For we serious savvy shoppers, one of the benefits online shopping has delivered is access to a much broader range of products overseas.
Well, the government has decided they want a share of the haul and have proposed to lift the GST exemption for imported goods under $1000.
Let me explain what it is and what it means.
In layman’s terms, we know if we shop offshore stores and spend over $1000 we need to pay duty when the item lands in Australia. So for many years, savvy shoppers have bought a fabulous range of goodies and ensured their packages remain under the $1000 mark on the declaration. If it is over $1000 duty needs to be paid before the parcel is released.
Australian bricks and mortar retail spokesmen like Gerry Harvey have bemoaned that Australian stores can’t compete with offshore online sellers because they need to charge GST and the offshore stores do not. So under the guise that adding a GST to all goods purchased offshore will support the local retailers and drive customers to shop locally, the government have proposed legislation to remove the $1000 exemption and apply GST to all goods.
This will include digital purchases often referred to as the “Netflix tax”. GST will also apply to buying apps, ebooks, books, software and movie subscriptions.
That all sounds straightforward until we get to the compliance and implementation of the legislation.
The very earliest the bill can be passed is next month, May. The start date of this GST is 1 July. How will this new tax be collected? Via the international seller. That leaves around four weeks for international retailers to get prepared. Remember, when we launched GST in Australia the lead time to get prepared was eighteen months.
Naturally, there has been some pushback. The Tax Institute which represents Accountants and Tax Lawyers told the senate inquiry that the law was being introduced too quickly and is needlessly complex. EBay, Alibaba and Amazon have also expressed their concerns to the senate inquiry. It seems this legislation has a ‘one size fits all’ approach without understanding the way many of these giant international marketplaces operate.
For example, eBay is not a retailer. It is a marketplace where customers shop with retailers who pay fees to eBay so they can sell from the eBay platform. Asking eBay International to collect GST for all sales on their platform is like asking Paddy’s Market to collect GST for all fruit and veggie sales from their fabulous stalls.
The other consideration with the large international sellers like Alibaba is that Australian customers are a very tiny percentage of their total customer base. To make these rapid and costly process and IT system changes in a month for 1 July launch will not be a priority for them. Marketplaces like Alibaba where their product range is infinite would also have to apply GST only to those products where necessary. I am sure many of us remember the shenanigans around GST applying to tampons but not condoms without rhyme or reason.
So the result? Ebay, Amazon, Alibaba and others are proposing to block Australian customers where GST is required. Not a good outcome for Aussie customers nor for the success of the legislation.
The Australian government is expecting to collect $350M over the next four years in just the ‘Netflix Tax’ alone. We understand their motivation to cash in on the online shopping boom however clearly it needs to be more thoroughly thought through.
If this bill is passed will it achieve it’s goal of supporting local retail?
In my humble shopaholic opinion, I think they have miscalculated here too. Most of us shop overseas because of the incredible range of sizing, variety and products not available in Australia. If we shop on price, it is due to the pricing being massively different like 50% discount. Therefore, this legislation will not impact that shopping behavior by just adding a 10% GST.
The only immediate impact it is set to have on Aussie’s shopping international stores is blocking us. With every door that closes another opens so stay tuned for the updates and do your international shopping in the coming weeks.