Come Sunday, there will be some important changes to Australia’s goods and services tax (GST) and how it applies to overseas retailers and suppliers.
These changes have been in the works and announced for a long while now, but with recent debate around penalty rates, company tax, and income tax, you’d be forgiven for forgetting they even existed in the first place. They were first legislated way back in June 2017, but at the time weren’t slated for implementation until July 1, 2018.
To get you back up to speed on the penultimate day of the financial year, here’s a quick SmartCompany explainer on the new GST changes, and how they might affect your business.
First of all, what are the changes?
From July 1 this year, the low-value GST-free threshold for online purchases from overseas retailers will be scrapped, meaning purchases of $1000 or less from overseas businesses will attract the GST for the first time.
Furthermore, businesses with GST-eligible sales to Australian customers of over $75,000 in the past 12 months will be required to register with the Australian Taxation Office and collect GST.
These changes will affect merchants, re-deliverers, and electronic distribution platform operators, such as online marketplaces.
Small business owners and members of Australia’s business community have been pushing for the changes for years, with famed Harvey Norman boss Gerry Harvey lobbying for the changes back in 2010 as retailers began to feel the bite of online retail.
But international retailers such as Amazon and ASOS opposed the changes in a number of submissions to the government last year, saying the move “would not even represent a win for bricks-and-mortar retailers” as Australians would still find ways to shop online.
Great, what do they mean for me or my business?
How much these changes affect your business will depend largely on how much your or your business buys low-value goods from overseas suppliers. The impact will be felt more by the international businesses that will now have to collect GST for the first time on sales to Australian consumers, including for digital goods.
Aside from the tangible impact on consumers, the changes will mean more for businesses from a competition and consumer point of view. Thanks to the changes, it will become more expensive for customers to purchase goods from overseas suppliers, meaning more Aussie shoppers could look to local providers to save money.
Additionally, big-time retail overseas competitors will have to start collecting the tax, which many in the small business community argue will level the playing field for local operators.
What is Amazon doing, and why is it so upset?
In response to the changes, retail behemoth Amazon has said it will ban Australian shoppers from buying physical goods from its international online stores come July 1, a move that was generally regarded as an extreme reaction to the changes. Fellow online retailer eBay, who also initially opposed the GST changes, has said it will not be banning any shoppers.
Amazon strongly opposed the changes, making a submission to the government inquiry into the changes in April last year, months prior to the company officially launching its Australian operations. At the time, it said it would create an “inherent disincentive” for online retailers to comply with the law.
“While we regret any inconvenience this may cause customers, we have to assess the workability of the legislation as a global business with multiple international sites,” Amazon said in a statement at the end of May.
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“Based on our assessment, we will redirect Australian customers from our international sites to amazon.com.au where they can shop for products sold by Amazon US on the new global store, available today.
“This will allow us to provide our customers with continued access to international selection and remain compliant with the law, which requires us to collect and remit GST on products sold on Amazon sites that are shipped from overseas.”
What do small business owners think of the change?
By and large, small business owners and leaders of business representative groups are in favour of the changes, long believing the closing of the tax loophole will level the playing field between big and small retailers.
Speaking to SmartCompany in April last year, founder of online bookstore Booktopia Toby Nash said the change would help both the government’s and small businesses’ bottom lines.
“If you look at it as a higher level, it’s not about levelling the playing field, though it will go some way,” he said at the time.
“It’s about all of [the money] is going offshore and the rest of us are trying to struggle here, and we pay our GST, but there’s never enough money going around to fund things.
“We all want to know that we’ve got hospitals, that we can have roads. It’s about just making sure there’s a tax model where should stuff be sold in Australia, there’s a way of funding all of our national projects.”
However, some local retailers don’t believe the change will have much effect at all, with Dannielle Michaels and Monique Filer, founders of b.box for kids, saying consumers will still find cheaper prices overseas regardless of the GST changes.
“We don’t believe this will level the playing field, as depending on the product, the consumer could potentially still get the products they want, at a much lower price from the US, even when GST is added,” they said.