Approved Third Party Logistics (3PL) Company Scheme - BluTrust

Streamlining Logistics with Approved 3PL Scheme

Approved Third Party Logistics (3PL) Company Scheme

Gain a competitive edge with Approved 3PL Scheme: No GST on imported goods for logistics services to overseas clients

Purpose

In order to increase the competitiveness of third-party logistics companies offering logistics management services to overseas clients who use Singapore as their logistics hub, the Approved Third Party Logistics (3PL) Company Scheme has been introduced.

Benefits of Approved 3PL Company Scheme

A logistics company usually imports and supplies goods that belong to its overseas clients (principals) in the capacity of a Section 33(2) agent.

When you import goods belonging to you or your overseas principals, you do not have to pay GST under the Approved 3PL Company Scheme. When you remove imported goods belonging to you or your overseas principals who are not GST-registered from Zero GST warehouse, you don’t have to pay GST. The overseas principals must not be GST-registered or, if they are GST-registered, they must be listed under overseas vendor registration (OVR) as pay-only persons; if you remove and sell imported goods locally to persons who are approved under the following GST schemes (including your overseas principals’ customers), you do not have to charge GST:

Approved Major Exporter Scheme (MES) businesses;
Approved Import GST Suspension Scheme (AISS);
Approved Contract Manufacturer and Trader (ACMT) Scheme; or
Approved Third Party Logistics Company Scheme.

Capital Allowances

Deductions for the decline in value of depreciating assets are available under the Uniform capital allowance (UCA) system. In addition to the rules for depreciating assets, deductions are allowed for certain other capital expenditure.

Small business entities have the option of choosing simplified depreciation rules. Under these rules, small business entities can claim an immediate deduction if the cost is below the relevant threshold or else add the asset to the small business depreciation pool.

Land, trading stock and most intangible assets (excluding exceptions such as intellectual property and in-house software) are not depreciating assets.

The decline in value is generally calculated by spreading the cost of the asset over its effective life, using one of two methods:

Prime cost method – decline in value each year is calculated as a percentage of the initial cost of the asset
Diminishing value method – decline in value each year is calculated as a percentage of the opening depreciated value of the asset
MORE: Australian Taxation Office (ATO) Decline in value calculator.

For most depreciating assets, taxpayers can either self-assess the effective life, or use estimates published by the ATO. Taxpayers can recalculate, either up or down, the effective life of an asset if the circumstances of use change and the effective life initially chosen is no longer accurate. An improvement to an asset that increases its cost by 10% or more in a year may result in an obligation to recalculate the effective life of the asset.

Decline in value of cars is restricted to the car limit. From 1 July 2022, the luxury car tax threshold for luxury cars is $64,741 (it was $60,733 for the year commencing 1 July 2021). Luxury car leases are treated as a notional sale and purchase, with decline in value restricted to the car limit.

The decline in value of certain depreciating assets with a cost or opening adjustable value of less than $1,000 can be calculated through a low-value pool. The decline in value for depreciating assets in the pool is calculated at an annual diminishing value rate of 37.5%.

Changes for 2022 and 2023

From 12 March 2020 until 31 December 2020, the asset cost threshold for the instant asset write-off (which is usually only available to small business entities) has increased from $30,000 to $150,000 and the eligibility criteria expended to cover entities with an aggregated turnover threshold of less than $500 million (up from $50 million).

Further, from 12 March 2020 until 30 June 2021 the Backing business investment measure applied to businesses with aggregated turnover below $500 million and provides either:

A deduction of 50% of the cost or opening adjustable value of an eligible asset on installation (existing depreciation rules apply to the balance of the asset's cost), or
For businesses using a small business depreciation pool, a deduction of 57.5% of the cost of the asset in the first year, with the balance added the asset to the small business pool
In addition, from 6 October 2020 to 30 June 2023, full expensing applies to allow eligible businesses with an aggregated turnover of less than $5 billion to deduct the full cost of new eligible depreciating assets. For businesses with aggregated turnover of less than $50 million, full expensing also applies to eligible second-hand assets.