Inaction on lowering GST threshold angers online retailers

Advocates for Australian-made products have slammed the nation’s treasurers for political cowardice after they deferred a decision on reducing the $1,000 GST low value exemption for overseas online purchases.

Currently overseas goods valued at under $1,000 are exempt from the 10 per cent consumption tax. Australian retailers are pushing to have the threshold reduced in a bid to secure a level playing field with international competitors.

Some retail groups have also warned that failure to act will lead to thousands of job losses and billions in foregone tax revenue.

On Friday, the Treasurers of the states and territories met with their federal counterpart, Joe Hockey, after reaching an in-principle agreement last November that the threshold needed to be lowered.

However, online shoppers were granted a reprieve from a broader tax on their purchases after the issue was put off. Mr Hockey said that any final decision on a new threshold would need to be determined and agreed to by the states – the recipients of the GST.

Ian Harrison, chief executive of the Australian Made Campaign which administers the well known Australian Made and Australian Grown logos, blasted the deferral as a disgrace.

“The $1,000 threshold – below which GST is not payable on imported goods purchases online – is simply a case of Australian taxation law discriminating against Australian retailers, and through that, Australian manufacturers,” he said. “It is a ridiculous and unsustainable policy position to maintain.”

Australian National Retailers Association chief executive Margy Osmond said that action on reducing the threshold was needed quickly.

“This quirk in the GST mechanism means revenue that should be finding its way to State coffers for much needed community services, is subsidising foreign businesses,” she said.

“Australians already pay GST on goods purchased locally online or in-store. Fixing this loophole recognises how much retail is changing. Local retailers and the people they employ, don’t want protection, just a level playing field.

Ms Osmond said estimates conducted by Ernst&Young showed that tax revenue could be boosted by an additional $6bn by 2020 if the low value threshold was reduced from $1000 to $20.  The average online purchase is about $40.

Concerns with reducing the threshold centres on the extent to which it will increase the administrative costs linked to policing the GST.

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