GST-free threshold on overseas purchases to be scrapped

All goods purchased online from overseas retailers will be subject to the goods and services tax within two years, after federal and state treasurers today agreed to scrap the low-value GST-free threshold.

The threshold, which currently sits at $1000, will be scrapped from July 1, 2017.

In a press conference this afternoon, Federal Treasurer Joe Hockey said there is a growing consensus among international vendors to willingly apply consumption taxes to products and services when selling into a particular region.

However, when pressed for what the government would do if a large multinational like Amazon refused to apply the GST, Hockey was light on details and referred to the measures outlined in Senate’s interim report into tax avoidance. 

“Ultimately, if you are of any scale you are going to be caught up in the global taxation network,” Hockey says.

“You would expect us to appropriately act and we are.”

Hockey says the states and territories agreed on a zero GST-free threshold because it is the most practical option when it comes to enforcement. Earlier reports had suggested the governments were considering a threshold of $20. 

“I am confident we can do it,” Hockey says.

“If it was going to be a case of inspecting every parcel, that would be plainly ridiculous. There has been three or four different proposals put forward. This is the best proposal because it’s consistent with what is happening internationally. It is also the case that the companies are more willing now than they were a short period of time ago to comply.”

According to Fairfax, the lengthy timeframe for the abolition of the threshold has been designed so more work can be done to grapple with how GST will be collected from overseas retailers and the cost of doing so.

Australian retailers have long advocated for the change, which they say will put them on a more level playing field with international competitors.

Speaking to SmartCompany ahead of the meeting of federal and state treasurers on Friday, Maree Caulfield, director of tax at MGI Adelaide said doing away with the GST-free threshold is “reasonable”.

“It obviously will create extra compliance for these overseas companies in terms of extra registrations and lodgements but I don’t think that’s unreasonable if they are operating in Australia,” Caulfield said.

“The shopfront in the mall has to do it so it is only reasonable online retailers have to do the same.”