Cut GST threshold on online goods: report

THE independent GST review has called for changes to the way the consumption tax applies to goods and services bought online.

The report - by former premiers Nick Greiner and John Brumby and tax expert Bruce Carter - says the way the 10 per cent GST applies to online purchases disadvantages Australian businesses and costs the states "hundreds of millions of dollars" in lost revenue.

The panel report, released on Friday, said the current low-value import threshold should be at least halved from $1000 to $500.

This could be done almost immediately with no change needed to either GST law or customs arrangements.

In the long-term, governments should look at replacing the "at-the-border" collection of GST with a system that imposed a GST liability directly on overseas suppliers of goods and services to Australia.

The review panel found the existing system was open to flagrant abuse.

One example was the sale of expensive cameras which were bought in their component parts, at a price under $1000, and assembled by the buyer without incurring any GST.

The talks between the federal and state governments on a long-term solution should focus on amendments to GST law to make overseas suppliers to Australian residents liable for remittance of GST on all supplies of both goods and services that would otherwise be subject to GST if purchased from a domestic supplier.

"Such an approach would enable the GST exemption threshold for physical parcels to be reduced to a nominal level, no more than $20 or $50," the report said.

However, Robert Jeremenko, senior tax counsel at the Tax Institute, said the recommendation amounted to "tinkering".

"The GST threshold for overseas purchases should not be tinkered with in the absence of a whole-scale review of reform options in Australia's tax system," Mr Jeremenko said in a statement.

National Retail Association (NRA) chief executive Trevor Evans said the government could save more than 30,000 Australian retail jobs by scrapping the GST threshold on online purchases from overseas.

"The government's independent review of the GST has clearly found that the $1000 threshold on online purchases is undermining the competitiveness of local Australian retailers and must be changed immediately," Mr Evans said.

"The onus is now on the federal government to take action to save thousands of local jobs by putting Australia's retail industry on a more equal footing with our foreign online competitors."

He said the threshold in the UK was as low as STG15 ($A23.22).

A report by Ernst and Young, commissioned by the NRA this year, found the current GST regime for online goods could cost the Australian retail industry 33,400 local jobs by 2015 if the government does not act.

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