Five ways the GST threshold report recommends changing the postal sector

While retailers may have welcomed a new report into the GST low-value threshold that suggests offshore goods should be subject to the same taxes and charges as domestic parcels, experts point out the report deals with a bigger issue.

Not only does it highlight issues with taxation, but it also goes into specific detail about the current parcel system, along with the country’s logistics and transportation issues – and makes a huge number of recommendations to fix them.

Using pre-arrival electronic data, introducing a simpler way to record GST and putting Customs in charge of a range of new responsibilities are just a few of the ways in which the report recommends overhauling the distribution system for parcels.

It’s an apt time to recommend these types of fixes.

Australia Post constantly complains of being inundated with parcels, creating a huge backlog in its cramped retail locations. Customers receiving parcels often have to wait until weekends to receive their packages as they can’t pick them up in work hours.

The current system was never meant to handle this volume of parcels. As online retail expert Steven Noble points out, businesses have noticed as well.

“You’ll hear plenty of Australian online retailers say that it’s cheaper to send from a warehouse in New Zealand to shoppers here than it is to send something from a domestic warehouse to an Australian customer.”

“That’s an indication that something is broken.”

Last week, Australian Retailers Association executive director Russell Zimmerman told SmartCompany the Federal Government has to address the GST issue, and chiefly because it will have to address the logistics system anyway, given how much strain it’s under.

“The capacities at international mail gateways and licensed depots are under increasing strain,” the report states.

There are dozens of recommendations in the detailed 300-page report. But here are just a few of the ways it recommends changing the postal system to cope with the rise of online shopping:

1. The removal of duplication

Part of the problem with the current postal system is that there are duplications. Both Customs and Australia Post are doing the same thing and this creates inefficiencies, meaning that extra revenue gained from taxing offshore purchases would be lost in logistics costs.

The report recommends a few ways of reducing duplications, including removing Australia Post from its current role in opening mail as a second examination of offshore purchase. If Customs did this alone, there would be no need for a second check.

2. Electronic data

With so much electronic data available for gathering, the report says all this data could be used on arrival to enable a risk assessment. “This would improve alignment between border processing across import streams over time”.

This data could also help check whether packages are subject to GST or not – although it argues that when pre-arrival electronic data becomes available, the cost of collecting this GST will decrease because it can more accurately identify parcels.

“Costs fall proportionally more at higher thresholds because at these values, a higher proportion of goods arrive as EMS or parcels over 2kg than at the lower value levels,” it says.

In fact, the report specifically advocates the government joining international organisations to develop an electronic data interchange with offshore agencies.

3. Taking gaps out of the distribution process

The current distribution process is a complicated one. The report says this should be streamlined, so that Australia Post and other organisations have faster access to low-risk items.

The report suggests “permitting Australia Post, express carriers and other freight forwarders, once the goods are cleared by Customs and Border Protection and DAFF Biosecurity for community protection and biosecurity risk, to remove these goods from licensed depots and gateways, and manage their further deliver”.

Customs and Border Protection wouldn’t require GST to be paid prior to this, which would only slow the process down. Australia Post would be responsible for collecting it.

This would mean Australia Post could have quicker access to the parcels and enable their delivery much faster.

4. Introduce new performance criteria

This is a big one. The report suggests that not only should parcels be checked a second time by Australia Post, but that border agencies should be given stricter criteria for how long it takes to look at and assess different parcels.

“The performance criteria could include, but not be limited to, the time taken to undertake inspection and examinations, as well as cross-border agency and cross-gateway performance measures.”

Currently no such criteria is in place. Setting benchmarks would create a process where parcels are assessed much more quickly and efficiently.

5. Making postal agencies responsible for revenue collection

The report recommends that Australia Post, express carriers and other freight forwarders should be responsible for collecting the extra revenue if a lower threshold is introduced.

That would not only allow Customs to continue processing parcels, but it would also be convenient for shoppers who would only have to pay on collection of their item.

This story first appeared on SmartCompany.