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UPDATE: GST and Precious Metals

On June 26 2017, the Bill introducing GST integrity measures on precious metals was given Royal Assent by the Australian Parliament and has now been enforced.

Earlier in the year, a document released by the Commissioner of Taxation on the 22 February 2017 titled ‘Goods and services tax: What is excluded from being second-hand goods by paragraph (b) of the definition of that term in Division 195 of the A New Tax System (Goods and Services Tax) Act 1999’ proposed changes that may impact on second-hand dealers and pawnbrokers in the jewellery industry.

The now enforced  ATO view of the law is as follows:
  1. If the price for the acquisition from an unregistered entity is based on the spot-price of its precious metal content then it is not a GST creditable acquisition as it does not qualify as “second-hand goods”.
    1. If the price for the acquisition from an unregistered entity is not based on the prevailing spot price of its precious metal content then it does not have the character of the relevant precious metal. Examples of goods whose value is substantially higher than the intrinsic value of the precious metal content include  antiques, collectable coins, some jewellery and prestigious watches.  Such goods are not excluded from the definition of “second-hand goods” and GST credits can be claimed for 1/11th of the purchase price.
The change of the ATO's view means that some businesses will no longer be able to claim GST credits on purchases, from private individuals, of goods containing precious metals. For some purchases, businesses will need to apportion the value of purchases between the precious metal content and the other components (such as gemstones) and only claim GST credits in respect of the other components. Second-hand dealers will now have to consider, prior to purchase, if an item or part of an item will be eligible for a GST credit.

However, the Minister has taken into consideration of the concerns of second-hand dealers and pawnbrokers that:
  1. They often buy and sell goods containing precious metals at below the market value; and
  2. Could lose the ability to claim input tax credit by the operation of new arrangements.
In response, The Minister has drafted a determination that can exempt certain classes of goods from being subject to these changes. The drafted changes would allow the following to remain classes as second-hand goods”:
  1. If the goods are bought by a licensed second-hand dealer from the public and sold back to Australian consumer
  2. The valuable metal in the goods have been ‘substantially transformed’ by means of a manufacturing process or by skilled craftsmanship; and
  3. The good is ‘commercially distinct’ from the valuable metal in the gold.

Please see the draft determination here and an explanatory document here

Stephen Baxter of is able to assist businesses who want to understand and apply the new rules.  He can assist those businesses whose GST credits are already under review or have been challenged by the ATO.  He can be contacted on (02) 9221 2888 or via email on  

The JAA would also like your feedback if you see this issue might cause a serious erosion of your margins and want collective action to be taken.