Small Business Minister says removal of GST tax-free threshold for online purchases still an option

Small Business Minister Nick Sherry says the Government has not ruled out a reduction or removal of the GST tax-free threshold for online purchases from $1,000, saying it is awaiting the Productivity Commission’s report on the issue amid heavy lobbying by the Fair Imports Alliance to boost online prices.

Sherry warns that a reduction or removal of the GST threshold on imported goods bought online is no silver bullet because the price differential between online and bricks and mortar was often much greater than the 10% GST.

“Many of you are no doubt thinking the Government can do its bit to help you face the online challenge,” Sherry told a Council of Small Business of Australia 2011 national small business summit yesterday.

“We are, but not by removing or reducing the $1,000 GST threshold on imported goods bought online.”

“No matter what the [Productivity Commission] report recommends, it will be a serious mistake to think Australian consumers will be deterred from shopping online, including overseas, because of the GST.”

“There are far too many testimonials from happy online shoppers describing discounts, many times 10% for the same product bought from websites.”

Sherry’s office this morning reiterated that while the Productivity Commission will make its own recommendations next month, it was important to remember that the tax-free threshold was not the panacea to all retailers’ problems.

Prominent retailers such as Harvey Norman and Myer have complained that excluding imports valued at under $1,000 from GST payments was benefitting online retailers at the expense of bricks and mortar retailers.

The retail lobby group Fair Imports Alliance this morning criticised Sherry’s comments, saying it was inappropriate to pre-empt the commission’s report.

Fair Imports Alliance spokesman Brad Kitschke says “there’s no question that retailers need to engage with a changing marketplace.”

But he added that Minister Sherry “should think more carefully about making comments outside of his area of responsibility.” The Small Business Minister is not ultimately responsible for the issue; the office for Assistant Treasurer Bill Shorten has previously said it will give due consideration to the Commission’s report.

The Fair Imports Alliance this month seized on released documents from Customs and Treasury showing that halving the tax-free threshold could cost just $38 million over four years, arguing they disproved the argument that recouping GST and other charges was uneconomic. The Productivity Commission had previously estimated lost GST at $460 million.

“I’d be surprised, given the information we’ve received, if the Productivity Commission doesn’t recommend a reduction in the threshold,” Kitschke told SmartCompany last week.

But Shorten’s office said at the time the emails were outdated and approximate, and more up-to-date estimates about the implications of a lower threshold had been provided to the Commission.

Customs data released in April showed that of the 7.6 million parcels being imported into Australia in the nine months to March 31, 2011, the bulk of the parcels were valued at up to $100, with the second most common price point between $101 and $200.

In his speech, Sherry acknowledged difficulties facing the retail sector as Australians save more, online sales become more popular and the world economic outlook remains uncertain.

“These are just a few reasons – the bottom line is many of you are doing it tough,” he said.

Sherry called on landlords to take the growing popularity of online sales into account when setting rents.

“The booming online market is making physical location less relevant – that change however depends on the business sector,” Sherry said.

“Customers via web distribution can be literally located on the far side of the country or globe.”

“This new factor will need to be considered by landlords in establishing rental levels.”

He also called on businesses to build their web presence.

“Also worryingly is the fact not enough small businesses use the internet in any significant way as part of sales, distribution or interacting with suppliers, governments and authorities.

“While nine out of every 10 businesses are connected to the web, just three out of 10 have a significant web presence.”

“Online trading is a two-way street – it opens up new markets for retailers and new platforms for consumers.”