Opinion: Australian Government's 'Parcel Tax' Won't Help Aussie Businesses Or Consumers

Opinion: At the Australian treasurers' tax summit today, one topic on the table has already been agreed on in principle: cutting the $1000 threshold for collecting goods and services tax on parcels bought online internationally by Aussies. Choice is calling it a "parcel tax".

Online shopping image via Shutterstock

$1000 GST-Free Threshold Abolished: Overseas Online Shopping To Become 10% More Expensive

"Lower, simpler, fairer" is the hue and cry going out across the country from the federal level of government on tax reform, and it seems like "lower" in this case means dropping the GST-free threshold significantly below its current $1000-plus level. But I can't really see what is "simpler" or "fairer" about it.

GST is Australia's third largest source of revenue, and in 2013-14 was responsible for $56 billion that was dispersed to the states and territories — for things like building roads, train lines, water treatment facilities, hospitals and the like. That apportion is the topic of some controversy itself, by the way — NSW gets the lion's share of GST revenue, with Victoria and Queensland in close contention for second place and all other states and territories far behind.

But it's generally agreed by all levels of government that more tax revenue is a very useful thing. And that's why state treasurers, and Federal Government treasurer Joe Hockey, are effectively united in wanting to remove or lower the $1000 GST-free threshold.

But there's a problem with lowering the threshold. Massive costs in putting a system to monitor purchases, impose a tax and collect it from Australian consumers, as well as the cost in manpower and technology of actually running that system at the scale that Aussies shop online, would mean that lowering the GST-free threshold could actually cost more than it earns. That was the conclusion of a 2009 Productivity Commission report on the topic.

Unless something has radically changed since then, revenue from policing online shopping wouldn't be that significant, and the enforcement headache for consumers and postal services would be significant.

In the discussions today, Labor-held Victoria's treasurer Tim Pallas wants the threshold to be as low as possible without it dropping below the point where collecting the tax would exceed the revenue gained — which sounds like a zero sum game. NSW treasurer Gladys Berejiklian also wants the threshold to encompass as many online purchases as possible.

The problem for businesses is that even after the GST-free threshold is dropped, even if it's abolished, it will still be cheaper for Australians to buy some items, especially high-tech products like notebooks and smartphones and cameras and lenses, online. It's not going to help out local businesses as much as the treasurers might think, and it's not going to raise as much money as expected.

I recently bought a macro lens for my Samsung mirrorless camera through the B&H Photo Video website. B&H, based in New York, is a mainstay of Aussie camera geeks, because even after considerable shipping costs through DHL its prices are still almost always significantly less expensive than buying the same product from an Australian stockist. Not to take into account the fact that I couldn't even find that particular lens in Australia, because it's a niche product. This is exactly why I buy things online in the first place.

DHL's Oceania chief executive says a GST-free threshold drop would "clog up" the system of deliveries, both for courier companies and Australia Post. Australia Post is struggling with the steep drop of letter deliveries, but the only thing keeping its head above water is the healthy up-tick in parcel deliveries — up 21 per cent year on year. Kick online purchases in the teeth and you may as well be kicking Australia Post.

The Federal Government's Better Tax website called for submissions on tax reform earlier this year, and in March delivered a discussion paper that said that not only were physical deliveries of online purchases under scrutiny, but purely online transactions were also in the crosshairs:

"Imported goods (but not imported services) are generally subject to GST, unless the value is $1,000 or less. On the other hand, most imported services and intangibles purchased by consumers (primarily those purchased online, such as multimedia downloads) are not subject to GST."

So once that GST-free threshold is gone and your online purchases start getting taxed heavily, your streaming services and eBooks are next. That particular slug — the 'Netflix tax' — kicks in from the start of July 2017.


Comments

    You now that if they drop the $1000 threshold then you won't be paying 10% more for goods but something like 30%, because they'll need to factor in the cost of collecting the GST.

      Nah, if they somehow get it applied to us (the consumer) it will still be 10%.

      But there will still be another 20% or more percent the Government has to tolerate to have the paperwork done, and pay the public servants to collect the estimates.

      No true... I regularly order electronics for my business from the US which cost in excess of $1000. UPS charge AU$50 to collect the GST. Of course because I buy for my business I get the GST back.

      Regardless of that I found that even with the $50 and the GST I regularly save 30 to 50% compared to purchasing products locally assuming they are even available. Most of the time local suppliers give me order lead times of 6 weeks. When ordered from the US I get the products within 5 business days door to door.

        The issue is when you buy a $2.40 item from DX.com the $50 collection fee is still going to apply

          and thats an issue for the delievery mob. i was in the USA in december 2013 and in order for me to send the metroplex masterclass transformer from NYC to my house would of cost 600 USD through both UPS and FEDEX. Metroplex himself was only 150USD. US Post was 100USD.

          in the end i just brought another suitcase and put in that as i was allowed 2 suitcases on the flight back

        I've never been charged GST on orders over $1000, never. None of them were marked gift either.

      i'm concerned there will be some kind of 'processing fee' applied to all packages.. So that $2 part I need for a project will suddenly become a $22/part.. & the other issue is that it's really hard finding specialist bits of equipment, parts etc in Australian stores; so this will just be a big drain on innovation & businesss in Australia.

        x2 on this, I generally import because I can't get what I want in Australia. There's also the items where some middleman thinks he can charge me 200-300% of the US price to build his Sydney McMansion, but generally it's stuff I can't get here.

    Just think of the GST on those multi-million dollar Heroin, cocaine and Ice busts!

    So not only is our dollar weak, they slap on some extra tax as well. Awesome!

    The problem for businesses is that even after the GST-free threshold is dropped, even if it’s abolished, it will still be cheaper for Australians to buy some items, especially high-tech products like notebooks and smartphones and cameras and lenses, online. It’s not going to help out local businesses as much as the treasurers might think, and it’s not going to raise as much money as expected.

    If they don't see this now, then I say let them scrap the threshold and fall on their sword later.

    All this will do is accelerate the shift to online shopping.

    And good luck to them trying to collect said tax without reforming the tax system first to make it efficient and close loop holes that overseas businesses will most likely use as a massive "Haha!" to a lazy method.

    Last edited 21/08/15 10:46 am

    I hate to say it Campbell but your article is completely incorrect.

    Tony Abbott said
    no changes to the GST in the first term of the Coalition Government

    Lowering the threshold would clearly be a change, and Tony said no changes. He made it pretty clear.

    Tony wouldn't lie, would he?

      Lies are the only thing he has actually delivered.

      This wouldn't apply in the 'first term' given the 2016 election.

        That sneaky bastard.

          Also, this has cross party support (all S&T govs) so it's not really even the Fed doing this. Basically they all decided that they'd like more money and agreed that this is a way to get more money. The AG (through the ATO) just facilitates.

    Can we get the purchased "Online" removed from all references of purchesing from overseas?

    If I purchase from an Australia Online store I will be already paying GST. If I mail ordered something (if you remember that) from overseas it get hit with GST if over $1000.

    Can you see where this "Online" and not paying GST is BS!
    Report it correctly!

      First paragraph: "parcels bought online internationally"

        He has a point. It's not exclusive to online purchesing.

        Last edited 22/08/15 8:06 am

    I've still yet to hear anything regarding a plan on how they're going to magically make a foreign company collect and remit GST for them, other than some vague reference to the G20. And even if they do get Amazon to charge GST, what about all the thousands of other online stores that don't? Is it going to be a case of we only pay GST from the big retailers and pay nothing extra from the small ones, or are we going to have a situation where we have to pay collection fees on literally EVERY parcel except those that come from Amazon or the Book Depository etc., including $1 screen protectors from China or 2nd hand items from eBay?

    This whole thing is an utter farce. News.com.au is reporting "TREASURY has confirmed it has done no modelling on the economic impact of applying the GST to overseas online purchases under $1000." That's just freaking great isn't it? You don't know how much money it'll generate or cost, but you're going to slug us with it anyway to appease the retail lobby. Meanwhile, Australians continue to get screwed locally with everything costing at least 20% more than overseas. Then when the threshold is gone, Australians will have no choice but to buy local because the cost of the tax collection plus the delay in delivery will render online shopping utterly pointless.

      I know they looked at it a few years back and said it would cost more to collect money from smlaller purchases than it would bring in...

      But its about making it "fair" then it doesn't need to make sense........this is a Government idea after all

      lowering the GST-free threshold could actually cost more than it earns. That was the conclusion of a 2009 Productivity Commission report on the topic

      Last edited 21/08/15 11:32 am

    It is completely misguided to suggest that you can buy everything more cheaply from overseas. Australia has one of the most competitive retail markets on the planet and if you can't get things cheaper here, you're just not trying. I'll give you two examples.

    Last month I bought a new Dyson DC58 Animal hand-held vacuum cleaner from The Good Guys for $298. Go to eBay and do a search and see how much the cheapest one is there. In store it was marked at $328 and all I had to do was ask if the guy could do me a good price and he knocked $30 off.

    The second example is the Asus Zenbook I bought from JB in 2011, just a few weeks after they went on sale. I told the guy in the shop that I was thinking about buying one in the US the following month and wanted to check it out. He asked how much they were over there, I made up a price which turned out to be $50 under Best Buy's on-line price and he managed to drop the price to a level that meant that once I got my GST back at the airport, it was a further $20 below the Best Buy price. So I got a brand new, top-of the line ultrabook with a RRP of $1695 for $1350, $1227 once I got my GST back, just weeks after the model went on sale. Since then I always ask if they can "do me a good price" and they always do. I don't have to haggle or carry on, just ask for a price. If you're not doing that, you are definitely paying too much.

    Anyway, the fact is that governments need money to do all the things we expect them to do for us and if they don't get it out of us one way, they will find a different way to screw us over. If they want to charge GST on on-line purchases and they can make it work, I really couldn't care less.

      Everything? Don't think anyone is claiming that. But I can buy 2 rudy project glasses for the price of 1 here... including shipping... a pair of nikes for the same price with shipping the only advantage is I get the choice of 6 or 7 colours... same shoes here I can have any colour I like as long as its black... how about genuine thule boot organizer... here $160... online $105 with shipping. So bleating from retailers about how this will fix their business is old world thinking

        Being charged more for less selection annoys the hell out of me. Although shoes aren't the easiest to buy online as most companies have strict distribution agreements.

      Tamron camera lens a year or so ago aprox. $500 in Aust stores on line $200.

      1Month ago Zoom H5 portable recorder Aust store $400+; online $300

      It might depend on what you're buying

      "I bought two things cheaper in Australia, Therefore any other evidence is invalid"

      Video game in Australia - $89.95
      https://ebgames.com.au/pc-204113-Call-of-Duty-Advanced-Warfare-PC
      Amazon US - $41.96
      http://www.amazon.com/Call-Duty-Advanced-Warfare-PC/dp/B009CZE5AA/ref=sr_1_1_twi_gam_1?ie=UTF8&qid=1440168725&sr=8-1&keywords=call+of+duty+advanced+warfare+pc
      CD Key Website - $28.45
      http://www.g2play.net/category/11047/call-of-duty-advanced-warfare-steam-key/

      Last edited 22/08/15 12:49 am

      I bought my Lenovo Thinkpad from the US, week of release, for $2100AU with three years international warranty. It came out 2-3 months later in Australia, with massive stock shortages, for $3000AU with two years warranty. Why would I buy this in Australia? I've even had an issue with it and sent it back on warranty, global warranty worked well, zero issues.

      Not to mention the fact if I order something from the US, China, etc, they send it IMMEDIATELY, besides clothes I find in general Australians are goddamn lazy when it comes to shipping, there is absolutely no reason why shipping from overseas should be quicker, except Australians are selling without having their hands on the stock, or taking days to bother sending it in the first place.

      The only general exception I find is clothing, quite a few clothing retailers have popped up in Australia with competitive pricing against internationals, awesome return policy, awesome customer service, INVENTORY ON HAND, and same day shipping / next day delivery.

      Nothing pisses me off more than buying something in stock, that you never had in stock. If your supplier has stock, you don't. Don't lie to me.

      Last edited 22/08/15 7:59 am

      Your comparison is wrong. You compared purchasing the products from Australian stocked businesses....well done, most people know how to computer.

    How many times do they need to be told that the cost of implementing this would greatly outweigh the revenue it would generate.

      Doesn't matter how many times if they are not going to listen. Just like how Labor didn't listen with the Carbon Tax and the Internet filter.

      If they are not going to listen then the only option left is to continue as usual and let them get egg on their face when the outcomes they ignored finally catch up with them.

      This changes nothing significant for us, the consumer. Hockey is just going to find out the hard way that his job at fixing the inherited deficits gets a lot harder when he should have put his assistant treasure back in his place instead.

      Even if it takes longer to receive goods, people will continue to shop online due to:
      * " 'Cause We Can!" markups
      * Lack of availability
      * Sh*t house customer service.

      The last point is the main one for me where it's crazy how some places have worse customer service locally than an automated Web page.

      Last edited 21/08/15 11:12 am

        exactly like we have a choice, never ceases to amaze how people think they have a say in this ! Socialism needs other peoples money to survive, just a matter of turning the screws on the peasants

    I shop locally for food, some clothing / footwear and large / heavy items. If I can, I'll buy these online in the future.

    Any change to the GST-Free Threshold will not have an effect on my purchasing decisions.

    How would this work with all of the 'gifts' we receive from China?

    "Kick online purchases in the teeth and you may as well be kicking Australia Post."
    Good! Kick 'em anyway. They are f***ing useless!

      How would this work with all of the 'gifts' we receive from China?

      This is the thing, I would not surprise if nothing changes when overseas retails basically say "Eff this!" and just label all the manifests as "Gifts".

      Even if the move is warranted and welcome, what about the numerous loop holes in our tax system that allows tax to be minimised and dodged?

      Both sides seem to be all for reform but when it comes to actually doing something about it, they refuse to touch the system with a 1,000 ft pole because it's too hard.

      As for Australia Post, it's only still there because there is legislation dating back as far as 87 (?) that protects it.

      Long story short, there is a measure in place that if anyone wants to offer a competing service, they have to charge FOUR TIMES as much as Australia Post for anything under 250 grams (from memory). And there are bound to be other measures as well which are there to protect it and AusPost is just riding on those measures.

      Last edited 21/08/15 11:36 am

        The previous “gift concession” (by-law number 9740019) was revoked on and from 1 October 2008

          Didn't know that. Thanks for the heads up.

          Will have to look it up as it most likely still has a few loop holes.

          Last edited 21/08/15 4:30 pm

    I think it will be almost impossible to separate online non-physical purchases from those overseas and those local. For example, if I buy an eBook from iTunes (Australia) - it is online, digitally delivered and includes GST (collected by Apple). If I buy the same book from iTunes (US) - it is online, digitally delivered and does not include GST. How can a tax collector tell? Will they start demanding that I keep digital receipts to avoid double payment?

    For physical goods, I imagine that the collection will be forced on the delivery end of the arrangement (i.e. collected by DHL, AusPost, etc). That will presumably be based on the declared value of the goods.... $0.

    If retailers in Australia would like to have our business how about they employ people who have some product knowledge. Im tired of gojng to "specialist" shops to ask for lenses and spare parts only to be met with a blank look followed by "I'll just look it up" I can google products for myself.
    Applying gst to online sales will just increase the gifts we receive from overseas. Plus even if it is applied and we do have to pay it the instore Aussie tax will ensure its still cheaper online!

      You'd think for a country of well paid retail employees, the retailers might try and justify it by training their employees, instead of just giving them a sales target and a T-shirt.

    Unfortunately this move is more about Politics than Policy.

    For the government it looks as if it is "doing something" about uncollected revenue, it keeps Mr Norman and lobbyists happy. If the dollar was still at Parity to the USD then, perhaps, maybe there would be a bit more of a compelling argument, but ultimately it will cost more to police than revenue that will be created. Average politics and poor policy.

      Yep I agree. I think everyone is jumping the gun a little bit here. The treasurers from each state merely agreed to it today. They're the ones that benefit from this, so OF COURSE they agreed. They're not the ones that have to come up with the process on how it's done.

      I reckon we'll find over the next 2 years, that it's too hard to implement, so although all the greedy treasurers want to increase their tax revenue, it won't happen because it's simply too hard and convoluted.

      Just because the treasurers said it was a good idea and agreed, doesn't mean it's actually going to happen.

        Plus there is an election before this is implemented. They have to actually make it to a second term.

    Joseph, do you have any idea of reciprocity? People say from the US buying from Australia don't pay state taxes either.

    Here's an idea straight outta HN.. Have a go at propping up Australian retailers who automatically double the price of anything equivalent from the US, then when they pay an extra 10% they will still be 40% better off anyway and the prop fails. And meanwhile the taxpayer will be paying more than the tax income to run a system to collect petty tax amounts.

    Yeah, Joe super idea.

      hahaha people from the us buying from Australia... good one

      You know they retailers generally don't set pricing right ? You now it's the US, Japanese, Korean etc. companies that set pricing in Australia through their Aus offices.

        Ever seen cost price lists? There's a lot of profit.

    If you want to make tax simpler Joe, then get rid of all the concessions, rebates, loopholes, exemptions and many other tools that the 1% use to avoid paying them.

    Australia's Treasurers meet today to bury heads in sand; legislate that the earth is flat.

    I think if they do go ahead, it's simply going to generate a lot more resentment to Australian online stores who will be seen as the scapegoats even though it's really just a handful of large online retailers that are pushing for this.

    I buy local quite a lot actually, however when it is clear that there is an Australia tax being applied (not GST or whatever.. but some arbitrary amount being slapped on top) , I steer clear and if the only alternative is overseas, then that's where my dollars go.

    I'm curious how they are actually going to regulate this.. for the legit online retailers overseas, it's easy.. but for the not-so-legit traders.. for online digital purchases from not-so-legit traders.. what are they going to do? How will they know it's not a "gift" and so on? How will they know that $500 item, which is marked with a value of $5, is not actually worth $500? Yeah.. good luck with that.

    Create consumer resentment to the point where people will start to buy overseas out of principle and also overseas traders will start to work out the ways to limit what the consumer pays and the situation goes from win-lose, to lose-lose very quickly.. within months, perhaps weeks, I'd estimate

    All I see happening is that more and more online stores will stop shipping to Australia at all. Currently there are several places that just won't ship due to "i cbf" reasons or something more legit like "warranty' reasons... now we will start to get excuses like 'have to pay GST' and 'too hard to code to suit' reasons.

    It's not making things simpler... its making things far harder.

    Completely agree. Recently I had to buy some textbooks for Uni. I could get one from an online Australian store for $155 (including shipping) or order it from the UK for $84 (including shipping). Slap a 10% tax on that all you want - that Aussie store still isn't getting my business.

    So collecting tax from a few dozen mining companies was too costly and not worth doing. But collecting tiny amounts from millions of online transactions and at the same time having a big impact on a lot of people, while difficult, is worthwhile?

    If only the Australian public could have as much influence over the government as a few multinational mining companies. These guys don't represent the people anymore (either party) and I think as long as lobbying remains such a large part of our political system, things are only going to get worse :(

    Next step will be to charge GST on goods under $1000 purchased while on holiday and brought back through customs. Maybe an extra 10% on duty free.

    ...lowering the GST-free threshold could actually cost more than it earns. That was the conclusion of a 2009 Productivity Commission report on the topic.
    Since when has the recent Aussie government cared about facts when implementing policy? They ignore them with the NBN, data retention, site blocking, climate change, education, science investment, employment issues and probably a dozen other things I only vaguely know about.
    Why would they start paying attention to reality now?

    Excuse my stupidity but I'm not 100% clear on what's happening here.
    Are they going to abolish the LVIT as well as slap an extra GST on online sales?

    do they not know how over taxed we are. yet Google and apple get to pay ZERO. WTF

    Apple, Google, et al get away with not paying tens of billions of dollars in tax.
    Consumers get slugged for GST on a $6 phone cover. Oh, and if you think that the difference to us is only going to be 10%, it definitely won't be. One way or another, we'll be paying admin, processing and covering the shortfall of an inefficient government department.

    Thanks Tone.

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