Australian Treasury Report Favours Adding GST To 'Low Value' Overseas Purchases

This week, the Treasury's "Low Value Parcel Processing Taskforce" released a report recommending the introduction of the Goods and Services Tax on imported items below the $1000 threshold. It's something big local retailers have been pushing for to help them stay competitive with our strong dollar and the general lower cost of goods from countries like the United States.

The report is available on The Treasury's website, but at almost 300 pages, it's far from a light read.

According to the document, the LVPP's goals include allowing for "effective and efficient revenue collection processes that promote tax neutrality", the minimising of "any processing and administration costs, delivery delays and other compliance costs" and supporting "Australia's interaction with the digital economy", among others, though I'm not so sure about that last one getting any air time.

Its findings are extensive, but to summarise those related to applying the GST (or other fees) to low-value goods:

[The reform] would best be achieved through the application of simplified GST assessment arrangements for low value imported goods between a separate low value GST threshold set above $0 and below $1000 ... This proposed reform aims to streamline the handling and administration of low value imports of goods, while at the same time introducing new processes to collect revenue on goods valued at or below $1000 (to a threshold to be determined by government).

The report admits introducing such processes "constitutes considerable change" and more analysis is required to "determine and implement the required functionality, performance, scalability and integration complexity".

If such reforms did come into play, the government might not even be able to properly enforce them, given the retailers aren't based in Australia. From Assistant Treasurer David Bradbury (via The Australian):

"So even if we pass a law in which we say, 'You have to register for GST', the difficulty we have is when they thumb their nose at us and say 'Well, we're not going to'," he told ABC radio.

"At that point we have an enforcement issue."

[The Treasury via The Australian]

Image: Australian Government



    Let me just be the first to say this is f##ed. The majority of Blu-Rays I own are from Amazon UK. Adding 10% tax will bring them close to rip-off Australian prices, which I guess is the whole idea.

      You seriously only save 10%? (after shipping I presume... the GST will only be charged on the item value, not on the total cost)

        Why would you assume this? Currently, when you import, you pay GST on the item price + shipping price + import duty.

      Well then there's an extra reason to pirate them instead isn't there?

    How would they check every single package coming into Australia and then determine if it cost more than $30? This just won't work, they need to concentrate on the important stuff like drugs and weapons.

      That was my first thought too. How much would it cost them to charge you the $3 GST on a $30 Blu-Ray? With all overheads. That is why there is a threshold already, so that the cost of recovery is not higher than the income.

        Think that you will find that Customs etc charge an additional processing fee of at least $40 to collect the GST so Govt gets the GST and consumer pays the collection fee (see Customs website). This certainly was the case when we had a parcel through FedEx over the threshold - they collected a processing fee of around $50 on top of the GST.

    Seems only fair, on the positive, then australian retailers ripping us off will have one less avenue to justify it.

      sorry sir. but the only thing that will happen when this tax comes into effect. is NOTHING!

      retailer are still going to charge the SAME price for things and be JUMPING UP AND DOWN. they will just make some so crap about GFC or something to get away with it. and we will just buy it.

        Very valid point, they need to respond to it differently, perhaps lowering their prices to make them more competitive against their online competition?

      What? I can see the cost price of anything I sell and I can guarantee there isn't much on the major items. We usually sell $40 HDMI cables to make up for that fact.

        same thing your suppliers are ripping off their customers (you)

    It would be hard to enforce plus if your buying a lot of items at under there previously proposed limit of $30 just purchase them separately not all on the one order.

      Yeh right, and pay all the extra P&H? that's the stupidest thing I've heard today.

        I've ordered a lot from China and free p&h every time. Depends where and who your ordering from. Even heavy items like a new turbo I bought free p&h even though it was almost 10kg weight.

    Looks like a great opportunity for the public to submit their spending habits to the government. If we're lucky we'll get charged for having the GST collected like people in the UK do with overseas VAT purchases. Hurray for the government creating red-tape jobs to appease fat cat distributors in Oz

      Well Gillard and Roxon want the government to store and read all your email and web browsing, so the Tax office can scan all your messages and ebay transactions and charge you accordingly if you dare to buy something overseas. Oh, and don't criticize the government or the Communists in Gillards Government will jail you like the Chinese do to dissidents. What a wonderful Labor Government.

        Hey Steve did you note in title of the article where it reads "Australian Treasury..." It doesn't read "Australian Government". So you criticism of the government is, in this place, misplaced.

        Oh and there are other good bits in the report such as "pass appropriate collection costs onto the importer" and "permit Australia Post, express carriers and other freight forwarders to charge a handling fee for the costs of collecting any GST revenue."

        In the report at page 22 it claims that in 2014 a $100 imported item could be charged $22.31 (of which $15.04 would be the cost of collection). So with GST at 10% they want to charge close to 25%. That seems fair :-(

        I guess the one thing to do would be to ask the supplier to only give an email invoice and to put the value of the item, on the packaging, at something low such as $2.

          You do realise those "rip off" merchant Australian retailers and fat cat distributors already all pay for the privilege of having their GST and duties calculated for them, right? That's why importing over $1000 worth of goods doesn't add 10%, it adds 25% (book depository even have a warning about this in their FAQ)
          These comments threads are loaded with half informed comments from a public that want everything for nothing. The GST is an old fashioned tax, but it's the one we have and it funds all the state based services such as police, schools and hospitals. The only other option is to increase its amount which will drive more people to try to avoid it.

            You're sadly mistaken if you think everyone wants everything for nothing. I already pay a host of taxes, levies, rates, charges, donate to various charities...

            Ok, you think its fair to add 25% on top of the RETAIL price of $100 items one might buy overseas but I certainly don't.

            Actually, our income tax pays for those services too...not just gst. Half informed much?

          Mate, you want to check your facts before you comment, read The Gillard government directed Treasury to do the report and set their terms of reference. It IS the government that wants it. Your criticism of me is the thing that is misplaced and incorrect, not my criticism of the Greedy Gillard Government. Check your facts.

    What about the home based businesses whose livelyhood depends on importing items of less than $1,000 - 10% GST will sacrifice these mum and dad tiny businesses to the alter of the larger ones such as the DJ's and Harvey Normans!

      nope. thats not how GST works. GST paid on imports will be deducted from the GST paid by customers. GST is paid at all steps of the supply chain, but refunded to ensure no 'double dipping'

    The complexity of implementation, including 'considerable change' will mean this tax will leave the Gov in a negative cash position. This has been a waste from the start. Time for the retailers of this country to join the 21st century or be relegated to the past. Don't hire people to tell you they can maintain the status quo, find some clever folk that can help you take advantage of the new market.

    Or suffer the consequences of defeat.

    "big local retailers have been pushing for to help them stay competitive" surely staying competitive means doing away with ripoff price premiums like the X1 Carbon tax, not forcing other people to shell out money to the govt. Bit self serving bureaucracy where a senseless tax goes to paying the senseless drones to keep doing the senseless work. This tax will only work to harm sales.

    VPN.... Nuff said for digital stuff.

    With the current politicial climate I wouldn't worry about this happening. Maybe, just maybe if the libs got the house AND the senate next year but that isn't likely. Additionally, changing the gst requires state cooperation so they'd all have to agree as well.

      I think all the the states would agree as they would get an increase in revenue.. and i know 3 states that could use it.

    Didn’t hear big business complaining when the AUD was 55c a few years back and we had no options at all other than to buy their $$$$ products, Killing the pig for years and all of a sudden the consumer is getting a decent price. How bout they stop ripping Aus off and i will be more than happy to buy products from home.

    I can definitely see Big companies like Amazon and Adobe ,etc, banging up there delivery price to accommodate a tax they most definitely won't bother to pay.!

      Adobe's prices are already over 50% extra on top of the US price for a DIGITAL DOWNLOAD. They're unscrupulous in the truest sense of the word.

    The GST will NOT change things simply because it's not the problem. Big markups by greedy Australian
    business is the problem. Australian business wanted a global market, they got it, but so did us shoppers.
    Just bought a digital camera from HK for Au$390, mailed. Best local price funnily enough, was from serial whinger Harvey Normal who dropped from $599 to $559. GST? Well add $39 to $390, still ain't shopping at Jerry's rip off joint.

    If they added a 10% GST on low value imports, I'd still buy from overseas since the prices are more than 10% lower than local prices. However that'd mean I'd have less money left for other items I do buy locally. End result? Local retailers will see lower sales, not higher sales from this new tax. Not to mention that the compliance cost of collecting say $1.20 in GST tax on a $12 imported Blu-ray will outweigh the collected tax.

    So we'll have increased taxation, lower local sales, and net decreased government revenue - all to make billionaires like Gerry Harvey happy, who's failing business model is based on overcharging Australians who have no alternative.

    Well guess what? The internet exists and we have alternatives. The Australian consumer is tied of being ripped off and is buying elsewhere. You can't put the genie back in the bottle Gerry so alter your business model, instead of trying to tax the hell out of your potential customers to force them to buy from you.

      Agreed. On most items, pretty sure adding gst etc, would still be cheaper! Since we pay get anyway, might as well get our big ticket goods from overseas too! Actually, Gerry might not like that...

    If the gummint is going to collect GST for goods under $1000 then they need to improve the collection process. In the past, before Customs 'improved' computer system, you could simply pay at the Post Office. Now you need to do a manual entry, pay $50 to Customs, provide 100 pts of ID, fill in paperwork that takes around 90min (collecting supplier's details can take time). The manual clearance adds about a week and a half to the delivery too.

      Agree with you there. Bought my NAS from the US. Even after paying the extra tax (and customs fee's) I still saved over $300 on the local specialist supplier price, but the extra paperwork etc wasn't very clear and added even more cost and time to the goods received... but it was worth it in the end.

    I'm happy to pay the GST. All the purchases I make overseas save me way more than 10%.. There is no point in buying items from overseas vendors otherwise..

    However for this to work it needs to be supported by minimal paperwork on the part of the consumer.. Perhaps done by the bank as part of the funds transfer to the overseas vendor. After all, they have no trouble collecting their "currency conversion fee"...

    Does this mean the local retailers prices will increase to? Won't the retailers here have to pay the same GST on the products they import? Won't this cost be then once again passed on to us. I doubt they are going to absorb the GSTcost on all their products. Last time I look we did not manufacture much here.

      They already pay import duty JP..
      Unless they buy one item at a time (which they wouldn't)

      JP, I dont think you understand how GST works. If a shipment is worth more than $1000, then an estimate is created to determine a GST value. This is paid via the customs department (often via the registered importer).
      Once this is paid, it becomes a "local" item. The recipient then claims the GST back via their BAS, but also charges GST when they resell it.

        Thanks Phillo, makes sense now. I was not up to speed on how GST works on imports. Thanks for the explanation.

      You have no concept of the tax system in Australia do you? Go back to school.

        Correct, which is why I asked the question.

        Back to school. Sorry I finished school before the gst was implemented so they didn't teach something that didn't exist.

    Soooooo recently we had the ICAC looking into the reasons why consumers in Australia are being ripped off with imports like DVDs, CDs, BluRays, computer software and just about everything else. Now we have the Government looking into implementing GST collections for online goods below $1,000. This looks like a win win for the government and solving two problems for one. The government will make squillions more in taxes and consumers will no longer whinge about being ripped off cause the shit will cost the same no matter where we buy it.

    This would be about the least efficient way of collecting tax imaginable. Almost all the money collected will go to the cost of collecting it, according to treasury's own projections.

    So doesn't that mean that purchases must also includes any you make when you go on holidays OS. If I bring back, say, a bar of chocolate I'd be required to pay 50 cents GST.

    Employing staff is the highest cost to an organization so no local retails aren't "ripping" you off, retailers are hurting right now paying normal things like rent, tax, super, all that normal stuff that goes into running a business that delivers local products.

      +1 , the focus seems to be on big business, don't forget the small businesses going under now because of on line stores with next to zero overheads.

      I'm quite sure that retailers in Europe and the USA have similar costs to running their businesses, except that they've embraced online retail unlike the dinosaurs in Australia. Either way, even if I add 10% GST to items purchased overseas, they are STILL cheaper. And usually between 30-100% cheaper. The Australian retail industry has been too inefficient and too lazy for too long. Tough luck.

        Comparing Australia to the US or Europe is silly when it comes to material goods. We're an island in the middle of no-where with a (potential buying capacity) population of 20-something million.

        Compare this to 300+ million in the US and 750+ million in Europe. Then there's the amount of goods actually produced in these other countries locally.

        We (Australia) have to import the majority of goods to begin with for a comparatively small market - we're always going to get stung. Ordering one or two items yourself directly from the source will always win out. Or, shipping huge quantities either by air (very costly) or sea (very slow - eg. laptops only have a shelf life of around 3 months to begin with) and you can start to see why we're at a loss to start with.

        After the retail stores have sold as many units of a particular item they can, then discount it to just clear shelf space (potentially just breaking even - but still paying numerous overheads), then they're stuck with 'useless' stock. It's not as if they can then easily ship it to another European branch at a nominal cost... I don't know, do they just have to write it off and scrap it? Or then pay huge exporting costs to offload it to another country?

        Just 'getting' an item isn't the end of it. You have to factor the cost into the entire life cycle of an item.

        Digital goods on the other hand should be more competitively priced. I understand there's licencing and other factors which will always determine a small price variance, but not the huge mark-ups we see for some products #AdobeSuite

        Sorry Caine, but you are obviously a financial genius. If you are saving 100% on a product you are getting it for free. Best you stay at school so mum and dad can pay your bills for you.

    Yep, the government creates a study into the excesive prices that australians have to pay for all sorts of goods. Finds that we pay less by buying overseas. Creates a tax that brings overseas goods up to the price that australian businesses charge. That means that the government gets the price difference, not the overseas retailer. NICE SCAM.

    Ahh yes the old 'Every cost to run a business in Australia is higher' excuse. So high it doubles the cost when it hits Aussie selves? Look, I'm happy to pay GST on my online purchases. I think I can comfortably adjust to a 40% saving instead of 50%. Don't even get me started on the lack of range/choice on our retail shelves. I've also noticed an almost deafening silence from Gerry Harvey lately. Lesson learnt perhaps?

    as many others have stated, for many products, this will only slightly reduce the savings that ordering from overseas will give, so the only way to make this discourage overseas buying would be to make it so difficult to pay this tax that people just give up and buy locally.

    OK, let's imagine that this new law passed (heavenforbid).
    Someone buys a smartphone from overseas and pays 10% GST.
    Would that person then be able to reclaim the GST if they were travelling overseas (via the TRS)?
    Can't see why not.

      Of course they could claim it when they leave the country! (as long as it meets the requirements)

      The interesting thing with the TRS is that if you leave the country and claim GST on a product worth more than $1000, you technically may have to repay the GST when you reenter the country.

      While this rule probably wont impact most smartphones, it could hit you if you took laptops with you (etc).

    Yup.. it's another waste of time tax that's not actually going to do what it is being sold as doing. Carbon Tax anyone? When it costs double in Australia, in many cases, for many of the small items people are buying from overseas.. an extra 10% isn't going to matter much at all and certainly won't curb the offshore spending at all.

    AU Price: $100
    O/S Price: $50
    New O/S Price: $55

    Which one are you going to buy? Many of the places selling aren't even charging shipping these days either.

      It will do what it's supposed to do anyway, line the governments pockets.

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