Many Australians seem confused about whether new taxes will push up the price of online shopping in the new year.

December 12 or 13 is expected to be the nation’s biggest day of online shopping for the year, and perhaps all time, as The New Daily reported last week.

Consumers may want to enjoy the bargains while they can, as prices on foreign imports – clothes, shoes, online streaming services and more – are likely to increase by 10 per cent, or even slightly more, in 2017.

Dr Dale Boccabella, a tax expert at the University of New South Wales, said he was concerned that many consumers would be blindsided by the changes.

Several readers have contacted The New Daily asking if and when the government will apply the Goods and Services Tax (GST) to foreign online purchases. The answer is: they are, but the timing is a little complicated.

Why many are puzzled

A potential source of confusion is that the government has chosen to legislate digital imports (such as Netflix, Spotify, apps and ebooks) separately from physical imports purchased over the internet (such as clothes and shoes).

The changes originated back when Joe Hockey was treasurer. Photo: Getty

Legislation applying the GST to digital imports was enacted in May, which means the scheme is definitely going ahead.

But the application of GST to physical goods, heralded in this year’s budget, is yet to be legislated. The government released a draft of the proposed law in November, and submissions closed on December 2.

In the draft, the government revealed it would require all foreign online vendors to charge GST to Australians, provided their website sells at least $75,000 worth of goods into Australia in a year.

Currently, imported items worth less than $1000 are exempt from the tax.

The digital rule will come into effect on July 1, 2017. And the physical rule will apply from that date as well, so long as the government can get it through the Senate (it is expected to try in the first three months of 2017).

Rising prices … or blocked websites?

There are concerns that the way the physical tax will be applied will result in extra enforcement costs, pushing prices above the 10 per cent GST.

“Bringing foreign suppliers into our system imposes extra compliance costs on them. So maybe [the overseas vendors] will say we need to recoup those costs, so they might want to lift up their prices by more than 10 per cent to claw that back,” UNSW’s Dr Boccabella told The New Daily.

Another concern is that the government’s chosen enforcement process will fail, although the ATO could theoretically combat this risk by blocking offending websites.

There is some dispute over whether the ATO will use its power of website blocking to enforce the changes. Photo: Getty

Rather than using customs officials to enforce GST at the border, the scheme will rely on the ATO to collect and remit GST directly with overseas vendors.

Because this will require foreign sellers to voluntarily register for GST, there are fears it will not work.

The Tax Institute predicted a “very low compliance rate” in its submission, arguing the scheme was too complex for sellers, and that the ATO and customs would lack the required muscle to force compliance.

But in its submission, the Australian Retailers Association, which lobbied hard for the change, said it was “comfortable” about enforcement, following briefings from the ATO, Treasury and customs.

It seems a mix of international cooperation, and the threat of website blocking, allayed the lobby group’s concerns.

“Discussions indicated enforcement will rely on tax treaties with other countries, whereby the relevant authority within another country will enforce the new laws on retailers domiciled in their country, on behalf of the Australian government along with options including but not exclusively website blocking,” the ARA wrote.

This is despite Treasurer Scott Morrison denying in September that the website blocking power would be used.