Editorial / Hot Topics

GST and You – The ARA Perspective

GST and You - the ARA's Perspective

Witnessing the growth of online retail has been a truly unique phenomenon, but further work needs to be done to support our local industry, writes ARA Executive Director Russell Zimmerman.

The growth of online shopping in recent years has been a phenomenon to witness, and stands testament to the fact that the retail industry is going through perhaps the biggest period in history when it comes to the changing needs of consumers, growth and economic pressure.

That online, and therefore multichannel retailing, is the biggest growth area in Australian retail is no secret, and the Australian Retailers Association estimates it will continue to grow by up to 20 percent per year over the next few years. It’s only stating the obvious that retailers will be embracing opportunities offered by a constantly connected customer.

According to a recent presentation by Google at an ARA event, Creating Success Online, the top reasons why Australians shop online is product range and convenience, with the significance of price paling in comparison to this ‘top two’.

This presents a huge opportunity for Australian retailers to make sure their products are available in the multichannel shopping world to an increasingly connected consumer – to whom the channel through which a purchase is made is becoming increasingly irrelevant.

Supporting the Local Retail Industry to the Benefit of All

The projected growth in Australian online retail has necessitated moves to level the playing field for tax on offshore transactions to be collected, rather than slipping through the fingers of state economies. In light of this, ARA is calling for urgent implementation of the recently released Low Value Parcel Processing Taskforce’s final report recommendations.

The ARA believes not only will any delays to implementing recommendations create an inherent tax divide between onshore and offshore retailers, but also hamper the ability of the states to collect much- needed revenue, which ultimately goes towards employing the likes of teachers and police, not to mention relieving pressures on household budgets, which will in turn further stimulate the economy.

The last thing state economies need is for hundreds of thousands of dollars in potential revenue to slip through their fingers.

The sweeping reforms recommended by the Taskforce will also ensure Australian retailers can grow and innovate towards business success as a vital part of Australia’s economy, regardless of whether these retailers are operating bricks and mortar, online or multichannel businesses.

As more Australian retailers are moving and opening online the bulk of offshore transactions will remain uncollected due to the 2010-11 68.17 percent fall in the under $100 category. It’s imperative to implement the recommendations to start drawing the threshold below that figure in order to allow equal tax treatment.

Retailers need support – not barriers – to grow their businesses in the online space in order to respond to consumer demand. Many retailers are operating small businesses, and at the end of the day they’re trying to make a living and go home to their families.

Contrary to trying to stop online shopping or indeed overseas shopping, retailers are looking to join in on this and engage with their consumers in ways relevant to them- this can only be done fairly if the playing field is level. The reduction of the LVIT would remove one barrier for these Australian retailers and allow them to thrive and survive as part of a $240 billion economic sector.

 

4 Comments

  • Hi Russell, thanks for taking the time to write on Power Retail and add further explanation and weight to the ARA position. I agree with you that the states would benefit from the extra GST revenue, you only need to look at Victoria, NSW and Queensland all laying off public servants and struggling to meet wage demands of teachers, police etc.
    Although if the dollar falls then overseas imports aren’t as attractive anymore, and research indicates that consumers prefer local options so shouldn’t the ARA be pushing for more assistance to get businesses online providing an ‘omnichannel’ offering? The reality is that online is always going to offer the most efficient way to conduct retail, think wages, distribution, space, zoning all give online an advantage.
    So even if you even the playing field on a tax sense; tough retail conditions we keep hearing about aren’t really changed at all. I know the basis behind the need to change GST laws has changed recently – but what about rewarding innovation and assisting the small guys be in the space, I’d love to help you and the ARA get more businesses online.

    Reply
  • Why do people persist in peddling this bogus GST angle? Implementing GST on overseas purchases is not going to save local retailers.

    An extra 10% won’t make the slightest bit if difference to the consumer when prices difference of some goods is 500%. Lopping 10% off the savings is just minuscule as far as the consumer is concerned. They are still going to buy it overseas.

    You have to wonder whether the ARA and others seriously believe what they are saying or they are just playing politics and need to be seen to be doing something.

    Their argument is getting tiresome, no-one believes it and they just end up looking foolish every time they put it forward.

    Online retail is not the enemy, it’s the savior and the sooner all retailers realise that the better off they will be.

    Reply
  • Our direct competitors are offshore – we have to collect GST on sales and they don’t. It is cheaper to post something from Hong Kong to Perth than from Sydney to Perth because Australia Post apparently doesn’t charge overseas postal organisations for deliveries within Australia from overseas – instead the local parcel market has to subsidise that. So we pay tax and they don’t – and we effectively pay for their deliveries – and we’re meant to be able to compete?

    Reply
  • I run a local small business with a shopfront and this will just about kill me.

    Half my stock comes from Australia. But the other half is mostly specialist retail goods that can’t be gotten locally and come from a number of overseas suppliers. I’m already paying something like 30-40% shipping costs to get it here – as opposed to about 10% shipping to buy something in Australia. So keeping prices down is a real struggle. If this goes ahead, I’ll be taking an extra 10% GST and, I might add, an extra 5% sales tax which will no doubt get loaded on top of this. Which means a roughly 33% increase in my sales prices so that I can leverage on my capital.

    Most of my goods are under $100 in value and at the moment I’m competitive with internet suppliers. If this goes ahead it will knock me out of the market. Well done, Mr Zimmerman.

    Reply

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