Online shoppers in NZ currently have to pay GST on any purchase worth more than $400. A Government move to cut this dramatically is expected soon.
Online shoppers in NZ currently have to pay GST on any purchase worth more than $400. A Government move to cut this dramatically is expected soon.
News of a big cut to the GST threshold on online purchases for New Zealand shoppers could be just days away, as Australia is poised to slash its limit soon in a bid to raise money and protect local retailers.
Commentators say that if this happens as expected, the pressure will be on New Zealand to quickly match the Australian regime.
Australia currently has the highest threshold for imported goods in the OECD, allowing Australian shoppers to buy products online from overseas for up to A$1,000 before being charged GST.
However this could soon be dropped as low as A$20, with federal Treasurer Joe Hockey even suggesting GST be applied to all purchases without limit. New Zealand's limit is $400.
Revenue Minister Todd McClay's office said he could not comment on specifics, but there was a paper on the issue that was expected to be presented to Cabinet in August.
PwC Partner and GST specialist Eugen Trombitas said cutting the $400 threshold would bring Australia and New Zealand into line with other countries globally.
"This low threshold is international best practice and consistent with many other countries," he said. "Every option should be considered as reform will impact all New Zealanders and have a lasting impact," said Trombitas.
"The Australian proposals give more impetus for our policy makers and NZ Customs to review the position on imported goods," Trombitas said. "It becomes particularly significant and relevant for New Zealand to see if it can achieve consistency with the taxation of imported goods and services."
Australia had previously looked at dropping the threshold but decided that revenue collected would not be worth the effort, with the cost of collection tipped to be higher than the revenue made.
As online shopping continues to increase however, governments are now looking for the easiest option for increasing its tax collection as well as levelling the retail playing field according to Deloitte tax partner Allan Bullot.
"Every cent of GST collected goes to the state governments and they are broke," Bullot said. "There have been calls for increasing GST to 15 per cent, for broadening GST but this is an easy fix for them from a political perspective, in that they are also saying, we want to make it fair for everybody."
The Australian proposals give more impetus for our policy makers and NZ Customs to review the position on imported goods. It becomes particularly significant and relevant for New Zealand to see if it can achieve consistency with the taxation of imported goods and services.
Bullot said the ideal collection method being looked at was for GST to be charged at the source, meaning retailers would have to register for GST in the country they were selling to, with the extra GST cost but no extra effort required for customers.
"It makes sense for them to impose GST on imports coming into Australia but trying to do it at source rather than the border," Bullot said. "That is the ultimate goal and I think maybe what will happen is you'll get the situation where you have the rule, we know it won't be enforced that much but we'll make sure we pick up the big players."
Bullot said targeting the largest sellers would mean the effort and costs of the tax collection was worth the effort. He said regardless of the outcome of Australia's decision, New Zealand was likely to also see changes in the near future.
"There have been no specific numbers discussed, but comments made about working with Australia and given CER and the broader context you would expect any change from both countries would be a move towards harmonising as much as they possibly could," Bullot said. "Particularly because from an international perspective, many countries consider us one market."
