GST on Online Purchases

Earlier this month NAB released their analysis of online retail sales for August 2015 showing an increase of 0.6% after the decrease of 1.4% in July (source). The consensus seems to be that while online sales appear to be erratic there is an overall trend reflecting slow but consistent growth. The report also estimates that in the past 12 months up to August 2015 Australians spent $17.5bn online however it didn’t indicate how much of these sales were GST free being under the $1,000 threshold from overseas sellers.

Business groups Australia-wide argue that they are at a disadvantage given low value imports are GST free and have been calling for the Government to lower the GST free threshold or abolish it altogether. Collecting GST on overseas purchases however can be problematic depending on the approach the Government decides to take.

It appears that the Government is going to ask overseas sellers to register and voluntarily comply with Australian tax law. Only time will tell how effective this will be given that the ATO will have no jurisdiction to actually pursue these organisations to pay up their obligations. This approach could also result in an increase in fraud with offshore retailers charging GST to the customer but the not passing this on to the ATO.

In 2011 the Productivity Commission warned that the cost of administering a lower GST threshold on imported goods far outweighed the revenues earned, let us hope that this does not artificially increase prices from less than reputable suppliers.

Draft legislation in Parliament aims to expand GST 1-Jul-17 to include digital products purchased from overseas companies including music, movies, ebooks and software as well as offshore consultancy and business services.