How to calculate GST on a low-value good

Calculating GST on a low-value good

After 1 December 2019, Make Music sells a guitar to Sam for US$650 and arranges to ship it to New Zealand. Make Music displays prices excluding GST. Under their terms and conditions, they advise Sam that GST will be charged at the checkout if applicable.

 

Overseas business	Make Music, a US merchant registered for New Zealand GST on low-value goods
New Zealand customer	Sam, a private individual buying a guitar
Purchase	Guitar US$650 Shipping US$30 Converted to NZD | rate US$0.6507 to $1 Guitar NZ$998.92 Shipping NZ$46.10 Single low-value good (NZ$998.92 before GST and shipping)
GST calculation (NZD)	Guitar $998.92 Shipping $46.10 Total $1,045.02 15% GST = $156.75 Sam pays $1,201.77
GST calculation (USD)	Guitar $650 Shipping $30 Total $680 15% GST = $102 Sam pays $782
Amount payable to Inland Revenue	NZ$156.75 (if priced in NZD) or US$102 (converted to NZD later)
GST payable at the border	No
Other charges payable at the border	Nil

 

The cost of the guitar before GST and shipping is NZ$998.92. Sam is charged GST at the point of sale because the cost is less than the NZ$1,000 low-value goods threshold.

Using the exchange rate US$0.6507 to NZ$1, Make Music charges Sam NZ$1,201.77 and returns GST of NZ$156.75 to Inland Revenue in its GST return.

Make Music could choose to transact in US dollars and convert the GST payable to New Zealand dollars later. They would then charge Sam US$782 and return GST of US$102 converted to New Zealand dollars using the exchange rate on:

• the date of the supply
• the last day of the taxable period
• the date Make Music files its GST return, or
• another date as agreed with the Commissioner of Inland Revenue.

Make Music would still need to convert US dollars to New Zealand dollars at the time of supply to determine whether the guitar is below the NZ$1,000 low-value goods threshold (and therefore whether GST is required to be returned on the supply).

 

Calculating GST on a high-value good

After 1 December 2019, Adventure Sport sells Hayden a kiteboarding kit for AU$1,200 and arranges to ship it to New Zealand. The price before shipping is greater than the NZ$1,000 low-value goods threshold, so it is a high-value item. GST and other customs charges will be payable at the border

Adventure Sport charges Hayden AU$1,300 (including shipping) and does not return GST on the sale to Inland Revenue.

 

Overseas business	Adventure Sport, an Australian merchant registered for New Zealand GST on low-value goods
New Zealand customer	Hayden, a private individual buying a kiteboarding kit
Purchase	Kiteboarding kit AU$1,200 Shipping AU$100 Converted to NZD | rate AU$0.9278 to NZ$1 Kiteboarding kit NZ$1,293.38 Shipping NZ$107.78 Single high-value good (NZ$1,293.38 before GST and shipping) Sam pays AU$1,300 or NZ$1,401.16
GST calculation	Nil
Amount payable to Inland Revenue	Nil
GST payable at the border	Yes, GST on the kiteboarding kit and shipping
Other charges payable at the border	Import entry transaction fee plus GST Biosecurity system entry levy plus GST

 

Calculating GST on multiple low-value goods

After 1 December 2019, Many Goods sells Sadie a bike for US$630 and a t-shirt for US$50 and arranges to ship them to New Zealand. On its website, Many Goods displays prices excluding GST. Under their terms and conditions, they advise customers that GST will be charged at the checkout if applicable.

 

Overseas business	Many Goods, a US online marketplace that sells goods and is registered for New Zealand GST on low-value goods
New Zealand customer	Sadie, a private individual buying a bike and a t-shirt
Purchase	Bike US$630 T-shirt US$50 Shipping US$100 Converted to NZD | rate US$0.6507 to NZ$1 Bike NZ$968.19 T-shirt NZ$76.84 Multiple low-value goods each with a value of less than NZ$1,000 before GST and shipping
GST calculation (NZD)	Bike $968.19 T-shirt $76.84 Shipping $153.68 Total $1,198.71 15% GST = $179.81 Sadie pays $1,378.52
GST calculation (USD)	Bike $630 T-shirt $50 Shipping $100 Total $780 15% GST = $117 Sadie pays $897.00
Amount payable to Inland Revenue	NZ$179.81 (if priced in NZD) or US$117.00 (converted to NZD later)
GST payable at the border	Not on the goods
Other charges payable at the border	Import entry transaction fee plus GST Biosecurity system entry levy plus GST

 

Each item Sadie has ordered costs less than NZ$1,000 before GST and shipping. Even though the combined cost of both items is more than NZ$1,000, GST is payable at the point of sale because both the bike and the t-shirt are a low-value good.

Using the exchange rate US$0.6507 to NZ$1, Many Goods charges Sadie NZ$1,378.52 and returns GST of NZ$179.81 to Inland Revenue in its GST return.

Many Goods could choose to transact in US dollars and convert the GST payable to New Zealand dollars later. They would then charge Sadie US$897 and return GST of US$117 converted to New Zealand dollars using the exchange rate on:

• the date of the supply
• the last day of the taxable period
• the date Many Goods files its GST return, or
• another date as agreed with the Commissioner of Inland Revenue.

Many Goods would still need to convert US dollars to New Zealand dollars at the time of supply to determine whether the goods are below the NZ$1,000 low-value goods threshold (and therefore whether GST is required to be returned on the supply).

 

Calculating GST on a consignment with a mix of low and high-value goods

Poppy has found the perfect wedding dress and shoes for sale in Australia. After 1 December 2019, she purchases them online through Fabulous Shopping who also offers free worldwide shipping. The shoes that Poppy has ordered are less than the NZ$1,000 low-value goods threshold so GST is payable at the point of sale. The wedding dress is more than the NZ$1,000 threshold so is a high-value good subject to GST on arrival in New Zealand.

At checkout Poppy notices that GST is charged on the shoes but not on the wedding dress. Fabulous Shopping has not charged a shipping fee in this example, however if shipping charges were applied, they would need to be apportioned between the two supplies using a fair and reasonable apportionment basis, such as weight. (See next example for how this is calculated).

Fabulous Shopping arranges for the items to be shipped to New Zealand. When they arrive in New Zealand Poppy is contacted by the freighting company to arrange clearance. New Zealand Customs will collect GST on the wedding dress, along with cost recovery charges and any applicable tariff duty.

 

Overseas business	Fabulous Shopping, an Australian merchant registered for New Zealand GST on low-value goods
Customer	Poppy, a private individual buying a wedding dress and a pair of shoes
Purchase	Wedding dress AU$1,100 Shoes AU$200 Shipping $0 Converted to NZD | rate AU$0.9278 to NZ$1 Wedding dress NZ$1,185.60 Shoes NZ$215.56
GST calculation (NZD)	Wedding dress $1,185.60 Shoes $215.56 Shipping $0 Total $1,401.16 15% GST on shoes only = $32.33 Poppy pays NZ$1,433.49
GST calculation (AUD)	Wedding dress $1,100 Shoes $200 Shipping $0 Total $1,300 15% GST on shoes only = $30 Poppy pays $1,330
Amount payable to Inland Revenue	NZ$32.33 (if priced in NZD) or AU$30.00 (converted to NZD later)
GST payable at the border	Yes, GST on the wedding dress. Import documentation and Poppy's receipt will show that GST has been paid on the shoes
Other charges payable at the border	Tariff duty on the wedding dress and shoes (Clothing and Footwear are dutiable) plus GST Import entry transaction fee plus GST Biosecurity system entry levy plus GST

 

The sale is transacted in NZD. Using the exchange rate AU$0.9278 to NZ$1, Fabulous Shopping charges Poppy NZ$1,433.49 and returns NZ$32.33 to Inland Revenue in its GST return.

Fabulous Shopping could choose to transact in Australian dollars and convert the GST payable to New Zealand dollars later. They would then charge Poppy AU$1,330 and return GST of AU$30 converted to New Zealand dollars using the exchange rate on:

• the date of the supply
• the last day of the taxable period
• the date Fabulous Shopping files its GST return, or
• another date as agreed with the Commissioner of Inland Revenue.

Fabulous Shopping would still need to convert Australian dollars to New Zealand dollars at the time of supply to determine whether the goods are below the NZ$1,000 low-value goods threshold (and therefore whether GST is required to be returned on the supply).

 

Calculating GST on shipping and insurance for a consignment with a low and a high-value good – apportionment based on weight

Using the above example, Poppy has purchased a low and a high-value good in a single transaction. If Fabulous Shopping does not offer free worldwide shipping and instead arranges shipping and insurance for AU$100, then GST must also be charged on the portion of shipping and insurance that relates to the shoes.

Fabulous Shopping will apportion the value of the shipping and insurance (AU$100) based on the weight of each item.

The total weight of the parcel is 3.5kg:

• wedding dress 3kg
• shoes 0.5kg

Therefore, the shoes are 14.29% of the total weight of the package (0.5kg divided by 3.5kg = 0.1429 or 14.29%).

Fabulous Shopping charges Poppy AU$2.14 GST on the shipping and insurance fee (AU$100 x 14.29% x 15% = $2.14).

 

Calculating GST when supplier has elected to tax high-value goods

After 1 December 2019, Golf Equipment sells Joel a set of golf clubs for AU$1,060 and a pair of shoes for AU$200 and arranges to ship them to New Zealand. On its website, Golf Equipment displays prices excluding GST. Under their terms and conditions, they advise customers that GST will be charged at the checkout if applicable. This consignment is made up of a low-value good (shoes NZ$215.56) and a high-value good (set of golf clubs NZ$1,142.49).

Golf Equipment charges GST on all goods at the point of sale because they meet the conditions to collect and pay GST on individual goods that exceed NZ$1,000 and have informed Inland Revenue that they elect to do this.

 

Overseas business	Golf Equipment, an Australian merchant registered for New Zealand GST
New Zealand customer	Joel, a private individual buying multiple items including a set of golf clubs and shoes
Purchase	Golf clubs AU$1,060 Shoes AU$200 Shipping AU$50 Converted to NZD | rate AU$0.9278 to NZ$1
GST calculation (NZD)	Golf clubs $1,142.49 Shoes $215.56 Shipping $53.89 Total $1,411.94 15% GST = $211.79 Joel pays $1,623.73
GST calculation (AUD)	Golf clubs $1,060 Shoes $200 Shipping $50 Total $1,310 15% GST = $196.50 Joel pays $1,506.50
Amount payable to Inland Revenue	NZ$211.79 (if priced in NZD) or AU$196.50 (converted to NZD later)
GST payable at the border	Not on the goods
Other charges payable at the border	Tariff duty on the shoes (Footwear is dutiable) plus GST Import entry transaction fee plus GST Biosecurity system entry levy plus GST

 

Using the exchange rate AU$0.9278 to NZ$1, Golf Equipment charges Joel NZ$1,623.73 and returns GST of NZ$211.79 to Inland Revenue in its GST return.

Golf Equipment could choose to transact in Australian dollars and convert the GST payable to New Zealand dollars later. They are not required to convert foreign currency amounts at the time of supply for the purposes of determining which goods are low-value goods, as GST will be charged on all goods (both low and high-value). They would then charge Joel AU$1,506.50 and return GST of AU$196.50 converted to New Zealand dollars using the exchange rate on:

• the date of the supply
• the last day of the taxable period
• the date Golf Equipment files its GST return, or
• another date as agreed with the Commissioner of Inland Revenue.