Why Amazon, eBay and ASOS are fighting the government hard on its plans to scrap the GST threshold for online purchases


Online purchases of less than $1000 made from overseas suppliers will be subject to the goods and services tax (GST) from July 1, but overseas retail giants are now fighting it out over how and when the policy should be implemented.

Global shopping marketplace eBay has said the policy could force it to prevent Australians from buying from its foreign sellers, while Amazon is arguing that logistics providers should be responsible for collecting and processing the tax.

But some smaller local operators say the specifics of the collection processes don’t matter as much as the policy’s aim.

In August 2015, federal and state government treasurers agreed to scrap the $1000 low-value purchase threshold — which meant small online purchases from overseas companies did not incur the GST — after sustained campaigning from small retailers, which argued the failure to collect the tax placed local businesses at a significant disadvantage to the likes of Amazon.

The government passed legislation for the change in February this year and with the law set to apply from July, retail and business groups have had their say on the rollout of the policy through submissions to the Senate Standing Committee on Economics, which is due to report on the policy next month.

International retailers warn of effects on consumers

In submissions to the committee, retailers including Amazon, ASOS and eBay have taken aim at the government’s policy on a number of fronts.

The first of these is that the overall policy fails to achieve the government’s aim of raising GST revenue, because it assumes online marketplaces will comply with the policy and that businesses will not move to other parts of the internet to circumvent the law.

“The way this Bill is drafted will drive overseas sellers off the kind of cooperative large-scale, Australia-based marketplace platforms onto the opaque parts of the Internet and search engines,” eBay suggests in its submission.

Secondly, overseas retailers disagree with the idea that they should be responsible for complying with the collection and processing of GST payments, instead saying this should be the responsibility of other parts of the supply chain, like logistics and delivery services, They believe it’s too much to ask multinationals to put the frameworks in place for collection so soon.

Online retail giant Amazon claims in its submission the policy will create an “inherent disincentive” for online retailers to comply with the law, and asks the committee to consider hand-balling the collection responsibilities to Australia’s logistics providers, like Australia Post.

The third key argument against the new laws is that it could stop international businesses from wanting to engage with Australian customers. For example, in its submission to the committee, eBay goes as far to suggest that the policy could regrettably lead to the company “prevent[ing] Australians from buying from foreign sellers”.

“This solution would not even represent a win for bricks-and-mortar retailers, because Australians would still find ways to buy online … this appears to be the most likely outcome at present,” the company said.

In its submission, fashion retailer ASOS said it is concerned the timeline for implementation is too tight and could place a burden on online retailers, and the policy will lead to what was in essence “two different systems” of tax.

“There are a number of concerns that arise from the differing treatment of ‘Low Value Goods’ and those values at about AUD 1,000. We are concerned about the practicalities of operating … in effect, two different systems of GST will be in operation, [and] adding another variable to the treatment of an item on checkout will only add complexity to the check-out process,” the retailer said.

However, it’s not just multinationals shouting out in protest. Closer to home, the “Keep Shopping Open” campaign, headed up by Disrupt Sports chief executive Gary Elphick, warns the change in GST collection models could affect small Australian businesses in the long term, suggesting that other nations will start imposing new taxes on Australian businesses selling into overseas markets in retaliation.

“It would be awful for our staff to be charged to collect tax on behalf of those countries we sell into around the world, just because of the administrative burden,” Elphick told SmartCompany this morning.

The Keep Shopping Open campaign is concerned the administrative burden on the tax is too complicated and will limit consumer choice, while also not being an effective policy for raising revenue. The campaign was launched by Elphick but is supported by partners, which he said could not be disclosed.

Elphick cites the fact that it costs $60 to collect GST on a transaction, meaning for purchases of under $600, the government would not break even. One alternative would be to have the GST threshold apply to purchases of less than $600, he suggests.

“I think that’s a great idea, bring it to a level where it’s possible for the government to collect it [and make revenue],” Elphick says.

Read more: Why Amazon won’t kill retail in Australia 

It’s about more than levelling the playing field, say local retailers

However, both small business groups and the Australian Retailers Association (ARA) have long held the view the GST policy will help address the gap between multinational retail giants and local operators, who already struggle to match companies on price before having to add another 10% in tax to items.

“This reform is a longtime coming, the retail sector will look very poorly on any delay caused to the implementation and those individuals causing the delay,” the ARA said in its submission.

Booktopia co-founder and chief executive Tony Nash says scrapping the threshold won’t necessarily level the playing field for smaller operators, but that’s not the only purpose of the policy. He says closing the GST loophole will go some way to helping both local retailers and the budget bottom line.

“If you look at it as a higher level, it’s not about levelling the playing field, though it will go some way,” says Nash.

“For us, it will be helpful, but at the same time, everyone knows the overseas retailer is still often [offering] more than 10% less than the local retailers.”

However, the purpose of the policy was also always about ensuring the government could recoup revenue from those doing business in Australia, says Nash.

“It’s about all of [the money] is going offshore and the rest of us are trying to struggle here, and we pay our GST, but there’s never enough money going around to fund things,” he says.

“We all want to know that we’ve got hospitals, that we can have roads. It’s about just making sure there’s a tax model where should stuff be sold in Australia, there’s a way of funding all of our national projects.”

The Senate committee will hold a public hearing into the legislation in Melbourne on Friday.

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Mikel Kew
Mikel Kew
4 years ago

This will be a nightmare for consumers unless significant changes are made. I’m all for buying local, but the fact is that there are many products that just don’t have local distribution. Anyone that has purchased more than $1000 worth of goods from overseas know that current methods of paying duties on overseas imports are horrifically complicated and incur additional fees etc. For it to work, the process for a customer to pay any duties would need to be totally rethought to be a LOT more user friendly than it currently is.

4 years ago

If this is really about knowing we’ve got the funding for hospitals, roads, national projects, etc., the Government has a far easier alternative than this. Go after the less than 200 or so multi-nationals that pay no or next to no tax on their Australian sales through the use of “management fees” and the like from their overseas parent entities. This would add far more revenue than what is being lost in GST.

Annette Scott
Annette Scott
4 years ago

Well bookstores in Australia certainly won’t be getting my $$ if we end up being charged GST on overseas purchases. Books are horrendously expensive here, and I still won’t buy them. I think I will end up reading books on my kindle, so, yes, purchasing, but far less GST – if it ends up being charged.

4 years ago

This will lead to a burst of inflation. Australian retailers will lift their prices now that aussie buyers have to pay more for imports.

Ed Shyed
Ed Shyed
4 years ago

“It’s about all of [the money] is going offshore and the rest of us are trying to struggle here,”

This is because local retailers place such extreme markups on items.

I am in ICT, many items I buy are up to 300% MORE buying locally, if I buy from US or China – the EXACT item, not a knock off, I save an enormous amount of money, which means I get to pass on those enormous savings to my clients.

If Australian businesses and government stop criminally ripping people off, more people would buy local.

HINT: The Govt talks about the “Australia tax” that US tech giants apply to us, yes, they do, but thats NOTHING like the Australia tax that Australian businesses and government put on us

4 years ago

I’m all for supporting local business. I’m buying as many stuff locally as long as their prices are not significantly overpriced compared to online.

But this tax collection model is not going to help the local business. It’s more like trying to restrict consumers’ choices and allow the few local retailing giants to dump unwanted goods to us at a ridiculous price.

If this model is going ahead on July, personally, I will NOT buy a single item from those who lobby and support this model of tax collections.