GST threshold won't be lowered for now: Aust govt

GST threshold won't be lowered for now: Aust govt

Summary: The Federal government won't lower the GST-free threshold for low value goods purchased from overseas online retailers but does recognise the threshold is high compared to most countries around the world.

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The Federal government has rejected calls to immediately lower the price limit of items purchased overseas for which Goods and Services Tax (GST) applies to, but has not ruled out doing so in the future after recognising that the threshold is higher than in most countries.

Last Friday, the GST Distribution Review panel released a report recommending that the GST threshold for goods purchased overseas be lowered from AUD$1000 to $500 immediately. This would act as the first step to tempering the online shopping onslaught and give some reprieve to local retailers.

Calls to lower, and even abolish, the GST threshold go as far back as 2010. Major retailers, including Harvey Norman and Myer, have been vociferous on this issue.

But a report in 2011 by the Productivity Commission pointed out that lowering the GST threshold would be fruitless if the cumbersome parcel processing system is not overhauled.

"With around 58 million parcels entering Australia under the low value import threshold each year, lowering the threshold before putting in place significant reforms to processing capabilities would cause major disruptions to the international mail service and result in major inconvenience to the businesses and consumers that rely upon it," Assistant Treasurer David Bradbury said in a statement. "Without greater efficiencies in the system, the cost to taxpayers of collecting the GST on low value parcels would also outstrip the revenue that is collected."

The Federal government has announced that it is gearing up to look at reforming the parcel processing system, but noted that the AUD$1000 GST-free threshold for low value parcels is out of step to many countries around the world.

The government is committed to keeping the threshold until "sufficient data and systems necessary for efficient and effective customs duty assessment become available."

IBISWorld Senior Industry Analyst Narem Sivasailam was doubtful that the threshold would be lowered after the recommendation by the GST review panel. Not only that, but he questioned the effectiveness of such a move.

While eBay and Amazon, both US-based companies, are the two most popular online retailers that Australians are purchasing from, the majority of sales still pass through local online retailers, Sivasailam said.

"If you look at the actual numbers, some 73 percent of online sales still come domestically," he told ZDNet. "EBay and Amazon may be popular, but we're simply not buying from them as much as we are from local retailers."

Sivasailam believed that lowering the threshold would only provide marginal benefits to local retailers.

Moving to an online presence is the first step for any local bricks and mortar retailer, and while big players have tried to do so, they are simply not doing it well enough, Sivasailam said.

"We saw, with the whole Click Frenzy fiasco, that a lot of their websites simply don't have a robust enough of an infrastructure to really handle that kind of traffic," he said. "Pricing is just one aspect, but ancillary things, like free online returns, customer service, and security of the websites, all come into play."

Sivasailam noted that there will always be a place for bricks and mortar retailers, and said that despite the online shopping frenzy, it still only accounted for 5 percent of all retail sales.

"Obviously, people are still quite happy to walk into stores, and the challenge now is to have a compelling enough online presence to complement traditional storefronts," he said.

Topics: E-Commerce, Government, Government AU, Australia

Spandas Lui

About Spandas Lui

Spandas forayed into tech journalism in 2009 as a fresh university graduate spurring her passion for all things tech. Based in Australia, Spandas covers enterprise and business IT.

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7 comments
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  • GST is not the difference!

    To much of what is bought overseas are up-to 50 or 60% price difference, not 10%.
    Books are sometimes more than double the price in Australia. (Thankfully they are not targeted)
    martin_js
    • I say abolish GST altogether

      reasons:
      -Kill the Cash economy (where no tax is payed whatsoever)
      -Its a Flat Tax (Affects the poor more than the wealthy)
      -If all Goods were 9% cheaper it would help the retailers

      In a perfect world the only Taxes that would be needed would be a Progressive Income Tax with a significant Tax free Threshold (say 30-40 thousand dollars) and ALL income is counted equally (no 10% crap for Capital Gains).
      nicholaas321
      • Agreed

        The result of GST is that everyone pays an equal amount of tax on necessities such as food regardless of their income (thus penalising people with lower incomes as much as the rich). What we need is a progressive income tax (higher taxes for higher income brackets in recognition of the decreasing utility of money) with a flat tax rate for each tier, and that alone, with zero loopholes provided for such things as trusts and dummy corporations that only the wealthy can afford to set up. Income tax acts should consist of essentially one sheet of paper setting out the income tax rate per level of income (plus additional pages re enforcement), not hundreds of pages of exceptions and loopholes.
        hmmm,
        • Oh

          and please, nobody tell me that people won't want to be rich if it means paying more tax. That's the biggest BS sob song anyone was ever been scammed into believing, and just reinforces my belief in the high levels of stupidity that exists amongst humans.
          hmmm,
  • Its all about "Standard of living"

    I could buy some of the items I desire locally, but I'd have to buy less of them.
    I can buy all the items I buy from overseas at way less (Try 40% to 80%) than the retailers locally are willing to sell them to me so if you add the GST (10%) I am still way ahead.
    But there is the question of timeliness which causes me to buy some items locally at a higher price "Because I want them now".
    I already don't ever shop at hardly normal because of his ranting about forcing the public to boost his profits and I will add others to my list as they become evident.
    They forget,there's a whole world out there.
    I will note that I was pleased to read the report of Woolworths CEO calling for business to look to lowering their costs rather than calling on government to penilise shoppers with new taxes-well done.
    Pete_112
    • Australia

      has a higher markup on goods than most countries in the world, and I think those figures are actually understated. If we as individuals can import goods from US retailers at less than half the price they charge here, that means major Australian retailers should be able to import those same goods at even cheaper wholesale prices from manufacturers and distributors, cutting out the middleman and availing themselves of bulk discounts unavailable to the rest of us, mark those goods up by 100%, and still charge less than they presently do. We know that most of the goods we get here (at Harvey Norman included) come from sweatshops in China and other countries at any rate.

      As a Canadian ex pat, I lived in a country with a population that was not only comparable to that of Australia's, but also spread out over greater distances. Although some DO benefit, much of Canadian industry does NOT benefit from having the large US market directly to the south. Quite the opposite. Canada has many manufacturers who produce products only for the Canadian market. Why? For one thing, because the US has its own healthy industries. These Canadian manufacturers need to compete against a country with much easier distribution and a much higher population and much better economies of scale, and have the added obstacle of marketing to people who can very easily engage in cross-border shopping. And yet goods that are manufactured and distributed exclusively within Canada manage to be competitive. Some did go out of business when NAFTA came around (partly because the US has enforced rules more vigorously than Canada, and has still resorted to several protectionist measures), but many still thrive. So what is wrong with Australia?

      Two words: Price fixing.

      The Age, for instance, ran an article in which Australian clothing importers openly bragged that they got their US suppliers to agree to not allow their goods to be exported to Australian customers at lower prices by competing overseas retailers. That is called "price fixing" any way you look at it.
      hmmm,
  • The only reason why this was considered...

    is because rich idiots like Solomon Lew want it, and when some self-interested rich bastard speaks, the government listens. The cost of administering and enforcing GST on items as low as $20 would outweigh the revenue generated from it. Solomon Lew and his pals avoiding paying tax as much as possible, and they import products made by cheap labour in China and other countries. They care NOTHING about the common person in Australia or in protecting their jobs. They just don't want to compete, because competition would mean no more profiting from price-fixing and price gouging. Instead of lowering their prices to be more fair and competitive, they want to force the prices charged by others to increase. The end result would be higher prices plus higher taxes for the common person since the government would have to pass the cost of operating the GST program to people who actually pay taxes (and that does NOT include Solomon Lew).

    Thank goodness common sense and basic math ruled the day.
    hmmm,