The government will steer clear of tampering with the $1000 GST-free threshold for goods bought from overseas online stores, instead opting to improve its systems for collecting tax on imported parcels.
Retailers have demanded the threshold be lowered, but a landmark review by the Productivity Commission last year concluded that doing so did not make economic sense.
Although it would raise tax revenue of $600 million, this would come at a cost of $2 billion, it said.
Since then, a taskforce within Treasury has been investigating how to make parcel processing more efficient, raising hopes among retailers that the government is considering lowering the threshold.
A final report from the taskforce, handed to Assistant Treasurer David Bradbury in September, said that cutting the threshold to $500 would be more cost-effective than slashing it dramatically, as some retailers have called for.
However, it is understood the government’s official response to the Treasury taskforce will not include changes to the $1,000 threshold.
Due to the complexity of having to collect extra tax from items arriving in hundreds of thousands of parcels, the government is instead expected to implement reforms to how it processes parcels.
It is understood the government is also concerned that abruptly changing the taskforce could unleash massive disruptions for consumers and small businesses.
The government is expected to publish its response to the Low Value Parcel Processing Taskforce, as the taskforce is known, in the coming weeks.
The decision not to change the threshold comes as growth in online shopping continues to accelerate rapidly, hitting ‘‘bricks and mortar’’ department stores, clothing and electronic goods retailers especially hard.
NAB this week estimated online sales in Australia hit $12.3 billion in the year to October, clocking up an annual growth rate of 26 per cent.
Despite its phenomenal growth, however, NAB said online sales account for about 5 per cent of the traditional retail market, and most of the online spending is with Australian businesses.