Australia Tax: Changes proposed to Goods and Services Tax (GST) treatment of cross-border transport

The Australian government has released for public comment draft legislation aimed at amending the Goods and Services Tax (GST) rules applying to certain cross-border transport services. The changes are intended to provide certainty for entities involved in the domestic transportation of goods exported from or imported into Australia. The changes are also intended to reduce the number of nonresident entities without an Australian presence that are liable for Goods and Services Tax (GST) or incur GST on their acquisitions that could cascade through the supply of goods or services they might make.

In summary, the proposed changes will mean that:

- The transport of goods by a subcontractor within Australia that forms part of the international transport of those goods by another entity from Australia will be taxable. However, the supply of those transport services will be Goods and Services Tax free if the supply is made to a nonresident that is not in Australia.

- The transport of goods by a subcontractor within Australia that forms part of the international transport of those goods by another entity to Australia will be taxable. However, the supply of those transport services will be GST-free if the supply is made to a nonresident that is not in Australia.

Liability for paying Goods and Services Tax (GST) on the domestic transport of imported goods will shift from transport suppliers to the importer of the goods. This will be achieved by including the cost of domestic transport in the "value of the taxable importation" calculation that is used to work out the Goods and Services Tax (GST) liability on the imported goods, while also removing the GST liability on the supply of domestic transport services made to, and services provided by, a nonresident entity that is not in Australia.

- For suppliers who transport goods to or from Australia, the scope of Goods and Services Tax-free international transport supplies will be extended to the point of collection prior to containerization for exports and the place of delivery for imports.

Once enacted, these Goods and Services Tax rule changes will apply as from 1 July 2010.