Law firm issues GST warning

Law firm Middletons warns local and foreign firms to take special care when taking advantage of changes to GST

August 17, 2010

Law firm Middletons has warned local and foreign firms to take special care when taking advantage of changes to the Goods and Services Tax (GST).

Following amendments to the GST Act, Australian carriers, forwarders and brokers will no longer be subject to GST exposure when they provide local services to a foreign company for international freight transport.

The amendments, in effect since July 1, came after a concerted industry campaign led by groups including the Customs Brokers and Forwarders Council of Australia and the Australian Federation of International Forwarders.

"The amendments to the GST Act are a welcome development for all companies involved in the carriage of goods into and out of Australia as they have the potential to significantly reduce the GST-exposure of local carriers, forwarders and brokers when acting as sub-contractors to foreign transport companies," according to Milddletons partner Stephen Thompson.

"The amendments also decrease the need for foreign companies to register for GST and claim input tax credits.

"However, in order to take advantage of the amendments, both Australian and foreign companies will need to carefully review the arrangements they have in place and also the documentation recording those arrangements."

Thompson highlights two points:

• agreements between foreign transport companies and their local subcontractors will need to clearly specify that the latter is providing their services directly to the former;
• for inbound moves, the wording of agreements and the arrangements with consignors will be critical in determining the ‘place of consignment’ and the extent to which the supply of transport services within Australia is exempt from GST.

Under the amendments, the supply of all domestic transportation services from the last point of collection prior to the place of containerisation is exempt from GST, provided the Australian subcontractor is acting as an agent for a foreign transport company.

"Put another way, local subcontractors who do not carry goods outside of Australia but contribute to the provision of an international transport supply within Australia, will not be required to charge GST as long as their services are being provided to a foreign transport company and involve carriage from the last point of collection prior to containerisation," Thompson says.

For inbound goods, the place of consignment is no longer the Australian port or airport, and is now the final place in Australia to which the goods are to be delivered under the contract for the international transportation of goods or place of delivery.

"As a consequence of the amendments, the transport of goods into Australia will be exempt from GST up to the place of delivery and local subcontractors will make a GST-free supply if their services are provided to a foreign transport company that is not in Australia at the time of the supply," Thompson says.

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