Cut GST threshold on online goods: report

THE independent GST review has called for a cut in the consumption tax threshold for goods and services bought online.

The report, by former premiers Nick Greiner and John Brumby and tax expert Bruce Carter, says the way the 10 per cent GST applies to online shopping hurts Australian businesses and costs the states "hundreds of millions of dollars" in lost revenue.

It says the current low-value import threshold should at least be halved from $1000 to $500.

This could be done almost immediately with no change needed to GST law or customs arrangements.

In the long term, governments should look at replacing the "at-the-border" collection of GST with a system that imposed a GST liability directly on overseas suppliers of goods and services to Australia.

The review panel found the existing system was open to flagrant abuse.

One example was the sale of expensive cameras, which were bought in their component parts at a price under $1000 and assembled by the buyer without incurring any GST.

The talks between the federal and state governments on a long-term solution should focus on amendments to GST law to make overseas suppliers liable for remittance of GST on all supplies of 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 $20 or $50," the report said.

However, government sources on Friday were talking down the prospects of any changes in the short term.

The "direct liability" approach could be burdensome, given that it would involve confiscation of packages, then releasing them to the purchaser subject to a penalty, payment of the GST and import duties.

Dropping the threshold would also result in a massive increase in parcel processing, the cost of which would exceed the benefits and clog up the system.

The government, which is set to respond within weeks, is likely only to recommend that parcel processing systems be improved as a first step.

International online retail sales still account for only 1.4 per cent of total retail sales revenue in Australia.

Domestic retailers account for 75 per cent of all online sales, and domestic online sales are growing faster (28 per cent) than international online sales (22 per cent).

National Retail Association (NRA) chief executive Trevor Evans said the government could save more than 30,000 Australian retail jobs by scrapping the GST threshold on online purchases from overseas.

"The government's independent review of the GST has clearly found that the $1000 threshold on online purchases is undermining the competitiveness of local Australian retailers," Mr Evans said.

He said the threshold in the UK was as low as STG15 ($A23.22).

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