$1000 GST-Free Threshold Abolished: Overseas Online Shopping To Become 10% More Expensive

A consensus between state and federal treasurers today during tax reform talks means that all purchases made overseas — through popular online shopping websites like Amazon, Book Depository and NewEgg, as well as any traditional methods like mail order — will incur a 10 per cent GST charge, abolishing the existing $1000 threshold.

Opinion: Australian Government’s ‘Parcel Tax’ Won’t Help Aussie Businesses Or Consumers

The Treasurer, Joe Hockey, says that the agreement means all overseas purchases will be taxed at the full 10 per cent GST rate, as of July 1, 2017. At the moment, no information on the enforcement or revenue collection of the GST component of overseas purchases is available; today’s agreement is likely in principle rather than in any exhaustive detail.

Hockey said of the tax at a press conference this afternoon that it would level the playing field for retailers in Australia:

Treasurers agreed to apply the GST to offshore sales into the Australian market. This is a significant initiative. From the 1 July, 2017, the GST will be applied to all products and service sold by vendors into Australia. This will deliver competitive neutrality for Australian businesses, and ensure fair and equal treatment of goods and services. If goods and services would have the GST applied in Australia, then the same should apply for goods [bought and imported] from overseas.

A start date of almost two years from now gives both states and Federal Government time to design and implement a scheme. It is still unclear what costs would be sunk in creating a program to monitor the importation of goods from overseas, and how such a system would be enforced in contacting consumers and demanding payment of the tax once a parcel has reached the border and has been marked for the additional fee.

Hockey says that there’s a lot of work to be done to implement the scheme, but adds that if the Government works out a way to implement the scheme earlier, it will be done. You heard right: the July 2017 date could be moved forward.

Meanwhile, Hockey added that taxation officials will travel around the world to get companies (like Amazon, Netflix, Facebook) to register for GST.

Hockey said that abolishing the GST-free threshold was the right way forward for the treatment of overseas purchases, rather than lowering it from $1000 to another arbitrary amount. The Productivity Commission had previously ruled that lowering it would cost more money to enforce than it would collect, which Hockey today slammed as a “ridiculous” suggestion. Basically, it’s cheaper to just charge everyone than a select number of individuals.

Quoted in the meeting, federal treasurer Joe Hockey told the assembled state treasurers that “it won’t be about policing the consumers, it will be about policing the vendors overseas” — but those vendors will pass the costs directly on to consumers, whether through an additional fee at the checkout level or at the point of a parcel’s entry into Australia in the case of less regulated international online stores such as eBay.