Online purchases face GST hit

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A new report recommending GST reforms is proposing to eventually instate GST on online purchases of over AU$20, calling for an immediate solution of halving the current AU$1000 threshold.

( 2010_1310 - Coins_3 image by Ben Hosking, CC BY 2.0)

The GST Distribution Review, by former premiers Nick Greiner and John Brumby, and business expert Bruce Carter, was released on Friday. It calls for a number of reforms; among them, GST on online purchases that are as low as AU$20.

The current threshold of AU$1000 for GST on overseas purchases, the review said, is out of step with the rest of the world. They said it is currently open to abuse, as consumers can purchase components of expensive items separately, such as cameras and lenses, to circumvent the threshold.

By lowering the threshold to AU$500, the government would be able to recoup the additional administration fees, and bring in around AU$30 million in additional revenue per annum, the review said.

Its recommendation is that this threshold be lowered immediately, but the long-term goal would be to bring it right down to around AU$20.

The review recommended:

That the Commonwealth and the states jointly examine as a matter of priority ways to secure the GST revenue base against its continuing erosion through the growth in imports purchased online.

This examination should include considering amendments to the GST law, so as to make overseas suppliers to Australian residents liable for remittance of GST on all supplies of both goods and services that would otherwise be subject to GST if purchased from a domestic supplier. Such an approach would enable the GST-exemption threshold for physical parcels to be reduced to a nominal level, no more than AU$20 or AU$50.

Australian retailers have long been calling for tighter GST on overseas purchases; on this point, however, the review stated that goods purchased overseas would probably still be cheaper than what customers would pay locally. Its stated aim is instead to widen the GST pool, rather than help local businesses.

Consumer advocate Choice said that the recommendation is also likely to cause inconvenience to customers. Head of campaigns Matt Levey said in a statement:

The problem of collecting GST from overseas businesses is that they have no obligation to pay it. This report proposes punishing Australian consumers for the actions of overseas companies who don't pay the GST by confiscating goods before a household receives them.

The Gillard government, however, has rejected the recommendation for immediate change. Assistant Treasurer David Bradbury said in a statement today that it is not currently cost effective to lower the GST threshold on overseas purchases.

As the taskforce's report made clear, there are no simple or quick solutions. With around 58 million parcels entering Australia under the low-value import threshold each year, lowering the threshold before putting in place significant reforms to processing capabilities would cause major disruptions to the international mail service, and result in major inconvenience to the businesses and consumers that rely upon it. Without greater efficiencies in the system, the cost to taxpayers of collecting the GST on low-value parcels would also outstrip the revenue that is collected.

He also noted that online purchases (both domestic and overseas) only make up 6 per cent of retail sales, and overseas online purchases just 1.5 per cent.

The full interim response can be found on the Treasury website, with the full response coming sometime in 2013, Bradbury said.



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djnightingale posted a comment   
Australia

I guess that's the governments only narrow viewed solution to assist the retail environment when it's obvious they can't compete in a global market. 10% GST won't put much of a dent into overseas purchases, as the discounts are generally far far greater than 10%.

And if you take the cynical view that the government is doing it for the money, which is very reasonable to do so, then the government will also be very disappointed. Another layer of bureaucracy and burden that the public once again has to pay for to put a pittance of peanuts in the governments coffers.

If the government(s) wanted to contribute or invest 1000% more into Australia all they have to do is start buying 100% of their fleet vehicles locally built. This goes for state and local government as well.

Lowering the threshold on low value imports will achieve nothing other than increasing the public burdon and putting a very short lived smile on Gerry Harvey and other big end retailers.

 

JohnP5 posted a comment   
Australia

lmfao... This is about protecting greedy asshats like gerry harvey and his dim-witted family, who obviously can't adapt to the new economy.

 

aslsw66 posted a comment   

Wow! So this would bring in an additionl $30 mllion per year? If you know the Government's finances, this amount is peanuts. But the "stated aim is instead to widen the GST pool, rather than help local businesses." Yeah right. It's just a sop to old-style Australian retailers who can't compete.

For the record, I have bought my DSLR and lenses from an Australian online retailer. Paid full GST, but around 15-20% cheaper than the 'best price' the local retailers could do. It's not overseas purchasing that is killing retailers, it's their blind adherence to an old strategy which is dying out.

 

Restricted_access posted a reply   
Australia

It is quite clear from the research that no money would be made if the government implemented this scheme. The problem is that the cost of the scheme outweighs its income. Nonetheless, we have the worst government in our history, one that seemingly thrives on failure, which undoubtedly means that this scheme will be implemented.

 

DefconOne posted a reply   
Australia

Agreed. Tax and spend, tax and spend, tax and spend. It's all Labor knows.

 

trebor83 posted a reply   
Australia

Let's not turn this into a political discussion.

 

Restricted_access posted a reply   
Australia

This is about politics! You cannot remove GST and other taxes from politics. In other situations, I would agree, but this issue of GST and other taxes IS a political debate.

 

trebor83 posted a reply   
Australia

Ok let me put it another way, let's not turn this into a party political discussion.

Its a technology site. If you want to hurl insults at Labour, fly the flag for the coalition, eat a rice cake with the green or fade into obscurity with the democrats, go do it at the drum

 

Restricted_access posted a reply   
Australia

"Its a technology site."

And this technology site chose to discuss a political issue. The author chose to talk about government etc. Given the situation with the article, it is not unfair to make political comment in response.

 

trebor83 posted a reply   
Australia

Its true, the nature of the story dictates some political content and the inclusion of comments from the government. But resorting to "we have the worst goverment in history" and "Tax and spend is all Labour knows" is the kind of out of context comment that I feel has no place here.

If you want to contribute here are a couple of talking point for you off the top of my head:
How this this likely to change your purchasing behaviour?
Do you feel this is likely to have any effect in saving domestic, bricks and mortar retailers?


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