14 September 2016
Consumer group CHOICE has found a legislative loophole that allows the Federal Government to block overseas retailers' websites if they fail to voluntarily collect the GST. Site-blocking could start as early as July 2017 and could see many consumers denied access to their favourite products.
"Being able to access overseas websites allows consumers to purchase products not available in Australia, making up for the failings of some domestic retailers," says CHOICE Head of Communications Tom Godfrey.
"Blocking these sites will disadvantage Australian consumers while providing absolutely no benefit to the local economy.
"For example, consumers can buy a range of speciality products from overseas-based stores. These include niche cosmetics brands like Charlotte Tilbury or Glossier, and non-standard sized clothing brands like Long Tall Sally and Pink Clove.
"When these tax changes are implemented, consumers who rely on these stores could be denied access to niche retailers who fail to voluntarily collect GST and send it to the Australian Government.
"There has been no modelling or information released from Treasury about the expected impact of changes to the GST Low-Value Threshold. There is no guarantee of economic benefit to Australia but it looks like inevitable loss for consumers," Mr Godfrey says.
CHOICE believes the Federal Government intends to enforce new tax regulations by using section 313(3) of the Telecommunications Act 1997 (Cth) that allows government agencies to seek assistance from the telecommunications industry in order to uphold Australian laws.
"New tax regulations to be implemented from July 2017 will ask overseas businesses with an annual turnover of $75,000 or more to collect GST on all goods sold, including those under the current $1,000 low-value threshold (LVT)," Mr Godfrey says.
"It's unclear why foreign retailers would adhere to Australia's tax change, so ultimately consumers will be denied access to a range of overseas retailers.
"Even though the economic benefits of the tax change are yet to be established, it's clear websites may be blocked if they fail to comply with new rules that require them to collect goods and services tax (GST) for purchases below $1,000.
"This policy change threatens to get very messy very quickly. Overseas retailers have no obligation to comply with Australian tax laws, and we all remember ASIC's attempt to block a handful of websites in 2014, when it accidentally took down over 250,000 sites," Mr Godfrey says.
CHOICE supports a level playing field for the GST, but has long pointed out the lack of a business case showing any benefit from applying the tax to low-cost consumer imports.
For more information visit: choice.com.au/shopping/online-shopping/buying-online/articles/gst-overseas-website-block
Tom Godfrey, CHOICE Head of Media: 0430 172 669
How will the new legislation work?
Under section 313(3) of the Telecommunications Act 1997 (Cth), Australian government agencies are able to seek assistance from the telecommunications industry in order to uphold Australian laws. This section of the Act has been used by various government agencies, including the Australian Federal Police and the Australian Securities and Investment Commission, to block access to websites.
The government has not released any modelling onthe impact of the new rules on consumers, although a number of reports have examined the broader implications of lowering or eliminating the LVT. For example, the 2011 Productivity Commission report on the Australian retail industry and the 2012 Low Value Processing Taskforce report.
Both reports stated that no change to the GST rules should be made until the government could come up with a new approach to processing imports costing under $1,000 "without creating delivery delays or other compliance difficulties for importers and consumers."
What is the GST LVT?
Currently, goods purchased through overseas websites that cost less than $1000 do not attract the GST. From 1 July 2017, the GST low value threshold (LVT) will be lowered to $0 on imports of physical goods. Foreign companies with an Australian turnover of $75,000 or more will be required to register and charge the GST on the products they sell.
 Budget 2016-17 LVT
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