Howard GST ruling haunts retail Online shopping Former PM ignored ministers' advice
The threshold, which retailers say encourages people to shop at overseas online stores, was set at $1000 in 2005 for all goods arriving in Australia by post, air or sea cargo.
Letters accessed under freedom of information laws show two ministries closely involved in the issue - Treasury and customs - had pushed for a $500 limit.
Moreover, Mr Howard was told a higher GST-free threshold could have negative consequences for businesses and tax revenue.
Assistant treasurer Mal Brough, writing on behalf of then treasurer Peter Costello, told Mr Howard in 2005 that a $1000 threshold could damage local businesses.
"The implementation of a $1000 across-the-board threshold could create an incentive for consumers to import low-valued products [of less than $1000] from overseas to avoid paying Australian taxes, which in turn could have an adverse impact on Australian businesses," Mr Brough wrote in September 2005.
Mr Brough, a Liberal candidate in the upcoming election, said the higher threshold would cost millions in forgone GST receipts each year, with the possibility this revenue hole could expand "significantly over time". Customs minister Chris Ellison also argued the threshold should be set at $500, saying this struck the right balance between the need for simplicity and revenue factors.
Mr Howard opted for the higher $1000 level, citing the government's commitment to "reduce the burden of regulation".
Other information on how Mr Howard reached his decision was redacted by the Department of the Prime Minister and Cabinet.
"I recognise in arriving at my decision that option three [the $1000 threshold] represents a greater potential loss in GST revenue to the states and territories than either of the other options canvassed in your letter," Mr Howard wrote to Mr Ellison in September 2005.
The department said it was likely to have advised Mr Howard on the decision but it could not find the relevant briefing documents.
The threshold has been a persistent gripe of the retail industry in recent years, due to the rapid growth in online shopping, helped by the strong dollar.
Retailers say Australia's threshold is unusually high, with Britain setting its limit at £18 ($30) and Canada at $C20 ($21). Cash-strapped state governments argue they could raise hundreds of millions more by lowering the threshold.
However, a Productivity Commission review in 2011 found lowering the threshold would not raise enough extra revenue to justify the extra cost of handling millions more parcels. Treasury is now investigating the issue again.
Tax Commissioner Chris Jordan said on Wednesday that lowering the threshold would likely involve requiring credit card companies or overseas retailers to charge GST.
"It has got to be a technology solution," Mr Jordan said. "It can't be an old-fashioned solution of the post office or customs putting stickers on parcels and assessing how much is to be paid." With Peter Martin
Frequently Asked Questions about this Article…
The GST-free threshold for goods bought overseas and arriving in Australia was set at $1,000 in 2005. That limit applies to parcels arriving by post, air or sea cargo and determines which low‑value imports are not subject to GST at the border.
Former prime minister John Howard opted for the $1,000 threshold in 2005. Documents show he overruled advice from Treasury and customs, cited the government’s aim to reduce regulatory burden, and acknowledged the potential for a greater loss in GST revenue from the higher threshold.
Letters released under freedom of information show Treasury and customs pushed for a $500 threshold. Assistant treasurer Mal Brough (writing for then‑treasurer Peter Costello) warned a $1,000 threshold could damage local businesses and cost millions in forgone GST each year, and customs minister Chris Ellison said $500 struck a better balance between simplicity and revenue.
Retailers have long complained the high $1,000 threshold encourages consumers to buy from overseas online stores to avoid GST, a concern amplified by the growth of online shopping and a strong Australian dollar. The threshold is a persistent gripe for the retail industry.
Australia’s $1,000 threshold is much higher than several peers: the UK’s limit is £18 (about $30) and Canada’s is around C$20 (about $21). Retailers and state governments argue Australia’s threshold is unusually high.
A 2011 Productivity Commission review found lowering the threshold would not generate enough extra revenue to justify the increased administrative cost of handling many more parcels. Treasury has been investigating the issue again, recognising the trade‑offs involved.
Tax Commissioner Chris Jordan has said lowering the threshold would probably require a technology‑based solution, such as requiring credit card companies or overseas retailers to charge GST at point of sale. He ruled out relying on manual customs or postal inspections.
Policymakers must balance reducing regulatory burden and simplicity for consumers and businesses against the risk of lost GST revenue and harm to local retailers. Officials warned a higher threshold could cost millions in forgone receipts, while reviews have questioned whether lowering the threshold would be cost‑effective given administration costs.
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