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Indirect tax

Goods and services tax

Extending GST to low value goods imported by consumers

Subject to the unanimous agreement of the States, the Government has announced that the goods and services tax (GST) will apply to low value goods imported by consumers from 1 July 2017. 

Similar to the measures announced in last year’s Budget in relation to the supply of digital services and intangibles by non-residents to Australian consumers, overseas suppliers that have an Australian turnover greater than $75,000 will be required to register for, collect and remit GST on the sale of low value goods to Australian consumers.

These arrangements will be reviewed in two years to ensure they are operating as intended and to take account of any international developments.

It is estimated this measure will increase GST payments to the States and Territories by $270 million over the forward estimates.  This measure should also ensure that Australian and foreign suppliers of goods are treated equally under the GST law. Furthermore, imposing GST on the foreign supplier (rather than on the entry of the goods into Australia) should ensure that goods are not unduly delayed during customs clearance procedures.

Small business GST concessions extended

As noted earlier, the Government announced in the Budget that it will increase the small business turnover threshold from $2 million to $10 million. This will provide small businesses with a turnover less than $10 million the option to elect to account for GST on a cash basis (rather than accruals) or to pay GST by instalments (as prescribed in the GST law).

This measure is designed to ease the tax burden on small businesses.

Increased integrity measures for the Wine Equalization Tax

To address a range of integrity concerns with the Wine Equalization Tax (WET) identified by the Treasury in a 2015 discussion paper, the WET rebate cap has been reduced and eligibility criteria tightened.

The cap will gradually reduce from $500,000 currently to $350,000 on 1 July 2017, followed by a further reduction to $290,000 by 1 July 2018. In addition, tighter eligibility criteria will apply from 1 July 2019. While we do not have the detail on specific eligibility criteria which may be introduced, based on the 2015 discussion paper, measures may include:

  • Tightening the definition of ‘producer of wine’ 
  • Restricting eligibility to exclude bulk, unpackaged and unbranded wine
  • Requirements to demonstrate payment of WET to access a rebate

What can be concluded though is that these measures will close perceived loopholes relating to the administration of the WET rebate and reduce the impact of the scheme on the budget bottom line.

Customs

Australian Trusted Trader

The Australian Government’s trade facilitation pilot programme, Australian Trusted Trader (ATT), has been fully funded to the tune of $69.9 million over four years. This funding includes $6.3 million in capital expenditure to facilitate implementation of the required people, process and systems changes to support ATT’s ongoing operation. During a pre-budget announcement, the Minister for Immigration and Border Protection affirmed the Government’s commitment to ATT and the role the programme plays in the achievement of Australia’s G20 growth strategy.

The announcement, and the size of initial funding allocated by the Government, has provided the assurance that the ABF will have access to sufficient resources to deliver real benefits to participants. It also helps to quell doubts of the Australian Border Force’s capability to work with industry and explore bespoke benefits that may be achievable for Trusted Traders under the umbrella of the ATT.

Named benefits to be implemented in forward years include periodic and streamlined reporting, duty deferral and streamlined clearance in Australia and abroad. These benefits will reduce international supply chain compliance costs and provide greater certainty.

Excise hike for tobacco products

Perhaps the worst kept secret of the 2016-17 Budget, the expected hike in tobacco excise has received bipartisan support in recent weeks. Forecast to raise $4.7 billion over the forward estimates, Government plans to raise tobacco excise and equivalent customs duty by 12.5 per cent per year from 1 September 2017 until 2020.

These measures will build on previous increases of 12.5 per cent over the last four years and will come into effect in September of each forward year. In total, the changes will bring tobacco excise in Australia to almost 69 per cent of the price per stick (based on current prices).

In addition to these changes, Government will make changes to the Customs Act 1901 and Excise Act 1901 to introduce tough new sanctions, including increasing the range of enforcement options available for illicit tobacco offences. To enforce these sanctions, additional funding to strengthen efforts to combat illicit trade in tobacco has also been allocated, with $7.7 million provided over the next two years to support the Department of Immigration and Border Protection’s ‘Tobacco Strike Team.’  

Other key indirect tax measures

In addition to these measures:

  • Government has committed to the signing and implementation of the Trans-Pacific Partnership (TPP) Free Trade Agreement - with an associated revenue reduction of $195 million from associated tariffs. This relative small reduction highlights that much has already been achieved through existing Free Trade Agreements with TPP countries.
  • In accordance with the World Trade Organisation Information Technology Agreement, Government will reduce tariffs on information technology products from 1 January 2017. This reduction will be reciprocal and reduce costs associated with IT products for consumers and businesses.
  • A limited excise refund scheme for distillers and producers of low strength fermented beverages will be introduced from 1 July 2017, with an estimated cost to revenue of $9.0 million over the forward years.
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