GST Changes for Australian Retailers Who Use Drop Shipping
As of 1 July 2018, the ATO is starting to implement changes for Australian retailers who use drop shipping. The ATO's changes will currently only affect Australian suppliers who are GST-registered, and this includes suppliers who 'drop ship.' If you're someone who practices this shipping method, read on.
Defining Drop Shipping
When a retailer 'drop ships' an item, it simply means that the items are not in Australia at the time of the sale. The items are abroad, and once the retailer purchases the item or items, the manufacturer or warehouse will ship the items directly to the Australian customer or retailer who purchased it. Before the changes go into effect on 1 July 2018, drop shipping an item doesn't come with GST. However, this is set to change this year, and you want to be sure you're doing it correctly to avoid a hassle at tax time.
1 July 2018 New Rules for Drop Shipping
Once 1 July 2018 comes around, Australian suppliers who are GST-registered must pay GST on each drop shipping transaction. In turn, the Australian retailers will treat each drop shipping transaction like any other domestic sales. They'll have to apply GST when the transaction takes place.
The ATO is changing how retailers handle drop shipping to ensure that any goods or products that the retailer sources domestically and abroad get the same GST treatment when retailers sell it to Australian consumers. This new change does not apply to any imported goods valued at over $1,000 AUD, alcoholic beverages, or tobacco products.
These things will continue to have GST added when it crosses the Australian border as it currently does per the ATO's regulations. Also, an Australian retailer who currently doesn't have a GST registration may have to get one. Whether or not you need to have your GST registration will depend on the number of sales and drop shipping sales you have each year.
You record both of these amounts in a 12-month period, and if they total over $75,000 AUD, you have to register for GST through the ATO. This can be very confusing, especially when tax time comes around this year. You want to ensure that you have everything set up and registered correctly, so your tax lodgement goes as quickly and as smoothly as possible. The friendly and professional agents at Parramatta Tax Accountant are ready and willing to help you with all of your drop shipping and GST registration needs. Contact us today.