State and territory treasurers have agreed to apply the GST to offshore sales into the Australian market.
From July 2017, the GST will apply to all products and services sold by vendors overseas into Australia.
“This will ensure that there is a fair and equal treatment of all goods and services,” treasurer, Joe Hockey, told reporters in Canberra on Friday.
There will be a “zero threshold”, meaning it will apply to all goods no matter what their price.
Hockey said he was confident big players such as Amazon would take part, but could not guarantee smaller companies would comply.
Retailers and major shopping centre owners have welcomed decision to close the GST loophole.
This decision follows the in-principle agreement at last month’s Council of Australian Governments’ meeting to reduce the current $1000 Low Value Import Threshold (LVIT).
The Australian Retailers Association (ARA) welcomed the decision, calling it “necessary and overdue”.
The ARA was the first to raise the issue of the LVIT and its $1000 limit and advocate for its removal in 2010.
“The ARA is incredibly pleased to see that the loophole allowing international businesses an advantage over Australian retailers will be closed,” said Russell Zimmerman, executive director of the ARA.
“The LVIT has caused Australian retailers huge concern, and its abolition is long overdue. The removal of this archaic law is necessary for the growth and sustainability of all Australian retailers.
“While the ARA would prefer to see an earlier introduction date than July 1, 2017, we’re pleased that the threshold has been entirely scrapped, rather than merely reduced,” Zimmerman said.
“Australian retailers will now be able to play in the global economy on a level field.”
The National Retail Association (NRA) and the Shopping Centre Council of Australia (SCCA) said the issue of the $1000 LVIT, which exempts overseas retailers from paying GST and a range of other taxes and charges, had dragged on for far too long.
“This is a fight the NRA began five years ago and has invested considerable resources into research and advocacy over that time. After all of this work, it is pleasing to see a win for the retail sector,” said NRA CEO, Trevor Evans.
“While the $1000 threshold was introduced with the GST in 2000, the advent of online shopping has seen overseas online retail giants gain a leg-up in our system, while placing an unfair impediment on Australian retailers,” he said.
“Coupled with the proposed action on the ‘Netflix tax’, it is pleasing to see the government is now on the right track to restoring integrity to the GST.”
SCCA executive director, Angus Nardi, said the decision was all about ensuring a level playing field in the retail sector.
“Closing the LVT loophole is about restoring integrity and fairness to the tax system,” Nardi said.
“In September last year, it looked like action on the LVT had stalled, with Treasurer Hockey suggesting a preferred model could not be agreed between the states and territories.
“It was therefore pleasing when Assistant Treasurer Frydenberg re-ignited the debate over Christmas 2014, highlighting how unfair the LVT was and confirming it would be re-examined.”
Hockey said the treasurers had failed to agree on taking the GST off feminine hygiene products.
He said further modelling on a range of possible tax reforms had been commissioned and the treasurers would meet again in September.
“Overall there was a clear message from the treasurers that… whatever we do must stimulate economic growth in Australia,” he said.
