Bad news for online shoppers

$1,000 threshold to go

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published November 30, 2012 2:39 pm AEDT

The current $1,000 GST threshold could be cut to just $20 in the long-term, according to a newly released report, commission by the Federal government.

Most other western nations have already implemented a limit of $30 Australian equivalent, over which consumers have to pay a GST-type tax for online purchases.

Much of the recent debate in Australia was focused on the GST being collected by customs agents, couriers or Australia Post. The GST review recommends the tax be collected from offshore retailers. That shouldn't be hard to do as many, such as Amazon, already have a process in place for other countries.

In the short-term, the Review recommends the low-value import threshold be cut to $500 as soon as practicable, which could be immediately, without any need for major changes to laws or the collection process.

Retailers like Harvey Norman Holdings (ASX: HVN), JB Hi-Fi Limited (ASX: JBH), David Jones Limited (ASX: DJS) and Myer Holdings (ASX: MYR), will be cheering the decision, as it more than likely will make their products more competitive with online sites – by instantly adding 10% GST to any offshore purchase over the threshold.

The review suggests that there is widespread abuse of the $1,000 threshold, with some items, such as expensive cameras, which would normally cost more than the threshold, being sold as components (such as body, lens, motor, battery and filters etc.), which do not individually breach the threshold.

The $500 limit was recommended as it would bring in a net $30 million in revenues, but the current process is expensive as it relies on customs to administer the threshold. Changing that to force offshore suppliers to pay the GST they collect, would cut the collection costs. The current system also has trouble dealing with intangible goods such as digital downloads of movies, books and music.

The Foolish bottom line

It seems it's only a matter of time before the threshold is lowered from $1,000. Governments don't like to miss out on revenues, and this doesn't seem like such a difficult move. Consumers, go shopping now!

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Motley Fool writer/analyst Mike King owns shares in David Jones and JB Hi-Fi. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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