Treasury has predicted just half of overseas retailers will offer to collect GST for low-value purchases made by Australians, as the government rushes to pass new legislation for the scheme in the next week.
The Treasury Laws Amendment (GST Low Value Goods) Bill 2017 passed the House of Representatives earlier this week and the government is seeking to have it pass the Senate next week before the winter break, with the aim of having the new GST collection scheme for goods worth less than $1000 up and running for July 1 this year. The legislation would impose strict new rules on all overseas retailers to apply GST to online purchases, or face “a range of administrative penalties” from the Commissioner of Taxation.
Domestic retailers are cheering on the change, while foreign companies such as eBay are warning that the rushed legislation could result in them abandoning the Australian market if they are forced to collect GST on behalf of the government. Treasury has modelled that $300 million over three years from July 1 will be collected, but has not released modelling on exactly how it arrived at that figure.
In response to a question on notice from the Senate committee examining the legislation, however, the Treasury department this week stated that in order to arrive at this $300 million figure, it obtained confidential parcel volume forecasts from the Department of Immigration and Border Protection, as well as Australia Post, broken up into price bands from $0 to $1000.
They then multiplied the number of goods in those bands by the average value in those bands, and adjusted it for expected compliance by overseas retailers, and then calculated the expected revenue at the GST rate of 10%.
At the outset, Treasury estimates between 25% and 30% of overseas retailers will comply with the new system to collect GST for the government. But the peak rate at which overseas retailers will comply is just 54%, which is expected to be reached in 2022-23, when Treasury assumes the system will mature. Part of this is due to the fact that overseas companies that sell less than $75,000 in Australia every year will not be expected to collect GST.
It has been estimated it will cost just $13.7 million for the ATO to ensure the GST is being collected, and the department has so far not released any modelling on how much it will cost these overseas businesses to change their checkout systems in order to collect GST from Australians at the point of sale.
This information is “commercial-in-confidence” according to Treasury, but the department has claimed that the legislation offers minimal regulator costs for retailers, through just having a simple registration system and remittance process.
Labor — while supportive of reducing the GST threshold to $0 — has called on the government to delay the introduction of the legislation. In the House of Representatives this week, Shadow Treasurer Chris Bowen said that the legislation was rushed and deeply flawed. He flagged that Labor would seek to amend the legislation in the Senate to delay the start until July 1, 2018, and would require the Productivity Commission to review the impact the legislation would have and other alternative models.
Assistant Minister to the Treasurer Michael Sukkar said another review would not deliver a different outcome, and would just delay the introduction of the new scheme.