More time please Mr Tax Man

Consumers and affected sectors of Australian commerce are at risk of facing complications by the introduction of a new, untested and complex tax regime. 

The Treasury Laws Amendment (2017 Measures No. 1) Bill 2017: Low value imported goods proposes that overseas vendors, electronic distribution platforms and goods forwarders account for Goods and Services Tax (GST) on sales of low value goods to consumers in Australia if they have GST turnover of $75,000 or more. The intent of the Bill is to ensure that low value goods face an equivalent GST treatment to goods sourced in Australia. Importantly, the legislation will also generate a significant quantum of GST revenue.

Feedback from last week's blog titled GST on low value imports – 1 July 2017 generated responses from Freight & Trade Alliance (FTA) members questioning whether overseas vendors will comply with this new Australian tax law.

There were also significant and valid concerns about the short timeline to implement associated systems changes.

These issues were reflected in the FTA submission to Treasury noting that whilst jurisdictions such as the European Union are looking at similar reforms, Australia is the first country to apply a GST to the importation of low value goods using a 'vendor collection model'.

We understand that the Bill will go before Parliament in the first quarter of 2017 with a much publicised target implementation date of 1 July 2017. The largest risk to implementation is clearly the short window available from the passing of the legislation to "go live".

The Australian import sector still vividly recalls the flawed Integrated Cargo System (ICS) implementation in October 2005 that brought Australian ports and airports to a grinding halt.

We hope that Treasury takes note of our reference to the Australian National Audit Office post implementation review of the ICS implementation (The Auditor General Audit Report No.24 2006–07, Performance Audit) that highlighted that Customs underestimated the complexity and the risks associated with the project "The implementation was not supported by a coordinated implementation strategy or adequate business continuity planning. Insufficient time was allowed for system testing, particularly end-to-end testing. Customs did not have quality assurance mechanisms to assess the readiness of third party software providers, the quality of their software or the preparedness of industry participants."

It is imperative that history is not repeated and that adequate time is provided to allow industry to design, scope, budget, implement and test systems.

Businesses affected will include overseas vendors with changes to web sites and back-end reporting through to international freight forwarders, express carriers and licensed customs brokers completing ICS cargo reports Self Assessment Clearances (SACs) and Full Import Declarations (FIDs). As there is a requirement to provide remittance to the Australian Government, this will mean that there will be accounting changes within the internal business processes of the vendors that will also require implementation.

In contrast to the low vale goods, legislation applying the GST to international sales of digital products and services provided to Australian consumers received Royal Assent on 5 May 2016 with the measures to apply from 1 July 2017. We commend the government for supporting this sector of commerce by providing an appropriate implementation timeframe.

We are at a loss to understand why a similar implementation timeframe has not been considered for the significantly more complex changes associated with the proposed changes for low value imported goods.

Let's hope that that the Tax Man listens to our concerns.

• Please share your views via our blog as published in Lloyds List Australia or contact me direct at pzalai@FTAlliance.com.au 

• The FTA submission to Treasury is available HERE (FTA LOGIN REQUIRED).

Paul Zalai - FTA