Goods purchased online will be subject to GST from July 1, 2017 after state and federal treasurers agreed to abolish the current $1000 threshold.
Federal treasurer Joe Hockey announced the change this afternoon, potentially paving the way for discussions on broader tax reform.
“This will deliver competitive neutrality for Australian businesses it will ensure there is a fair and equal treatment of all goods and services,” Hockey said.
He added that the treasurers had commissioned modelling on additional tax reforms and will meet again next month.
Both South Australia and NSW want the GST raised to 15%, however Victoria and Queensland oppose an increase. The Commonwealth says any GST increase would have to be accompanied by tax cuts elsewhere.
Charging GST on all goods and services bought online is a complicated task when the sellers are based overseas, but Joe Hockey said that multinationals and other governments are begging to agree on implementing taxation regimens across various international borders.
The treasurer said a zero threshold was the easiest option to implement and police, but the onus will be on the companies to act. He did not have any detail on how it would happen.
“If it was going to be a case of inspecting every parcel, that would be plainly ridiculous. There has been three or four different proposals put forward. This is the best proposal because it’s consistent with what is happening internationally. It is also the case that the companies are more willing now than they were a short period of time ago to comply,” he said.
How it would be enforced is yet to be established, but the treasurer said “Ultimately, if you are of any scale you are going to be caught up in the global taxation network.”
In the federal budget, the government announced a “Netflix tax”, which would apply GST to content services supplied from overseas, such as Netflix and iTunes. In July Hockey flagged abolishing the threshold for products bought online completely.
There have been reports that collecting GST on smaller-priced items would cost more than the revenue it would raise. But Hockey said earlier this year that through the G20, the government has identified a new way to impose GST on suppliers.
One tax Hockey said he’d look at abolishing earlier this year is going to stay: the GST on feminine hygiene products. The treasurer blamed his state counterparts for failing to agree on getting rid of the “tampon tax”.
Now read: The tampon tax stays.
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