All purchases from overseas will have a 10% GST added from July 2017 after State and Territory Treasurers and Federal Treasury Joe Hockey met at the Council on Federal Financial Relations Tax Reform Workshop in Canberra last week. The current $1,000 online GST threshold to be abolished.

It was agreed to broaden the GST to cover overseas online transactions (physical goods) under $1,000, with a proposal that relies on the overseas vendors to collect the GST for the states and territories.

The Commonwealth also recommended that the existing threshold for the GST liability be reduced to zero, in line with the GST collection for other products and services, Mr Hockey said. The states and territories have unanimously agreed to this in principle.

Non-residents (overseas suppliers) will be the ones who charge, collect and remit the GST for digital and physical products. As is the case in Australia, only vendors with an Australian turnover of $75,000 will need to register and charge the GST.

The Commonwealth will draft legislation for the application of the new arrangements from 1 July 2017.

In consultation with the states and territories, the Commonwealth will further develop the options discussed by the Treasurers, including packages involving changes to the Medicare levy or a change to the GST.

The Australian Retailers Association (ARA) welcomed the decision of State Premiers and Treasurers to remove the Low Value Import Threshold (LVIT) for goods purchased from overseas, calling it “necessary and overdue”.

The ARA was the first to raise the issue of the LVIT and its $1000 limit and advocate for its removal in 2010. “The ARA is incredibly pleased to see that the loophole allowing international businesses an advantage over Australian retailers will be closed,” said Russell Zimmerman, executive director of the ARA.

This story first appeared in Convenience and Impulse Retailing