New Tax Laws on GST to Include Overseas Purchases under $1,000
Our special Australia tax, inflated pricing and costly services are all a factor of our country's proximity to the rest of the world. If that wasn’t enough, retailers are now fighting for what they believe to be a more level playing field by forcing online shoppers to pay more for foreign goods. The existing rate that you may be aware of is that anything over $1,000 is liable for 10% GST. A two-day meeting at the Australian Council of Governments (COAG) witnessed leaders the industry and our country debate over GST being ‘modernised’ to include items under the value of $1,000.
NSW Premier, Mike Baird said that this debate was aimed at “effectively bringing the current system into the modern age” . The council also discussed other areas of GST at the COAG on Thursday 16th July and didn’t rule out making additional changes as and where they saw appropriate for modernisation purposes. It would finally appear as though Australian retailers are getting what they have been requesting for years, but how will this affect your pocket?
GST was originally introduced in Australia back in the year 2000 at a rate of 10%. Back then online shopping was in its infancy, eBay for example had only been running for 5 years and the Internet in general only had 360 million users across the entire planet. Anna McPhee, Retail council chief executive mentioned that the decision to re-evaluate the GST rate was an important step in the right direction. Earlier in the year I touched on this subject within my GST Budget article and how the Australian Retailers Association had been campaigning to increase GST on overseas goods for a more competitive market place.
The only issue, which has prevented the government from implementing the increase in GST earlier, has been due to the fact that it would only increase revenues by $600 million overall. The associated costs of collecting that $600 million to the government would be $2 billion, therefore it was passed as unjustifiable to spend taxpayers money on.
Joe Hockey, Federal Treasurer commented that as a result of the conversations with the UK government and several other jurisdictions, he believes he has found a way to collect additional GST more economically. Hockey has arrangements to discuss the matter in further detail next month with his state counterparts. The Prime Minister, Tony Abbot had a leaders retreat with other chief ministers and premiers to discuss the increase in GST from 10% to 15% on Wednesday 22nd July.
Tony Abbott has had increasing pressure applied from Labour parties to increase the levy for Medicare, in the hopes of generating the $45 billion required by 2020. However, Abbott has made his position clear about wanting to focus on raising GST rather than Medicare. His words explained, “The GST is a joint exercise by the Commonwealth and the states, whereas the Medicare levy is simply a commonwealth tax.”
KPMG earlier in the year conducted research to understand how a general GST rise on all products would affect our country's taxation incomes. A 10% GST rate applied to all products and services across the country would increase the government’s revenue by an estimated $12 billion. However, increasing the GST to 15% and still maintaining a similar selection of products exempt from GST would increase our government’s income by $26 billion per year.
The increase in revenue for the government would mean more sustainability for we the Australian people. Alex Malley, from CPA stated, “What our report shows is that additional GST revenue can be used to abolish a number of inefficient state taxes and also provide for personal income tax costs and compensation for low-income households, while also boosting economic growth.”
Ultimately, the GST rise looks like it will be good for the economy in Australia and also for business, even though we customers will be out of pocket. The rate of GST tax we pay in comparison to other westernised countries is considerably lower so shouldn't be too difficult a pill to swallow, although you can certainly expect prices to increase by 15% for overseas products under $1,000. If we're lucky we may even see GST go up for domestic goods as well (obviously I'm joking).
From time to time we do see deals from overseas retailers being posted up on Buckscoop because generally the UK and other countries have more competitive pricing on items such as console games and electronics (even with shipping included). Unfortunately, we don’t have any to share with you to represent how the increased GST will affect the price, but our Deals board is still full of fantastic offers for you to check out.
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