Most of those who do a decent amount of online shopping are well accustomed to receiving dodgy-looking packages from Hong Kong, labelled unconvincingly as a 'gift' -- so when Joe Hockey announced last month that GST would soon apply to all online purchases, the majority of the online community only scoffed, asking how exactly he planned to enforce this. Commissioner of Taxation, Chris Jordan agrees, admitting last week that the system would be essentially voluntary -- though Joe Hockey still has faith that it will at least catch the largest online sellers.
Online shopping image by Shutterstock
The change in the GST-free threshold comes as an effort to 'even the playing field' between local and international sellers, requiring GST to be paid on all purchases rather than just those over $1000, as currently applies. Most responses to the announcement have only pointed out how impossible it would be to get every international retailer in line with the policy, however. The reality is that it won't, but the largest players in the online marketplace -- like Amazon -- will comply with Australian GST requirements if international examples are anything to go by, claims Joe Hockey:
There are companies like Amazon and Facebook and others that are prepared to work with countries wherever they may be located to apply consumption taxes, should that country request it. That is because they don't pay the tax themselves, it's their customers that pay the tax. So I am absolutely confident...those sorts of companies will work with the tax office to apply GST to their sales in Australia, because they're doing it other countries around the world. And that is because they want to be good global corporate citizens.
Although the rest may be true, Hockey missed the mark with his claim that online retailers won't be affected as 'it's their customers that pay the tax,' completely failing to take into account the businesses' ability, or lack of, to offer competitive pricing. Commissioner Jordan points out that the majority of Australia's online sales currently come from the large companies, but when these companies are compelled to comply with our GST laws because they "wish to be seen to be complying with local laws," it's possible that smaller suppliers could be getting a larger share of the market -- given the ability to offer 10% more competitive pricing. Jordan isn't too worried about the small fries, however, saying: "Let's wait and see how that turns out, wait and see the size of that and work out if there are some other measures that might be feasibly introduced to pick up on more of those."
With Malcolm Turnbull's cabinet reshuffle, it's definitely worth noting that Joe Hockey is no longer the Treasurer as of yesterday. His replacement, Scott Morrison, has not yet made any comment on this issue, but political forecasters generally expect him to continue with tough tax reforms. Turnbull has said that every policy and commitment made by Tony Abbott and Joe Hockey will be up for review by his new government, so the future of online GST payments is no longer set in stone.