'You won't feel a thing': how the GST will hit online shoppers, or not

Online shoppers have 675 days left of tax-free online shopping after Treasurer Joe Hockey moved to whack the 10 per cent GST on all online imports from July 2017.

But according to tax experts, it may not have as much impact as you think.

NOT EVERYTHING WILL BE CAUGHT

There is a threshold before small businesses are caught.

Scottish sellers of artisan raw hand-spun wool, for example, selling less than $75,000 to Australia, won't have to collect GST and forward it to the government.

Melbourne Law School senior fellow and former KPMG tax partner Michael Evans, who has written a paper pushing for the change, said the point was to grab the majority of online purchases not all of them.

"You might say how are you going to catch these suppliers? Well the view may be if we get the majority then we have solved our revenue problem.

"If you get the big ones you'll get 80 per cent of your revenue as well, 80 per cent per cent of revenue comes from small percentage of suppliers...We have to be realistic and say a number of offshore retailers will probably not comply with the system," he said.

University of Sydney tax law professor Rebecca Millar agreed saying, just like in Europe where many online music retailers ignore the EU's electronic services rules, it was likely many businesses will not comply.

YOU WON'T REALLY CARE'

On top of the often high shipping costs to Australia, it might not even register for online shopping pros, says Mr Evans.

"I think what happens is once consumers engage in online shopping if they are comfortable with the experience then convenience takes over, I don't think the GST cost is relevant, you won't really care," he said.

Professor Millar argues a high threshold for the amount a company is selling into the country is important, pointing to the example in the EU.

From the start of 2015, foreign companies selling digital services had to start using the VAT rate of the country of their consumer, but only 12,000 out of an expected 1 million registered.

She says the $75,000 threshold might be too low, especially for businesses selling items worth just a few dollars.

"The question in my mind is whether there should be a higher threshold for non residents whether it should be significantly higher than $75,000," she said, saying policing smaller parcels could beef up compliance costs.

'WELL IT IS TOO HARD'

A low threshold could impact the variety of goods available to Australians, by putting off the mum and dad sellers of say, pure organic argan oil from Morocco's Guelmim-Es Semara Region.

"It is potentially possible that some businesses will go well it is too hard I might stop selling to Australia," Professor Millar said.

She also said authorities need to be wary, since any move here will eventually come to bite Australia's small online retailer.

"There is a reciprocity issue what we are doing to foreign businesses, other countries are going to want to do to our businesses.

"Our exporters with relatively small levels of production are going to have to start registering for VAT in a whole lot of countries around the world...[and] to some extent that might dampen trade," she said.

In the end, however, experts say with so many other countries moving towards collecting GST or VAT from foreign supplies, it's the right thing to do.

Both Millar and Evans say the challenges, and the fact authorities don't know how much it is going to make, are not reasons not to do it.