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GST to apply online: Hockey

It’s official: the golden age of online shopping will end on July 1, 2017.

Treasurer Joe Hockey announced on Friday that from that date, the 10 per cent goods and services tax will apply to all online purchases from overseas retailers.

That means everything that you purchase from the likes of Amazon, iTunes and ASOS will cost 10 per cent more.

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Getty

All purchases from Amazon will be affected. Photo: Getty

Mr Hockey made the announcement on Friday afternoon, following a meeting with state and territory treasurers at which agreement was unanimous.

“From July 1, 2017, the GST will be applied to all goods and services being sold by vendors overseas into Australia,” Mr Hockey said.

“This will deliver competitive neutrality for Australian businesses. It will ensure that there is a fair and equal treatment of all goods and services.”

He added: “If we can do it earlier than July 1, 2017, we will, but there is a lot of work to be done.”

He confirmed that there would be no lower threshold. Currently the lower threshold for overseas purchases is $1000.

He said taxation officials will “travel around the world visiting these companies” asking them to register for GST for products that are sold to Australia.

Regarding the ‘tampon tax’, Mr Hockey said state and territory treasurers “failed to come to unanimous agreement over the application of the GST on feminine hygiene products”. He said there needs to unanimous agreement, “therefore the matter has come to an end”.

GST on online purchases: what it means in dollar terms

At 10 per cent, one thing the new tax has going for it is that it’s easy to calculate. If you spend $100, you pay $10 extra in tax.

It will mean the most prolific online overseas shoppers will end up paying the most tax. If you spend $5000 a year, for example, you’ll find yourself paying an extra $500 a year in tax.

Here are some examples.

GST

“Not a broken promise”

Mr Hockey insisted that the new policy does not go against the Abbott government’s commitment not to make any change to the GST before the next election.

He said this was not a fundamental change, but rather an “integrity” measure to “plug the holes”.

“And secondly,” he said, “it starts on July 1, 2017, after the next election.”

The latter argument appeared to go against Mr Hockey’s wish for it to come in sooner – an objection to which Mr Hockey had no answer.

Retailers cheer, consumers boo

The National Retail Association (NRA) was quick to welcome the move.

David Jones

Domestic retailers like David Jones, Myer and Dymocks will be cheering. Photo: Getty

“The NRA has been arguing for many years for an end to this unfair loophole, which disadvantages local businesses, costs Aussie jobs and takes away tax revenue that could be spent on local services and infrastructure,” NRA chief executive Trevor Evans said.

“Because the GST exemption also triggers an exemption from import duties and customs charges, the cost difference can be as high as 25 per cent compared with a product sold here in Australia.”

He said local retailers “cannot be expected to prosper when our own laws disadvantage them”.

Consumer advocate CHOICE, however, was sceptical. It said that the cost of implementing the tax would exceed the revenue taken.

It cited the situation in the UK, where consumers must pay the consumption tax, plus a processing fee, when they pick up their parcel. On a purchase worth $20, this can push the final price up to $40.

“Australians seeking to avoid the Australia Tax markup – where products can cost significantly more here than overseas – shouldn’t be penalised with inefficient taxes,” said Matt Levey, CHOICE director of campaigns and communications.

However, Mr Hockey claimed that the tax would not be enforced in this manner, which he called “ridiculous”. Instead, it would rely on the cooperation of overseas retailers.

“As a result of our work in the G20 and in the OECD, there is now a growing global consensus where the vendors of goods and services overseas will willingly apply consumption taxes to their goods and services sold into a particular jurisdiction.

“Increasingly the global culture is going to force them to respond,” he said.

He said he did not know how much additional revenue the tax would raise.

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