Tax hike sparks concern for online purchases

A HIGHER tax will be slugged on big purchases from overseas, sparking concern it will be the first step towards lowering the GST-free threshold for online purchases.

The Federal Budget papers this week revealed the Labor Government would increase the Customs Import Processing Charge by about three-fold to "recover the costs of all import related cargo and trade functions" of Customs and Border Protection.

The tax hike is expected to generate $674 million in revenue over the forward estimates.

In 2010-2011, the import processing charge generated $144.1 million in revenue.

In real terms, the tax hike means people who import consignments by sea worth more than $10,000 will pay $152.60 for the customs processing charge instead of the current $50 rate.

For goods brought to Australia by plane, the charge will rise from $40.20 to $122.10.

Mark Molesworth, from finance firm BDO's corporate and international tax team, questioned what it meant for the GST-exemption on goods under $1000.

"There is a question about whether that is getting everybody ready to lower the $1000 import threshold, which is what a number of retailers are clamouring for," he said at a post-budget event in Brisbane on Thursday.

"So people importing books, CDs from Amazon and other online retailers will suddenly have to pay GST to customs."

Australian retail groups have pushed for the potential to slap GST on online purchases as the trend towards internet shopping has continued to blossom.

The Productivity Commission looked at the issue in 2011 and found lowering the GST threshold to $20 for imported goods would generate $500 million in revenue but it would cost three times more for parcel processing.

A Federal Government taskforce delved into the issue against last year and most good imported into Australia were less than $300.

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