GST-Free Threshold Axed: 10% Tax Coming To All Overseas Purchases

It’s official: All overseas purchases under $1000 will soon be subject to a 10 per cent GST surcharge, following a consensus on tax reform between state and federal treasurers. In other words, your future Amazon and eBay orders are going to be treated the same way as a local purchase. Call it the Gerry Harvey tax.

For years now, Australian retailers have been lobbying the government to abolish the $1000 GST-free threshold for overseas purchases, which they claim put local businesses at an unfair disadvantage. Well, it seems their prayers have finally been answered.

Treasurer Joe Hockey confirmed today that all overseas purchases will be taxed at the full 10 per cent GST rate from 1 July 2017, following an Australian treasurers’ tax summit.

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.

The two-year interim will allow the state and Federal governments to design and implement a scheme for the collection of said tax. Worryingly, the Treasurer indicated that if a viable system can be worked out beforehand, the commencement date could be moved forward.

The co-called “parcel tax” will be charged to overseas vendors who operate in Australia, who will adjust their pricing accordingly. To bypass the difficulty of enforcing every offshore site to apply GST, the tax will likely be added as a “processing fee” which consumers would have to pay before the goods can be delivered.

As we have noted in the past, this seems like a pretty harebrained scheme that will potentially cost more to implement than the amount of revenue collected from it. Plus, the overseas price for electronics will likely remain cheaper anyway, which means local retailers will still be operating at a disadvantage. The only difference is that online shoppers will be paying a bit more.

From a consumer’s perspective, this is obviously a huge annoyance that will squeeze our wallets in yet another way. That $200 pair of headphones suddenly doesn’t look as attractive at $220. Expect plenty of these conundrums come 2017.