Leaders give go ahead for GST on low-cost online purchases from overseas

Australian shoppers are set to start paying GST on online purchases from overseas after the country's state and territory leaders offered "in principle" support for the move.

The change would see a 10 percent goods and services tax charged on all purchases valued at less than AU$1,000 bought from overseas-based online stores, such as eBay in the US, Amazon or Book Depository. The tax was previously only levied on big ticket items from offshore worth more than AU$1,000.

The change will mean a significant shift for consumers who have previously been able to dodge the GST on some of their online shopping, and is considered a win for local retailers who have long lobbied for a 'level playing field' on taxation to ensure they can compete with overseas providers.

However, with the details on implementation yet to be nutted out, there is a concern that implementing the tax could cost consumers more than just an additional 10 percent on purchases, in the form of administrative and collection fees. It is also unclear whether consumers would be able to dodge the tax by using a Virtual Private Network or similar technological measures that help internet users disguise their online location.

The news on the taxation change came from a Council of Australian Governments (COAG) meeting of Federal, State and Territory leaders in Sydney this week.

According to a communique released after the event, "there was agreement in principle by Leaders to broaden the GST to cover overseas online transactions under $1000." The matter is set to be referred to an upcoming meeting of Treasurers to be thrashed out in detail.

Speaking about the move to bring GST onto lower-ticket online purchases, CEO of the National Online Retailers Association Paul Greenberg said it "seems to be the way the world's moving."

However, while he noted it was ultimately a governmental decision, Greenberg said retailers could not really on a 10 percent tax to make them strong online players, no matter how vocal they were about a level playing field.

"The industry leaders, Gerry Harvey, they won't decide. It's a government decision," he said. "It's always been unfortunate that some of our larger retailers have seen fit to get into the scrum and it almost looks like they want to impose a tax on their shoppers, which doesn't make any form of logical sense."

Ultimately, he said the industry has to "innovate our way to success" and that online shopping is "not a 10 percent game."

But with the GST change set to go ahead, Greenberg said it's not all bad for shoppers. He argued that Australian players are lifting their game and the revenues moving to overseas retailers had declined in recent years, not just because of a sliding dollar.

"Australian retail has worked bloody hard to meet or exceed the offshore offer," he said. "Instead of focusing on this darn 10 percent...what is our competitive edge? Brand, multiple touchpoints, quick delivery and service and returns."

Consumer advocacy group Choice has raised concerns that collection costs will be passed on to consumers that "far exceed" the 10 percent tax.

"It is still yet to be proven that lowering the GST low value threshold will raise more in revenue than it will cost to collect," a spokesman for Choice said. "While the government claims 'technology' will allow this to happen, we are still yet to see the details."

However, Greenberg said it was in retailers interests not to "spend a dollar to collect 50 cents" as that would equate to "retail putting its very worst face forward."

With many digitally-savvy internet users already using VPNs to hide their online location for other reasons, or even using parcel forward services to ship from overseas sites, there may also be ways around the rules.

"Let's not underestimate the savviness of the shopper. There's a bit of sport there in global retail," he said. "That is certainly what we've expressed to Government. Consumers are savvy."