The GST-free threshold for goods purchased online could be dramatically lowered if a proposed change from the NSW Treasurer gains support from other states.
NSW Treasurer Mike Baird wants the minimum GST-free threshold lowered to as little as $30, which would see all overseas purchases over $30 slugged with a 10 percent GST surcharge.
If passed in parliament, the change would generate hundreds of millions of dollars in extra tax for the Commonwealth.
Currently, the GST-free threshold for goods bought overseas is $1,000. However, the vast majority of online purchases fall well below this threshold - according to the latest Productivity Commission report, around 77 percent of individual online purchases were worth less than $100.
NSW Treasurer Mike Baird told our sister site CRN the proposal was aimed at boosting State revenue as well as helping to improve brick-and-mortar retail sales in Australia.
“Online retailing is a growing part of our retail market and as this trend continues to grow, we think there should be a level playing field for our retailers and shops on the ground,” Baird told CRN.
“You only have to look around the world to see that the threshold is much lower, where in places like Canada the threshold is $19 and in the UK it’s $28."
Baird said that the additional revenue generated by the tax would help to offset some of the State's "inefficient taxes" such as stamp duty on houses.
“Of course we need to look at all of the details on this and additional work needs to be done on the administration, but my hope is that the Commonwealth and the other state treasurers will consider this,” Baird added.
The Treasurer’s proposal has received full backing from the body representing local retailers, with the Australian National Retailers Association (ANRA) CEO Margy Osmond saying it would help struggling Australian sellers to stay afloat.
“We agree that the GST threshold should be dropped and it’s something we’ve been saying for a very long time,” Osmond told CRN.
“It’s an issue that’s way overdue to be dealt with. We’ve now had two years of far-reaching and thorough investigation of the issues around this. It’s time to stop navel-gazing and just get on with it.”
Osmond said that ANRA recommended a minimum GST-free threshold of $100, rather than the $30 proposed by Baird.
"This isn't about stopping Australians from having the option to shop online overseas," Osmond said. "It's simply about levelling the playing field between overseas businesses and local businesses, and at the same time collecting much needed tax dollars that should be flowing back into the communities where Australians live."
Online retailing is expected to skyrocket in coming years, with some analysts predicting growth of around 15 percent per year.
The rise in online shopping has already been blamed by segments of the Australian retail sector for sharp drops in annual profits and the closure of local stores.
In Februrary last year, a group of retailers fronted by Harvey Norman owner Gerry Harvey lobbied the Government to lower the GST-free threshold on goods and services purchased online from overseas.