The Government has released further details on the proposed collection of GST on low-value imported goods from 1 October 2019.
As previously announced, this will feature an offshore supplier registration model, which is currently in place in Australia. This will require offshore suppliers selling goods with a value not exceeding NZ$1,000 (up from NZ$400 previously) to New Zealand consumers to charge and collect GST, if their total sales to New Zealand consumers exceed NZ$60,000 a year.
Goods supplied to GST-registered businesses would be excluded but a business would have a “reverse charge” (i.e. would need to account for GST) on any imported goods that are used for non-taxable (e.g. private) purposes.
The Proposals
The key changes from previous announcements are:
Raising the threshold for collection of GST by the offshore supplier from goods with a value of NZ$400 to NZ$1,000.
Allowing offshore suppliers to elect to charge GST on goods worth more than NZ$1,000. This election will be available if 5% or less of their total NZ sales are of goods valued over NZ$1,000. Alternatively, suppliers who do not meet this test may apply to the New Zealand Commissioner of Inland Revenue to charge GST on goods over the NZ$1,000 limit.
One impact of raising of the threshold is that customers buying goods worth between NZ$400 and NZ$1,000 may actually be better off than under the current system, because tariffs and New Zealand Customs cost recovery charges will no longer be collected on these shipments.
Offshore marketplaces and re-deliverers remain liable for the GST obligations of the underlying supplies.
The announcements confirm that double taxation will be avoided so that New Zealand Customs does not also collect GST on goods in a consignment over NZ$1,000 where GST has already been charged by the supplier.
Implications
One factor to consider is the impact this will have on the number of offshore businesses supplying low value goods to New Zealand consumers. Will offshore suppliers withdraw from the New Zealand market? This could push up prices from less competition, or consumers having to absorb the cost of using re-deliverers.
The experience from Australia so far is that the transitional issues, particularly systems changes, are significant.
What next?
A bill is scheduled for introduction in November 2018 containing the proposed rules. Using normal legislative timeframes, enactment of the final rules may not take place until June or July 2019, which will result in a very short timeframe for offshore suppliers to make the necessary systems changes.