Consumers save millions online

ABS estimates $6.2 billion of goods bought overseas fall below $1,000 threshold for GST in last year alone

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 August 19, 2013 3:01 pm AEST

Australian consumers are saving more than half a billion dollars in GST by online purchases from overseas.

The Australian Bureau of Statistics (ABS) estimates that the value of goods imported under the Low Value Threshold (LVT) – currently $1,000 – at $6,226 million, up 15.8% compared to last year. Although the ABS notes that it doesn't have any reliable means of tracking this information, but does admit that a large number of parcels were coming into the country under the LVT.

It also means the government is missing out on a cool $560 million in annual tax revenue, although the government has repeatedly stated that the cost to lower the LVT would outweigh the benefits.

The new estimates will likely raise the ire of local retailers, who have long called for the government to lower the tax-free threshold. Gerry Harvey, of Harvey Norman Holdings (ASX:HVN), last year stated that he had given up protesting, because he couldn't see the government taking any action.

Premier Investments' (ASX:PMV) chairman Solomon Lew said in December last year that there was overwhelming evidence of the damage it had done to the local economy, and warned that it was putting Australian companies and jobs at risk. "My message to the government is that we have all run out of time", said Mr Lew. "In every other comparable country, governments have recognised the need to deal with this as a serious matter of public policy and have already acted, while our government plays 'process games'."

In June this year, large retailers joined forces to kick off a campaign by the Australian National Retailers Association (ANRA). It included Coles and Bunnings – both owned by Wesfarmers Limited (ASX:WES) – as well as Woolworths Limited (ASX:WOW) and Harvey Norman.

ANRA estimates that it would raise the government $1 billion a year, while costing $100 million to implement, and cost $34 million annually in operating costs.

Foolish takeaway

Until the government takes steps to reduce the threshold, the issue is unlikely to die. Coming up to an election, we could see retailers raise the issue again.

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Motley Fool writer/analyst Mike King owns shares in Woolworths.

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