Australians to pay GST on low value imports from next year

Australians currently have the luxury of buying good from overseas retailers without attracting an additional GST tax of 10% on purchases under $1,000 in value, but that will end next year.

From July 1, 2017, offshore retailers that sell goods to Australian consumers of more than $75,000 each year will have to register for, collect and remit GST to the Australian government.

That means Australians will now have GST levied on their Amazon book purchases, or any purchases from major overseas retailers (including software).

The government had at one stage considered stopping goods when they entered the country and levying the GST then, but the scheme was expected to cost more than the revenue it bought in. This new move is much more simpler and easier for the government to administer, and should bring in an additional $300 million in GST revenue over the next few years and will be distributed to the states and territories.

The Treasury department has already successfully applied this model to collect GST on digital products such as movies and video games, and is widely used in Europe for collecting their value-added tax (VAT) at the point of sale. That means it should be fairly easy for the major overseas retailers to levy and collect GST.

Australian retailers will no doubt be very pleased, as they have had to compete against products sourced from offshore with an effective 10% discount to start with. Gerry Harvey, chairman of Harvey Norman Holdings Ltd (ASX: HVN) has been an outspoken critic for years about the loophole, and will no doubt be fairly pleased with this new measure.

Other retailers that should benefit include, Premier Investments Limited (ASX: PMV), Woolworths Limited (ASX: WOW) and its struggling Big W business, Wesfarmers Ltd (ASX: WES) and its Kmart and Target stores, OrotonGroup Limited (ASX: ORL), Temple & Webster Group Ltd (ASX: TPW), Pacific Brands Ltd (ASX: PBG) and JB Hi-Fi Limited (ASX: JBH).

Foolish takeaway

It was always likely that the GST would be applied to low-value offshore purchases, it’s a wonder that it’s has taken the government this long to implement it.

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Motley Fool writer/analyst Mike King owns shares in Woolworths and Wesfarmers. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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