The Australian government has requested the Board of Taxation to review the performance of the Low-Value Imported Goods (LVIG) measure. The LVIG enables the application of goods and services tax (GST) on low-value import purchases valued at $1,000 or less. The Board is expected to examine how well the measure has performed in achieving its goals and if any amendments are required in its ongoing use.
Australia was one of the first countries in the world to introduce a vendor model that took effect on 1 July 2018. Before this, consumers could directly import goods worth less than $1,000 without attracting GST. Any importation worth more than this attracted GST at the border. Since the LVIG implementation, suppliers, online platforms and re-deliverers with a GST turnover of $75,000 or more were required to register, collect and forward GST to the ATO. The goal has been to ensure that even low-value imports face the same tax regime as other goods sourced domestically.
Some issues that have since arisen with the LVIG regime is a failure by some suppliers to be aware of this tax obligation and duly register and collect GST. There have also been reported challenges where suppliers in the importation process fail to make accurate declarations on GST. Some importations were also found to have insufficient supporting documentation on the classification of the customer and whether the goods qualified to be GST-free. Other transactions were also found to have a mix of goods that were taxable and GST-free, leading to confusion in how to calculate GST.
According to Assistant Treasurer, Michael Sukkhar, the introduction of LVIG has helped remove an unfair advantage that foreign businesses had over local ones. At its inception, the LVIG measure was predicted to boost the federal budget by about $300 million over the subsequent three years. It however exceeded this expectation greatly. The ATO reported collecting $250 million within the first nine months of the LVIG and most recently, another $385 million for the 2019-2020 period.
The Board of Taxation is expected to assess the effectiveness of the LVIG regime and industry compliance with the associated rules. It is also to collaborate with the Treasury, ATO, and Australian Border Force as part of a targeted external consultation process. The Board is also tasked with coming up with recommendations on how to improve the system and report on any international developments regarding the collection of GST on LVIG. This review is expected to conclude and report back by 17 December 2021.