Leaders agree to consider changes to online GST threshold

Federal and state government leaders have finally agreed that it may be time to begin collecting GST on online purchases valued below the current AU$1,000 threshold.

All federal and state leaders have agreed that there is an opportunity to make changes to the existing GST threshold to include overseas online transactions under AU$1,000.

During the gathering for the first Leaders' Retreat, the topic of making changes to the existing tax system, including GST, was discussed.

"This matter will be referred to the upcoming meeting Treasurers to progress in detail," Prime Minister Tony Abbott said.

Collecting GST on imported goods has long been debated, since internet shopping grew in prominence, but has repeatedly been seen as not cost effective. Currently, GST only applies to parcels purchased from overseas that are valued over AU$1,000.

A GST review carried out by the former Labor federal government in 2012 recommended the GST threshold for online purchases to be lowered from AU$1,000 to AU$500. At the time, Assistant Treasurer David Bradbury, said the cost to taxpayers of collecting GST on low value parcels would outstrip the revenue gained as a result.

"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," he said.

Recently, Australian Treasurer Joe Hockey said he has found a way to collect GST on all imported parcels, which he will share with state premiers when they meet in August.

The Treasurer has also previously noted there are plans to apply the 10 percent tax to digital items, including books, music, TV shows, films, and subscription services, that are sold in Australia by foreign-based companies such as Netflix and Apple.

The plan to tax digital goods, which Hockey said has the potential to generate billions of dollars in revenue, follows moves by the government to crackdown on profit-shifting practices by multinational companies that employ the so-called "double-Irish sandwich" method of funnelling profits through its Ireland-listed company in order to pay a lower tax rate in Australia.

Assistant Treasurer Josh Frydenberg has previously said that levying the GST on online purchases would level the playing field for Australian companies.

"Both [Treasurer Joe Hockey] and I have been quite consistent in our call in providing a level playing field for the provider of key services in Australia, whether they come from overseas or whether they're provided domestically, and this is an area that we've been working with international partners on, trying to get a good understanding of where Australia's tax system should be for the future, because we have a growing digital and e-commerce world and the tax system needs to stay up with that game," he said.

Australian retailers have also long lobbied the government to make changes to the GST threshold, arguing that the existing system is hurting business.