GST changes for Australian retailers who use drop shipping
From 1 July 2018, GST will apply to sales of low value imported goods (valued at A$1,000 or less) to consumers in Australia.
These GST changes will also affect Australian GST-registered suppliers including Australian retailers who ‘drop ship’.
Drop shipping in this context refers to sales of goods that are located overseas at the time of sale and sent directly to consumers in Australia from an overseas source (for example, manufacturer, wholesaler or warehouse).
Currently these transactions do not incur GST. However, from 1 July 2018, Australian retailers should treat these sales the same as other domestic sales, and apply GST at the point of sale.
These changes will ensure goods sourced domestically and from offshore receive the same GST treatment when sold to consumers in Australia.
Imported goods valued above $A1,000, as well as all tobacco products and alcoholic beverages, will continue to have GST applied at the Australian border as per current arrangements.
Any Australian suppliers not registered for GST, will need to include drop shipping sales when determining if they are required to register. If your GST turnover is A$75,000 or more in a 12-month period, you are required to register for GST.
Example
Stellar Fashion, a major online Australian-based GST-registered retailer, makes a sale to a consumer in Australia (after 1 July 2018) for a dress valued at $A100. The dress ships directly to the consumer by sea cargo from the company’s offshore supplier based in the Philippines. Stellar Fashion treats the sale the same as a domestic sale and remits 1/11th of the sale price to the ATO. They account for this on their business activity statement.
If you have questions on any of the above issues raised, please do not hesitate to contact us.
Marius Fourie
Accountant
T: 02 9984 7774
E: mariusf@northadvisory.com.au
“From 1 July 2018, GST will apply to sales of low-value imported goods (valued at A$1,000 or less) to consumers in Australia — including those sold via drop-shipping.”
About the author
Cayle Petritsch - Director & Wealth Advisor
Cayle Petritsch, Director and Wealth Advisor, works with our existing clients who have recognised the importance of business owners making strategic financial choices not only for their company, but for their personal finances too.
Cayle saw a great opportunity to expand North Advisory’s services into SMSF/superannuation, personal wealth management, asset protection services and other crucial personal finance facets that business owners need to consider.
His approach to wealth management allows you to receive highly personalised wealth advice. Working closely with Marius, Cayle understands the unique needs of every client, from their lifestyle and business goals to their retirement plans.
Key Takeaways
Drop-shipped goods to Australian consumers are now treated like domestic sales for GST purposes.
From 1 July 2018, low-value imported goods sold via drop-shipping must include 10% GST in their price at checkout.
GST registration rules apply — retailers must monitor turnover including drop-shipping sales.
If total sales (including those from overseas suppliers) exceed A$75,000 per year, GST registration is mandatory.
Breakdown value thresholds matter: only imports valued at A$1,000 or below are covered by this GST change (excluding tobacco/alcohol).
High-value imports or restricted goods remain subject to traditional import duties and border GST arrangements.
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Frequently Asked Questions
What is “drop-shipping” under these GST rules?
Drop-shipping refers to when an Australian retailer sells goods that are located overseas at the time of sale and are shipped directly from an overseas supplier (manufacturer, wholesaler or warehouse) to the Australian consumer — bypassing domestic inventory.
As a retailer using drop-shipping, when does GST need to be applied?
From 1 July 2018 onwards, if the goods are “low-value imported goods” (valuation ≤ A$1,000, excluding tobacco and alcohol) and sold to Australian consumers, GST must be charged at the point of sale — just like any domestic sale.
Do I need to register for GST if I drop-ship?
Yes — if your total GST-related turnover (including drop-shipping sales) reaches or exceeds A$75,000 in a 12-month period, you must register for GST. Even if under the threshold, you may wish to register voluntarily.
Are all imported goods affected, or only low-value items?
The rule specifically applies to “low-value imported goods” (A$1,000 or less). Goods with higher customs value — or restricted items like tobacco and alcohol — are still subject to the standard customs-border GST/import duty arrangements.
What does this change mean for pricing and compliance for an online retailer using drop-shipping?
Retailers now need to factor GST into their pricing at point of sale, collect and remit GST via their Business Activity Statement (BAS), and keep proper records to comply with ATO requirements — just like for domestic sales. Failure to do so may result in non-compliance.
What GST change affects Australian retailers using drop shipping?
From 1 July 2018, GST applies to sales of low-value imported goods (valued at AUD 1,000 or less) that are drop-shipped directly to consumers in Australia.
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