to the next Federal election (scheduled for 2016). While it cannot be ruled out, it is unlikely that there will be any changes to local GST laws, including to adopt the destination principle, prior to this election.

In the interim, the supply of intangibles (particularly in cross-border transactions), as well as the internet is only going to become more prevalent popular as time goes by. This is particularly in light of purchasers worldwide becoming more comfortable about the security and on-time delivery of their purchases. This is the one area of merchandising that continues to have a positive outlook far into the future, and even more of a reason for legal practitioners to be informed about the GST implications of supplies of goods and services.

Note: This is an extract from Internet Law Bulletin, Volume 18 No 3