‘Drop shipping’ refers to sales of goods that are located overseas at the time of sale and shipped directly to consumers in Australia from an overseas source (for example, manufacturer, wholesaler or warehouse).
Currently, these sales do not incur GST. However, from 1 July 2018, the changes to the GST treatment of low value imported goods means that Australian retailers should treat these sales the same as other domestic sales, and apply GST at the point of sale.
The changes will ensure goods sourced domestically and from overseas receive the same GST treatment when sold to consumers in Australia. Any Australian suppliers currently not registered for GST, will need to include drop shipping sales when determining if they are required to register. If your GST turnover is A$75,000 or more in a 12-month period, you are required to register for GST.
Imported goods valued above $A1,000, as well as all tobacco products and alcoholic beverages, will continue to have GST applied at the Australian border as per current arrangements.
Example
Amazing Fashion, a major online Australian-based GST-registered retailer, makes a sale to a consumer in Australia (after 1 July 2018) for a dress valued at $A100. The dress ships directly to the consumer by sea cargo from the company's offshore supplier based in the Philippines. Amazing Fashion treats the sale the same as a domestic sale and remits 1/11th of the sale price to the ATO. They account for this on their business activity statement (BAS).