GST Free Limit and Online PurchasesMarch 21st, 2014
Slashing the $1000 GST-free limit on goods bought overseas could significantly improve Victoria’s Budget by millions of dollars, the State Government says.
There is mounting evidence that online shoppers are taking advantage of a tax loophole where overseas purchases under $1000 don’t attract GST. The internet spending binge means the government is missing out on potential revenue, prompting calls to review Australian tax laws. It will be presented at a meeting of Federal and State treasurers in Canberra. Retailers have stated that $1 billion in tax is not being collected.GST Free Limit and Online Purchases
It is estimated that Australian consumers will spend about $12 billion online this year, with between 40 and 45 per cent spent on offshore purchases according to research cited by the Australian Retailers Association. Victorian Treasurer Michael O’Brien said the $1000 tax threshold was relatively high and he was concerned about the long-term integrity of the tax system.
“There is mounting evidence of deliberate avoidance of GST for online purchases, with invoices being divided up into smaller parcels below the $1000 threshold,” O’Brien told the Herald Sun. “This makes it harder for local retailers to complete and reduces the GST revenue which funds our schools and hospitals.”
Many countries provide an exemption for imports below a certain value so small transactions that make limited contributions are kept out of the GST net. But the ability to buy offshore goods consumption-tax free varies from country to country. In this light, the Australian tax-free level of $1000 is significantly higher.
Mr O’Brien said the carve-up of the GST between the states meant Victoria subsidised other states by about $1.2 billion a year. If Australia was to cut the threshold from $1000 to $20 it would raise $500 million, but would then cost $1.6 billion to process 30 million mail parcels.
Allowing these goods in, free of GST is giving the consumer a huge benefit which has an effect on the domestic retailer and wholesalers, who are small business people, and thus has an effect on employment and government income.
Mr Evans said a report by Ernst & Young found lost GST revenue to the states would exceed $1 billion next financial year because of this loophole. He also said other reports estimated up to 33,400 local retail jobs were at risk, mainly those of lower paid or venerable workers such as young people , single parents and seniors returning to the work force.
Reference: Herald Sun news article, GST-free limit on overseas purchases bought online is under fire, Phillip Hudson & Matt Johnston, 25 Nov 2013.
Retailers seek tax review as online shoppers avoid GST, Tim Barlass, 24 Oct 2010, www.smh.com.au.
Offshore GST-free limit needs tweaking, 28 Jan 2011, www.smh.com.au