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GST: Q&As for NZ consumers and NZ businesses

Close-up of person's hands holding a credit card and shopping online on a tablet.

GST: Q&As for NZ consumers and NZ businesses

Close-up of person's hands holding a credit card and shopping online on a tablet.

These questions and answers refer to proposed legislation, which may change as it moves through the legislative process.

 

General questions

What are low-value imported goods?

Customs currently collects 15% GST and tariff duty on imported items, including anything bought online from overseas, where the total amount of duty and GST on the purchase equals NZ$60 or more. We call goods that don’t have GST and duties collected on them ‘low-value imported goods’.

If the proposed legislation is passed, what we mean when we say ‘low-value imported goods’ would change. Most goods bought from overseas and valued at NZ$1,000 or less would be considered low-value imported goods and would have GST collected by the overseas business you made the purchase from.

 

Why is Government proposing changes?

New Zealand retailers currently add GST to the price of their goods, collect this GST, and pay it to New Zealand Inland Revenue.

Right now, GST isn’t collected on all goods purchased online from overseas. That’s because the cost of collecting less than NZ$60 in GST and duties at the border is not cost-effective.

Government is considering new GST rules that would require overseas businesses to collect GST on low-value goods sold to New Zealand consumers online or by mail order.

This change would help level the playing field for New Zealand businesses. With the steady growth in online shopping, it would also stop a significant amount of tax revenue from being lost.

 

What do other countries do?

There are no global guidelines for collecting GST or similar taxes on low-value imported goods.

However New Zealand’s proposed rules would be broadly similar to the rules introduced by Australia in July 2018.

The European Union (EU) has committed to collecting Value Added Tax (VAT) on imported goods from sellers outside the EU from 1 January 2021.

 

When could this proposed GST rule change become law?

This is a matter for Parliament, but at this stage the Government expects the GST to be charged on all low-value imported goods (other than alcohol and tobacco) from 1 October 2019.

 

What would happen to parcels that cost over NZ$1,000?

Customs would continue to collect GST and tariff duty at the border on parcels or consignments valued over NZ$1,000. However, Customs would not collect GST on low-value goods in parcels or consignments valued over NZ$1,000 or on high-value goods (over NZ$1,000) if it has evidence that the GST has already been collected by an overseas supplier, marketplace or re-deliverer.

 

How would overseas businesses know when to charge me GST on my purchase?

Overseas businesses would determine whether your purchase must have GST applied. They would calculate whether the value of each item you bought (excluding any fees to send the package to you) totals NZ$1,000 or less. If it does, they will charge GST.

Some overseas businesses may opt to also collect GST on goods valued over NZ$1,000, so you may also pay GST on goods over NZ$1,000 that you buy on overseas websites.

 

Are there any exceptions?

Overseas businesses would not collect GST on supplies of fine metal and of alcohol and tobacco products, because:

  • fine metal is already exempt from GST under existing rules
  • most alcohol and tobacco products (regardless of value) are subject to excise taxes and GST at the border. There is no proposal to change this.

Goods sold to GST-registered New Zealand businesses for use in their business are also excluded under the proposed rules. That’s because businesses can claim back GST on these purchases, so we would just end up paying back any GST that had been collected.

However, if goods are imported by a New Zealand business in a consignment valued above NZ$1,000, the business would pay GST and duty on these goods at the border.

 

Did Government consult on these proposed changes?

Yes. Check out the original discussion document the Government consulted on and read the submissions received.

 

 

New Zealand consumers

How would the proposed changes affect New Zealand consumers?

Under the proposal, consumers in New Zealand would pay GST on goods valued at or below NZ$1,000 when they place an order with an overseas supplier.

This means consumers could generally:

  • pay a little more for most goods that cost less than NZ$400, because GST was not charged in the past, but would be now.
  • pay less for most goods that cost between NZ$400 and NZ$1,000, because tariff duty and cost recovery charges would be removed for parcels or consignments below NZ$1,000.

Customs would continue to collect GST, tariff duty and cost recovery charges on parcels and consignments valued over NZ$1,000 when they arrive in New Zealand if they haven’t been provided with evidence confirming that GST was already collected by an overseas supplier, marketplace or re-deliverer. That would include collecting GST on low-value goods in a parcel or consignment valued over NZ$1,000.

This change would also mean greater transparency for New Zealand consumers. In most cases, what you pay online would be the actual, full price. The chance of you being surprised by having to pay additional GST, tariff duty and cost recovery charges when your parcel arrives in New Zealand would reduce.

Note: Cost recovery charges collected by Customs include Customs’ import entry transaction fee and the Ministry for Primary Industries’ associated biosecurity system entry levy.

 

Does this proposed GST rule change affect online shopping only?

No. Consumers in New Zealand would pay GST on any goods valued at or below NZ$1,000 when they place an order on an overseas supplier’s website or by mail order.

 

These goods aren’t made or sold in New Zealand, so why should I have to pay GST on them?

GST isn’t a tax on Kiwi goods. It’s a consumption tax – which means it’s generally charged on goods and services that are used in New Zealand. It makes no difference where the goods were manufactured.

 

Could goods be held up at the border because of this proposed change?

No. New Zealand consumers would pay GST on goods that cost NZ$1,000 or less when they buy them online. That means there is no need to hold these parcels at the border until GST is collected. However, all existing border security and biosecurity checks and rules would still apply.

The current process for collecting GST and tariff duty at the border on parcels or consignments valued over NZ$1,000 would continue to apply. Customs would not collect GST on parcels or consignments (or low-value goods within a parcel or consignment) valued over NZ$1,000 if they receive evidence that the overseas supplier, marketplace or re-deliverer has already collected GST.

 

How would I get the GST back if I return a purchase?

If you return a purchase to an overseas business, that business would be responsible for refunding the GST to you.

 

 

New Zealand GST-registered businesses

How would the proposed changes affect GST-registered businesses?

Low-value goods sold by overseas suppliers to GST-registered New Zealand businesses for use in their business (business-to-business supplies) are excluded under the proposed rules.

However, if goods are imported by a New Zealand business in a consignment valued above NZ$1,000, the business would continue to pay GST and duty on these goods at the border.

 

How would overseas businesses know not to charge GST on my purchase of low-value goods?

The overseas supplier would treat you as an individual consumer unless you inform them you’re a GST-registered business.

 

How would I get the GST back if I’m charged at the time of purchase?

If an overseas supplier accidently treats a GST-registered business as an individual consumer and charges GST on low-value imported goods, the overseas supplier would be responsible for refunding the GST to you. You would be unable to claim back the GST in your GST return unless the overseas supplier provides you with a full tax invoice instead and the value of the supply (excluding GST) is NZ$1,000 or less.

 

How would I get the GST back if I return a purchase?

If you return a purchase to an overseas business, that business would be responsible for refunding the GST to you.