31 March 2017
Media Release - #2017029, 2017

In the role of: Minister for Revenue and Financial Services [19 July 2016 - 28 August 2018]

Combatting fraud in the precious metals industry

The Australian Government is taking action to combat fraud in the gold trading industry.

From 1 April 2017, entities buying gold, silver and platinum that have been supplied as a taxable supply for GST purposes will be required to apply a reverse charge.

This means that if you buy gold, silver or platinum from another business, you:

  • will be responsible for reporting and paying the GST amount to the ATO when lodging your business activity statement (BAS).

If you sell gold, silver or platinum to another business, you:

  • will no longer need to remit any GST on the sale to the ATO;
  • will need to clearly state that the sale is a reverse-charged sale on the tax invoice you provide. This also applies if you are a buyer and you use recipient-created tax invoices; and
  • will be responsible for reporting the sale when lodging your BAS.

Also effective from 1 April 2017, the definition of ‘second‑hand goods’ will be amended to clarify that goods containing gold, silver or platinum are not second‑hand goods. This change will ensure that GST registered entities do not incorrectly claim input tax credits when acquiring gold, silver or platinum, regardless of its form.

However, to protect genuine participants in the second-hand jewellery and collectibles market, not all goods that contain gold, silver or platinum will be excluded from the definition of second-hand goods.

“While most gold traders do the right thing and comply with their GST obligations, some do not. These changes to the GST law will target this criminal activity,” the Minister for Revenue and Financial Services, the Hon Kelly O’Dwyer MP, said.

“To make sure this activity does not simply shift from gold to other precious metals, these changes will apply to all metals which are prescribed as precious metals, including silver and platinum, to stop this occurring.”

This is a technical change to the law to support integrity of GST payments. It clarifies the law to ensure the GST payable is collected as intended and it does not affect the amount of GST payable.

These changes will be legislated as soon as possible. Once the legislation is passed by Parliament, the changes will apply retrospectively after the date of this announcement to ensure those who are engaging in this tax evasion activity do not get more opportunities to do so.

The ATO is continuing to work directly with industry players dealing with gold bullion to provide guidance on GST obligations. Information about the reverse charge and definition of second-hand goods is attached to this media release, and additional guidance can be found on the ATO website. The website also includes information on briefing sessions planned for early April and a dedicated hotline to assist with any queries businesses may have.

Attachment A - GST and precious metals

Reverse charge

A supply of goods that consists in whole or part of gold, silver, platinum (or other precious metal prescribed by regulation) is subject to a reverse charge for GST purposes in the hands of the recipient of the supply if the recipient is registered or required to be registered for GST.

However, the reverse charge does not apply if the value of those goods and each separately identifiable good that forms part of the item supplied exceeds the intrinsic value of the constituent valuable metals by ten percent or more.  This will ensure that there is no mandatory reverse charge mechanism for goods that contain valuable metal but should properly be characterised as consisting of the value‑added product, rather than the constituent metal.

Definition of second‑hand goods

The definition of second-hand goods will be amended to clarify that goods to the extent that they consist of gold, silver or platinum are not second-hand goods. This is to ensure that there is no argument that merely slightly defacing gold, silver or platinum bars can bring these goods within the definition of second‑hand goods.

However, there are some occasions where this rule would inappropriately apply to goods that should be treated as second‑hand goods. To remedy this, collectibles and antiques that are bought and sold for their value as collectibles or antiques rather than the value of any constituent gold, silver or platinum may still qualify as second-hand goods. 

For other goods containing these metals, a threshold test will apply. Where a dealer buys and sells finished goods from an unregistered person, and the value of the goods is 10 per cent or greater than the intrinsic value of any constituent valuable metals, these goods can be second‑hand goods even if they contain gold, silver or platinum. For example:

  • a $20,000 watch which contains $500 worth of gold content
  • a computer worth $500 that has a small quantity of silver worth $20; and
  • a piece of jewellery valued at $200 containing platinum content worth $20.

The ten per cent threshold by which the value of the goods exceeds the intrinsic value of any constituent valuable metals reflects that such goods should properly be characterised as consisting of the value-added product, rather than the constituent metal.