Economic Crisis
As outlined in an article from 12 April 2020 in The Age titled Freight industry running out of storage space due to COVID-19, state government and port corporations are appropriately contingency planning and examining staging sites as required to store containers in the event of supply chain failures.
The limitations of this activity and risks faced by the international trade sector is highlighted in an associated article from 8 April 2020 in the Australian Financial Review titled Importers seek relief from port charges squeeze.
"While state government and port corporations are currently contingency planning and examining staging sites as required to store containers in the event of supply chain failures, this will be a futile exercise if goods cannot be cleared from customs control into home consumption," Susan Danks, head of customs and regulatory compliance for the Freight & Trade Alliance (FTA), said in a letter to Treasury last week.
Projected impacts include: - congestion at the ports, leading to increasing delays to all containers that are "block stacked" at terminals, jeopardising the timely release of essential goods;
- while limited storage may be available off port, the goods must be held under customs control until they are paid and released - limited capacity exists at current customs controlled premises being gazetted in accordance with Sec15 or licensed in accordance with Sec 77G of the Customs Act 1901;
- as the port congests, trade slows, equipment such as shipping containers, required for exports will not be available;
- increased costs across the supply chain, with precedent suggesting that stevedores and shipping lines would give little (if any) reprieve for associated storage or late empty container return penalties, this in turn compounds costs faced by importers (including increasing Infrastructure Surcharges administered by stevedores) and the cash flow of customs brokers; and
- delays in returning empty containers within required time frames, resulting in an equipment shortage within supply chain not being able to fulfil export requirements - as experienced in Europe and Asia, relating to reefer containers held up in China, a worldwide shortage of prescribed equipment attracted surcharges of up to $1000 per container.
FTA / APSA Advocacy
In response, Freight & Trade Alliance (FTA) and the Australian Peak Shippers Association (APSA) provided a submission to the National Covid-19 Coordination Commission on 27 March 2020 and follow-up correspondence to Treasury, the Australian Taxation Office (ATO) and the Australian Border Force (ABF) on 3 April 2020 advocating for deferral Duty, GST and Import Processing Charges (collectively referred to as "import statutory charges").
FTA / APSA has also escalated concerns to state governments and in a formal briefing to the Deputy Prime Minister on 7 April 2020 outlining concerns that in this unprecedent economic environment, many import businesses face the genuine risk of being unable to maintain business continuity and that impacts as outlined above will be experienced at our national container ports.
Federal Government Response
FTA / APSA has received assurances that the Federal Government remains committed to ensuring supply chains continue to function by avoiding congestion at our border. We understand that the ABF is working behind the scenes on possible deferral options and will work with Treasury, the ATO and border agencies to promptly deploy solutions on a need basis.
FTA / APSA will continue to collect data from members to demonstrate the seriousness of the issues raised and will continue advocacy for early pre-emptive (rather than reactionary) COVID19 relief measures.
Industry Response – a "New Normal"
In parallel to the FTA / APSA advocacy activity, it is evident from member feedback that business models have rapidly evolved.
Customs brokers are no longer accepting the cash-flow imposition of making up front import statutory charge payments and recouping costs from importers on a disbursement basis.
The "new normal" leaves importers to either make up front payments to customs brokers or to register via the Integrated Cargo System (ICS) to make direct EFT payments of import statutory charges.
This is already generating early warning signs that containers may become stranded at our wharves with importers struggling with insufficient cash flow to clear goods into home consumption.
Deferred GST (DGST) scheme
Data collected from members, as outlined in our correspondence to Treasury, indicates that GST payments is the most significant component of import statutory charges.
Accordingly, FTA has been working closely over the past 2 weeks with the ATO on the benefits provided to importers under the current Deferred GST (DGST) scheme and the potential for further enhancement as a COVID19 relief measure.
While details of any enhanced arrangement are yet to be outlined and clearly require further government consideration, we urge our importer members to register NOW for DGST taking into consideration:
- the unique timing opportunity presented for existing quarterly reporters; and
- to be "first-in" to take advantage of any enhanced COVID19 relief measure associated with the scheme.
NOTE: In the current economic crisis, the ATO confirmed receipt of significantly increased number applications for DGST registration. We understand that the ATO have significantly increased automated capabilities, that should process up to 500 DGST applications per day.
Current benefits of DGST
Importers registered for DGST are required to lodge their Business Activity Statement (BAS) monthly and electronically. Once approved, the import GST otherwise payable at the border is deferred until the 21st of the following month. That is, importers registered under DGST will defer the payment of GST on any importation occurring throughout the month of April, until the 21st May. The payment of GST on any importation occurring in the month of May, will be deferred until the 21st of June. And so on, every month.
15 days remain to lodge a DGST application (as of today, 15 April 2020)
Given previous member feedback indicating wait times for DGST registration have been up to 30 days, FTA advocacy efforts have focussed on the need for immediate relief for importers seeking registration under DGST.
As a result of those efforts, we are pleased to share with members the following assurances received from the ATO:
- depending on whether or not an entity currently reports monthly or quarterly, DGST can be in place (linked in the ICS and ready for use) within 3-4 business days provided they first change to monthly GST reporting;
- importers seeking DGST registration but yet to lodge their BAS for the period (monthly or quarterly) ending 31 March 2020 can still apply and WILL NOT be refused registration on that basis alone; and
- for businesses that do register for DGST in the month of April, a significant shift in processes may be required in order to adjust to monthly / electronic BAS reporting - in this case, importers newly registered for DGST can seek flexibility around payment deadlines.
In addition to the above, it is extremely important to note for importers currently reporting their BAS on a quarterly basis, they must first change to monthly electronic BAS reporting for GST and lodge an application for DGST in the month of April, being the first month of their next reporting period.
This leaves only 15 days from today to lodge an application with the ATO.
Importers currently reporting their BAS monthly and not already DGST registered, can lodge an application at any time.
NOTE: Eligibility is extended to those that are up to date with tax returns or payments – this includes members of GST groups, branches and joint ventures. You or anyone relevant to the application may not be approved if convicted or penalised by a court for specific offences within the last three years.
The DGST application process
For entities seeking to apply for DGST registration, the process is as simple as:
- Changing your GST reporting from quarterly to monthly using your tax or BAS agent, myGov account or by phoning the ATO on 13 28 66. If you already lodge monthly, go to step 3.
- Wait 24 hours for processing to occur.
- Apply for the deferred GST scheme – this must be done by the person authorised for tax purposes on the ATO's system.
If you are successful you should be notified within 24 hours.
Note: It may take three days before Australian Border Force's (ABF) systems recognises and processes imports through the deferred GST scheme.
For information about:- deferred GST, see ato.gov.au/dGST
- additional support the ATO is providing during COVID-19 visit ato.gov.au/coronavirus
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