Online tax ripples could affect Kiwis

Australian Federal Treasurer Joe Hockey suggested GST be applied to all purchases without limit. NZ's limit is $400. Photo / Getty Images

Aussie moves to slash GST threshold for buying on net likely to have spin-off in NZ.

Online shoppers will be paying more for goods overseas if New Zealand follows moves by Australia to slash the GST threshold to raise tax money and protect local retailers.

Australia has the highest threshold for imported goods in the OECD, allowing Australian shoppers to buy products online from overseas for up to A$1000 before being charged GST.

But 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 the Cabinet this month.

There would be consultation afterwards before any changes were made.

PwC Partner and GST specialist Eugen Trombitas said cutting the $400 threshold would bring Australia and New Zealand into line with other countries.

"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," he said. "It becomes particularly significant and relevant for New Zealand to see if it can achieve consistency with taxation of imported goods and services."

Australia had previously looked at dropping the threshold but decided revenue collected would not be worth the effort, with the cost of collection tipped to be higher than earnings.

But as online shopping continues to rise, Governments are now looking for the easiest option for increasing 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 considered 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 from 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 would be worth the effort. Regardless of the outcome in Australia, New Zealand would likely see changes soon.

"There have been no specific numbers discussed, but comments made about working with Australia and given CER ... you would expect any change from both countries would be a move towards harmonising as much as they possibly could."