GST imports could raise their cost by over a third

Friday, 10 January 2014  Features

Retailers are once again urging the government to lower the $1,000 threshold upon which 10% GST can be charged to goods bought online from offshore retailers.

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"If GST was imposed on internet orders sent from overseas, the actual cost could rise by nearly a third - much above the 10% suggested by retailers," said Dale Boccabella, an Associate Professor of Taxation Law at UNSW's Australian School of Business.

Retailers are once again urging the government to lower the $1,000 threshold upon which 10% GST can be charged to goods bought online from offshore retailers. The federal government has promised an announcement on this early in 2014.

He has calculated that a $500 item bought over the web from overseas could end costing between $650 and $750, if GST was imposed. He said this is because "Australia Post will be required to collect and remit GST to Customs and Border Protection (C&BP), and recoup these costs from the consumer. The Department of Agriculture, Fisheries and Forestry (DAFF) is also likely to levy charges in support of its biosecurity obligations."

He adds "the cost will be even higher if GST is levied on transport and insurance costs, which is currently the case for goods above $1,000."

Dale Boccabella's research suggests that a lower threshold cannot be introduced quickly, or it may incur the same problems as happened in 2005 when the Integrated Cargo System (ICS) was introduced by C&BP, which severely disrupted the movement of cargo and significantly compromised border security over a two-month period.

He said "the brick and mortar retailers and the states would prefer a lower threshold implemented as soon as possible. However to allow for proper planning and staging a reduction in the threshold to its ultimate long-term level may push implementation of this reform into a new federal parliamentary term, which raises the prospect that it would have to run the 'gauntlet of an election'."​​​

"Considering that polling from Essential Research shows Australians are opposed to any lowering of the GST threshold for goods purchased online from overseas providers, this would knock it out of touch. Voters aged 35-54 are particularly hostile, with 57% opposing such a move. The low value import threshold issue is likely to be the new government's first real test on tax reform. While 'The art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the least amount of hissing' according to Jean Colbert, I hope the substantial consumer hissing will not divert the government from sound decision making."

Dale Boccabella, and colleague, Kathrin Bain, are presenting a paper on the low value threshold issue at the January conference of the Australasian Tax Teachers Association in Brisbane (20-22 January, 2014). The paper will explore the current state of play including developments in administering a lower threshold and the political ramifications of the various options.

For comment contact

Dale Bo​ccabella on 02 9385 3365 or 02 9874 2539 or
Media contact: Julian Lorkin: 02 9385 9887