License article

Cut in GST-free threshold eyed

The federal government is laying the groundwork for a future cut in the $1000 GST-free threshold for goods bought from overseas online stores.

Assistant Treasurer David Bradbury said on Monday that the $1000 threshold was "very high" compared with overseas, and the government would start preparing "business cases" for changing the tax rules governing low-value goods purchased from overseas.

Although it has ruled out cutting the threshold immediately, and no final decision on the matter has been made, the government will commence a series of processes that would allow it to change the threshold at a future date.

For instance, it will consider legal changes to encourage foreign firms to collect GST from Australians, and will kick off negotiations with the states on the contentious issue.

It expects more detailed information on the matter next year, which would inform its final decision on the issue.

Mr Bradbury said domestic retailers should not be unfairly disadvantaged by the $1000 threshold, even if it was not the main reason many Australians shopped at overseas online stores.


"While this is not the biggest challenge confronting the retail sector, the government does recognise that on the basis of fairness and tax neutrality, Australian retailers should not be disadvantaged by taxation arrangements which favour overseas retailers," Mr Bradbury said in a statement on Monday.

"The government also acknowledges that the current threshold of $1000 at which GST is collected on low value parcels is very high by international standards."

Mr Bradbury made the comments as he unveiled the government's interim response to a Treasury taskforce that has examined what steps may need to be taken for the threshold to be lowered.

A landmark review by the Productivity Commission last year gave "in-principle" support for cutting the threshold, but found it did not yet make economic sense.

Some 58 million parcels enter the country each year under the low value import threshold – and collecting GST on these goods is likely to be extremely complicated and expensive.

Treasury's taskforce has taken a closer look at how to cut these costs, and recommended a number of changes that could allow the government to lower the threshold in the future.

In its interim response, the government accepted most recommendations and outlined various steps it would take before providing a final response next year.

Although it has not made a final decision on the threshold, it will start talks with the states about putting in extra funding to support changes to the parcel processing regime.

The government will also introduce legislation separating the threshold for customs duty from the threshold for GST, allowing the threshold for GST to be lowered in the future if needed.

It will also consider calls that it change the laws to enable overseas firms to the collect the GST from Australian customers.

States receive all of the $50 billion a year that is raised by the GST - but growth in tax collections has stalled in recent years, prompting state premiers to demand the threshold be lowered.

Retailers have also lobbied for the threshold to be lowered, saying it gives foreign operators an unfair advantage.

The executive director of the Australian Retailers Association, Russell Zimmerman, called for an immediate cut, saying the current system also online retailers based in Australia, as well as physical stores.

“It's important to note this is not a 'bricks vs. clicks' battle; rather, the increasing amount of Australian retailers operating online are also on an unlevel playing field as a result of the GST loophole," Mr Zimmerman said.