The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
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David Bradbury

Assistant Treasurer, Minister Assisting for Financial Services & Superannuation and Minister for Competition Policy & Consumer Affairs

5 March 2012 - 18 September 2013

Media Release of 03/12/2012

NO.152

Interim Response to Low Value Parcel Processing Taskforce Report

The Gillard Government has today announced its interim response to the Low Value Parcel Processing Taskforce report.

The Government would like to thank the members of the Taskforce, led by Dr Bruce Cohen, for their thorough and detailed analysis of this issue. The Taskforce was commissioned to investigate options to improve the efficiency of processing low value imported parcels.

The work of the Taskforce followed the 2011 Productivity Commission (PC) report into the retail sector. The PC found that the low value threshold for Goods and Services Tax (GST) and duty on imported goods was not the main factor affecting the international competitiveness of Australian retailers. It did find that there are in-principle grounds to reduce the low value threshold, however it also concluded that it would not currently be cost-effective to do so without significant improvements in the efficiency of processing low value parcels.

As part of its response to the Taskforce, the Government has rejected calls for an immediate reduction in the threshold, but will begin preparing business cases and possible implementation plans for reforms to low value parcel processing.

The preparation of business cases and possible implementation plans is consistent with the Taskforce report and is necessary in order to examine in further detail the reforms recommended in the Taskforce report and ensure that costs and benefits of any changes are carefully considered.

A decision cannot be made regarding the possible lowering of the threshold until these business cases and possible implementation plans for reforms to low value parcel processing have been prepared, and the costs associated with any possible changes have been determined.

As the Taskforce's report made clear, there are no simple or quick solutions. With around 58 million parcels entering Australia under the low value import threshold each year, lowering the threshold before putting in place significant reforms to processing capabilities would cause major disruptions to the international mail service and result in major inconvenience to the businesses and consumers that rely upon it. Without greater efficiencies in the system, the cost to taxpayers of collecting the GST on low value parcels would also outstrip the revenue that is collected.

The Government recognises that Australian consumers enjoy the convenience and choice provided by online shopping and any tax advantage associated with the low value import threshold for GST are not necessarily a decisive factor.

It should be noted that online retail sales, both domestic and overseas, still only account for around six per cent of overall retail sales. While there has been strong growth in online retail sales, published data indicates that the majority of sales are made with domestic retailers, with online sales by international retailers accounting for less than 1.5 per cent of total Australian retail sales revenue.

While this is not the biggest challenge confronting the retail sector, the Government does recognise that on the basis of fairness and tax neutrality, Australian retailers should not be disadvantaged by taxation arrangements which favour overseas retailers.

The Government also acknowledges that the current threshold of $1,000 at which GST is collected on low value parcels is very high by international standards.

Any additional GST revenue from a future lowering of the threshold would accrue to the States and Territories, not the Commonwealth, and the Government will undertake initial consultations with State and Territory governments to determine what funding they would be prepared to commit should there be a future decision to proceed with reforms to enable the lowering of the threshold.

A final response to the Taskforce report, outlining the outcomes of these processes, will be released in 2013.

The Government will continue to consult with the Retail Council of Australia and stakeholders such as the peak body for express carriers, CAPEC, and Australia Post in undertaking these processes and preparing the final response to the Taskforce report.

The Government's interim response to the report is available on the Treasury website.

3 December 2012