Tax

When will the changes to GST for overseas purchases kick in? A SmartCompany Q&A

Emma Koehn /

The Senate has passed legislation to scrap the low-value GST-free threshold for online purchases from overseas retailers, but there are still a few hurdles in the way before Australian businesses will see the change in action.

The bill was agreed to in the upper house with an amendment from Shadow Small Business Minister Senator Katy Gallagher on Monday, with the change meaning the new framework will kick in on July 1, 2018 — one year later than was originally slated.

The debate over the $1000 GST-free threshold for online purchases from overseas retailers has been rolling ever since online shopping started to gain popularity with Australian shoppers, and some members of the small business community have been campaigning for years for the change to be made.

So how did it all start and what happens next? it’s time for a SmartCompany Q&A.

1. How long has this change been on the table?

Electronics retailer Gerry Harvey was one of the first big local retail figures to start campaigning for a change to the goods and services tax, lobbying as early as 2010 for the government to consider changing the threshold at which GST applies for overseas purchases.

In 2011 the Productivity Commission reviewed the possibility of lowering the threshold, but at the time raised questions about whether the net value of applying the GST to orders of less than $1000 would be at all worth it given the significant costs of recouping the tax from overseas suppliers.

In 2015, then Treasurer Joe Hockey took up the mantle again, releasing draft legislation to change the way GST applied to overseas purchases.

The current legislation was introduced to the House of Representatives at the start of February, and the rollout of the changes, which were originally slated to come into effect on July 1, has been considered by the Senate Standing Committee on Economics.

2. Why do small businesses want the change?

Local online retailers have previously told SmartCompany they are under no illusions that the shift will protect them entirely from online juggernauts like Amazon, but the principles at stake are important. 

In the present context, the government is not generating any GST revenue when shoppers buy low-value items offshore, Booktopia founder Tony Nash says, and at the same time, local retailers are unable to drop their prices more than 10% to match overseas competitors.

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

“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.”

3. What do the big e-commerce players say?

In their submissions to the Senate committee investigating the change, international retailers including ebay and Amazon insisted scrapping the GST-free threshold will have unintended effects for Aussie shoppers.

EBay suggested in its submission the legislation could force it to block Australians from buying items from foreign sellers. The multinational retailer also argued third party resellers will move away from legitimate platforms ion favour of the “opaque parts of the internet” where they will keep selling items while flouting Australian GST laws.

Amazon insists the policy is difficult to enforce and puts an unfair burden on platforms to collect GST, when the responsibility should be hand-balled to logistics operators like Australia Post. The retail giant told the Senate committee the policy would present an “inherent disincentive” for overseas businesses to comply with the new frameworks.

4. Will it be difficult to enforce?

It’s not just multinationals that claim the policy is difficult to enforce; lobbying from interest group Keep Shopping Open — which is headed up by former Shark Tank contestant and founder of Disrupt Sports Gary Elphick — says the policy could result in retaliation from other markets.

Keep Shopping Open argues that if Australia goes down this path, other jurisdictions may want to impose additional services taxes on Australian customers, and online retailers in Australia may be charged with collecting tax for other nations.

“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 previously told SmartCompany.

However, the government insists that its collection model — which would see online marketplaces like Amazon and individual vendors with a turnover of more than $75,000 have to register to collect GST on low-value items — is the most straightforward model and will actually remove the burden for small online stores that use platforms like eBay to sell.

“Including online marketplaces ensures that only a limited number of entities need to collect the GST, rather than the multitude of small, individual vendors making supplies through these online marketplaces that compete with Australian retailers here in Australia. This represents the most efficient system for collecting GST and limits the costs of compliance,” Treasurer Scott Morrison explained in his second reading speech in Parliament. 

5. What happens next?

Because of the Labor amendment to the legislation, the Productivity Commission will be tasked with reviewing the policy and its implementation before July 1, 2018.

This means it will be at least 12 months before small local online vendors see a change occur, and the amended bill will also have to be approved in the House of Representatives again before it becomes law.

Shadow Treasurer Chris Bowen told the ABC on Monday he is also looking to see whether the Productivity Commission makes suggestions that would require further changes to be made to the legislation.

“I think if the Productivity Commission adopts or recommends a better way of doing it, it’s really incumbent on the Government to take that up,” he said.

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Emma Koehn

Emma Koehn is SmartCompany's senior journalist.

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  • brendan

    Fuck it entirely!!