Australian Treasurer Joe Hockey on Wednesday listed changing the "low-value import threshold" as one of the unenacted Labor tax measures that the government will not progress.
Hockey said it could not go ahead because the government has not yet considered the business case.
The former Labor government had been working with the state and territories on the business case, but there were concerns about the cost of administering it.
There is an AU$1,000 threshold at which GST is collected on goods bought from overseas.
About 60 million parcels enter Australia each year, containing goods priced under the threshold.
Retailers have argued that this makes it harder for Australian businesses to compete.
Former Victorian Premier John Brumby, who was involved in a review of GST distribution, said on Wednesday that it also means the states are missing out on about AU$1 billion a year in revenue, which could be used for schools and hospitals.
He said that in the long term, the threshold should be cut to AU$20 as it stands in the US, the UK, and Canada.
"When you look at the numbers in this ... the proportion of online offshore purchases as a total of retail sales is just galloping away," Brumby told the National Press Club.
"This is costing Australian jobs, costing Australian retailers, it's an unlevel playing field, and it needs to be fixed."
Brumby said that other countries do not find the cost of compliance a burden, as the transactions are all conducted on computers.
"It's just a non-issue," he said of the administration concerns.