No GST relief in Australia or NZ until 2016

Western Australia has stalled moves to reduce the $1000 threshold on GST for privately imported goods as a negotiating ploy to increase the state’s slice of the GST pie.

While consensus between the state and Federal governments is tantalisingly close, the intransigence of the WA government has stalled  any decisions on the issue, with change unlikely before July 2016 at best.

The Australian retail industry is effectively being used as a bargaining chip. At stake, according to an Ernst and Young report on behalf of the National Retailers Association, is over 30,000 retail jobs and GST revenues of up to $1 billion per year.

Former WA Treasurer Troy Buswell admitted the WA government was holding up moves to level the playing field between the Australian retail industry and overseas retailers so as to force the Federal Government’s hand on allocating a greater proportion of GST revenues to Western Australia.

There were ‘very few points of leverage in the GST debate’ he told the AFR in January this year. ‘This [the Low Value Threshold] is one and we intend to leverage that for all that we can, to try and get a fairer outcome for WA.’

Troy Buswell’s replacement as Treasurer, Mike Nahan has adopted the same hardline negotiating position.

“I’m not interested in WA paying more for online sales if the vast bulk of that money goes to the Eastern States,” he said in March.

WA receives less that 40 cents in the dollar of GST collected in the state.

All other states, led by NSW, are in favour of lowering the threshold, and the Federal Government is willing to move once there is unanimity between the states.

However, in COAG meetings in March and once again in September they failed to agree.

‘At our last meeting in March, the Commonwealth agreed to a request from the states collectively to further explore options around lowering the value at which GST is applied to the importation of goods into Australia,’ Federal Treasurer Joe Hockey stated in a September 19 press release. ‘Currently the threshold is $1000. States indicated today that they had not agreed a preferred workable approach on this issue. The states may choose to raise this as part of the Tax White Paper process.

– If this were the case, there would be no possibility of the threshold being reduced until the 2016/17 Federal Budget – July 2016 at the earliest. The Tax White Paper – which will also look at increasing the GST from 10 percent – is not due to be tabled until the end of 2015.

NZ moves also stalled

Although the online GST threshold is only NZ$400 in New Zealand, it is still relatively high compared to other countries, and NZ retailers will also have to wait until 2016 to see any relief, according to a report in NZ retailers website, Retail News.

With a GST rate of 15 percent, New Zealanders have added incentive to avoid the tax by buying offshore.

However, the NZ tax office wants to wait for an OECD review of international tax issues to be finalised to ‘ensure any New Zealand initiatives are guided by the approaches recommended by the OECD.’

‘This timeline will push into 2016 any relief for Kiwi retailers from the current GST loophole that exempts goods purchased from offshore websites valued under $400 from GST,’ Retail News reported.

The silver lining – for Australai and well as New Zeqaland – was that the OECD is likely to recommend that international online retailers be required to collect GST for overseas sales.

Industry association Retail NZ estimates that NZ is losing up to NZ$400 million a year in foregone GST revenue. Retail News reported that online spending at offshore sites is up 28 percent on October last year.