Australian Govt On Verge Of Lowering GST Threshold

By Rory Betteridge | 10 Apr 2015

Applications to online advertising and digital media, and lowering or abandoning the GST low-value threshold, are all under consideration by state and federal governments as Federal Treasurer Joe Hockey impressed the need for tax reform.

Federal Treasurer Joe Hockey flagged the changes with state treasurers last night, claiming that support was building despite not yet being able to reach consensus.

As it stands, all online transactions that take place through offshore retailers only attract the GST if the transaction is valued over a $1000 threshold. Australian retailers have long campaigned to have this threshold lowered to $20, or removed entirely; this would force offshore sellers to charge GST on almost all purchases made online.

The measures are being considered in the face of a looming problem in Western Australia, where falling resource prices are affecting the bottom line in the heavily mining-reliant state. The amount of GST revenue the state receives from Canberra is traditionally offset by its income from the sale of natural resources; as money from resources dries up, the case is made, a greater share of the GST should be received.

Other states, who would sacrifice their GST revenue for the sake of WA, are against this measure, critical of WA governments’ inaction on GST while times were good. State treasurers, facing a smaller share of the GST, could be enticed to agree to lowering the low-value threshold on online sales as a means to preserve their share of GST money.

“Western Australia has previously held out in relation to the low value threshold despite the best endeavours of many (other treasurers),” Hockey told News Ltd. “Western Australia has always held out on the basis that they would not support anything to do with the GST (because) a majority of it goes to other states.”

The move would mean relief for Australian-based retailers online and offline, who have long argued that offshore sellers were able to undercut them on account of not charging the GST.

“All the big companies have been exploiting that right,” Harvey Norman boss Gerry Harvey had said to Fairfax earlier this year. “They milked it, and they will continue to milk it until someone stops them.”

“We are paying hundreds and hundreds of millions of dollars to the Australian Government (in GST) while all the others get a free kick,” Premier Investments head and retail veteran Solomon Lew said late last year. “It’s just not on. There is no country in the world that is tolerating this problem.”

In addition to this, Hockey also sought support for application of the GST onto what he referred to as ‘intangible’ goods, such as downloadable media and streaming services. Despite it being by definition the application of a new tax on a product, Hockey insists on calling it a tax ‘integrity measure’, claiming there’s a ‘clear difference’.

“There are a number of those companies that are prepared to charge the GST on the services they are putting into Australia but they want to know they are not at a competitive disadvantage,” the Treasurer told Fairfax, referring almost directly to Fairfax-owned streaming service Stan, and NewsCorp-controlled Presto, both currently being undercut by major US-based competitor Netflix.

The move couldn’t come at a less convenient time, as the Abbott government seeks to address digital piracy. Australia is one of the world’s leading markets for the illicit downloading of movies and TV, which is largely driven by higher costs; industry bodies believe anything that raises the cost of these services will only exacerbate the problem.

Communications Minister Malcolm Turnbull also suggested applying the GST to digital advertising earlier this year.

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