Buying online could soon get more expensive. Previously, purchases under the $1,000 low value threshold were exempt from GST. However, years of pressure from vocal Australian retailers has spurred the Government into passing legislation to collect GST on all purchases from 1 July 2018.
According to research conducted by the National Australia Bank, in 2017, Australians spent a total of $22.7 billion online of which about only one fifth was with foreign online retailers. What Australians spent with foreign retailers equated to around 1.5 per cent of retail sales by “bricks and mortar” retailers, which in the grand scheme of things is not all that significant. The recent legislation has been passed by the Government as a way to curb the exponential growth of foreign online retailers and to stop GST leakage.
The Government has opted for a vendor collection model, which means that foreign online retailers, such as Amazon and eBay, will be liable for the GST on goods sold to an Australian consumer. Foreign online retailers are only required to collect GST where they make sales to Australians of more than $75,000 per year. This exempts small sellers of goods to Australia; however, most large foreign online retailers will easily meet the threshold.
What does this change mean for Australian consumers?
Some foreign vendors may choose to absorb the cost of the GST rather than passing it on to the consumer, but they will still need to include the GST component in the price of their goods and periodically remit this to the Australian Tax Office (ATO).
Some other online retailers may choose to pass on the GST component to the Australian consumer, which means the overall price of the product that you buy, could increase.
At this stage the large online retailers have not given any indications as to what they will do. It is also not known how the Government will enforce this largely voluntary payment model on retailers situated in foreign jurisdictions.
One thing is certain, if you’ve been putting off an online purchase under $1,000, it would probably be wise to get in now.