The GST exemption threshold for online sales of goods and services from Australian Goods and Service Tax (GST) is likely to drop soon from $1000 to $20 per item.

Currently, Australians who make purchases from other countries via the internet need only pay GST (the Australian equivalent of VAT) if the purchase exceeds $1000. Australian State and Territories government political leaders have been meeting with their Federal counterparts and have been debating the threshold amount, with $20 reportedly in serious contention.

Changing the threshold to AUD $20 would bring it more in line with other countries such as the UK, US and Canada.

The Australian Bureau of Statistics found in 2012-13 that three out of four internet users were online shoppers, a number significantly higher than when GST was first introduced by the Howard government in the late 1990s. The percentage of online purchase is continuing to grow.

Australian Made campaign says GST change will stop penalising Australian producers and retailers

The Australian Made campaign has welcomed indications that the GST threshold may soon be lowered.

“We congratulate all the Governments on arriving at this decision, which will remove a fundamental flaw in our tax system, whereby Australia has been effectively penalising our local retailers, and through that, our local manufacturers and producers,” Australian Made Campaign Chief Executive, Ian Harrison, said.

“Eliminating this discriminatory application of the GST will help level the playing field for local products competing with imports.”

A final decision on the GST threshold will be made at a meeting of all Australian Federal, State and Territory Treasurers scheduled for August 2015.

Serious tax reform needed, KPMG

Meanwhile, as State and Territory politicians knock together new revenue-sharing arrangements between Federal and the State and Territory governments, leading consulting and accounting firm KPMG has released a copy of its submission for Australia.

“If serious tax reform does not take place over the next few years, Australia risks being uncompetitive internationally,” said KPMG Australia Chairman Peter Nash.

In a submission to Treasury, KPMG says the Australian GST rate should be increased  from 10 per cent to 15 per cent and should be applied to all food, health and education products and services. Currently, “fresh food” and various health and educational services are GST-exempt. Goods considered basic necessities are also currently excluded from the GST.

In its submission KPMG quotes economist Saul Eslake from a previous publication:

“The highest-income quintile (fifth) of Australian households speeds almost six times as much on GST-free food as the lowest-income quintile. As a result, more than one-third of the $6 billion in revenue forgone as a result of tax exemption of food GST benefits households   in the top 20 per cent of the income distribution.”

KPMG argues that the above statistics support a view that removing the GST exemption from fresh food will hit the lowest-income earners much less than high-income earners.

This may somewhat counter-balance an argument that GST, as a regressive tax, will hit the poor harder.

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