Overseas businesses selling to New Zealand should get ready for 1 December 2019. From this date on they may need to register for, collect, and return GST of 15% on low-value goods sold to NZ consumers.
Low-value goods have a value of NZ$1,000 or less. The value excludes GST, shipping and insurance costs. Examples of low-value goods include books, clothing, cosmetics, shoes, and small electronic items.
Exceptions are alcohol and tobacco products, which will be taxed at the border regardless of value.
Imported goods valued over NZ$1,000 will continue to have taxes and duties applied at the border.
Which overseas sellers are affected by the change?
overseas businesses who sell to New Zealand consumers, either online, by phone or by mail order
online marketplaces which businesses and people sell through
businesses providing mailbox redelivery of low-value goods
personal shopping services from countries other than NZ
If a business's total supplies to NZ exceeds - or is likely to exceed - NZ$60,000 in a 12-month period, they will need to collect and return GST. Registering for a GST number can be done online using IRD's 'Non-individual registration' service.
Which NZ consumers will these rules affect?
Any buyer who is not GST-registered
Businesses who are GST-registered but are not buying the goods for their business (ie wholly for personal use)
Why have these changes been made?
When GST was introduced in 1986, few New Zealanders were purchasing goods from overseas suppliers, and online shopping did not exist. Most imported goods were purchased by GST-registered businesses and then sold to consumers.
Currently NZ Customs collects GST on imported goods where the total amount of GST and tariff duties equals NZ$60 or more. It is not cost-effective to collect less than this amount, and would result in delays for consumers buying low-value goods from overseas.
With the growth of e-commerce it was necessary to ensure fair and consistent GST collection on all imported goods, regardless of their value.
An example of a low-value overseas purchase:
Jeremy buys a guitar from an overseas seller, and there is a shipping cost to send to NZ:
Guitar $980 + shipping $30 = $1,010
As the guitar is valued under NZ$1,000 the seller must charge GST. He must also include the price of shipping in the GST calculation:
$1,010 + 15% GST = $1,161.50
$1,161.50 is the total Jeremy will need to pay to the seller; $151.50 is the GST amount the seller needs to return to Inland Revenue.
To find out more, watch Inland Revenue's video explaining the changes in greater detail:
If you're unsure how these changes may impact your business, please contact us - we'll be happy to help.