As it stands, goods bought from overseas don't attract the Goods and Services Tax if they cost less than $1000. Why? Because almost all research to date has shown that the high administration costs of collecting the GST on these goods would be more than the revenue it would raise.

Some Australian retailers have blamed sluggish sales on this low-value threshold and have been leading a campaign to reduce it to as low as $20, raising the price Australians pay on almost everything bought online. But CHOICE research reveals that the campaign by Australian retailers to blame the GST low-value threshold for the industry's woes just doesn't add up.

How would a GST for online sales work?

Retailers have been calling for Australia to adopt a similar approach to the UK, where the Royal Mail charges an £8 (A$14.70) collection fee for parcels that are liable for tax or customs. If Australia were to adopt this and lower the tax threshold to just $20 as some have suggested, it would push the price of a $20 item bought overseas to almost $37, with consumers paying nearly $15 extra just so the government could collect $2 in GST revenue.

Our infographic below breaks down the numbers.

It's not all about price

CHOICE surveyed online shoppers and found only 12% nominated saving on "duties and taxes by purchasing on overseas websites" as a reason for shopping online. We also found that although many Australians shop online to get the best bargain, their main reasons are actually related more to convenience than price.

The top reason Australians buy online is so they can shop at times that suit them, followed closely by the convenience of getting products delivered to their door. The retail sector is facing some real and significant challenges, but this research shows that the low-value threshold simply is not one of them.

Online shopping saves more than GST

For consumers looking for a bargain on overseas websites, most of those surveyed claimed they save much more than 10%, which would be equivalent to the extra cost of the GST. In fact, 68% of consumers buying from overseas websites in order to save money said they save more than 15%, and 43% said they save more than 25%. So even if the 10% GST were applied, overseas websites would usually still cost less.

Such price differences aren't surprising, considering CHOICE's research for the IT Pricing Inquiry in 2012 found Australians are paying around 50% more than US consumers for computer hardware, software, games and digital music.

What CHOICE wants

CHOICE supports a level playing field for Australian retailers, and thinks the threshold should be lowered provided it can be done cost-effectively and efficiently, with no massive fees, delays or red tape for consumers.

Lowering the GST threshold for online sales under $1000 shouldn't rely on inefficient costs of collection – whether paid by government or directly by consumers. This would outweigh any benefits and place even more cost-of-living pressure on households.

Treasury is currently producing a business case for lowering the GST threshold, and CHOICE awaits the outcome of that process.