NZ officials eyeing Australian tax fix

The chances of Kiwis having to pay GST on internet shopping purchases any time soon may hinge on whether rules announced by the Australian government on Friday prove workable.

The Australian government announced it would press ahead with a so-called ‘‘Amazon tax’’ that will force foreign businesses to collect GST on both physical goods and digital products and services sold to Australians from July.

Tax experts said New Zealand government officials would be closely watching the success of the scheme.

At stake may be whether Kiwis have to pay about another $200 million a year in GST on myriad imports, from the likes of books bought from Amazon to clothes purchased from Asos.

Australia will require foreign firms that sell more than A$75,000 worth of goods and services to Australians each year levy GST on purchases worth less than A$1000 (NZ$1060), from July.

In an unexpected twist designed to avoid one risk of confusion at the border, it has proposed consumers should remain responsible for paying GST on imports that exceed the A$1000 threshold, regardless of the supplier.

The New Zealand government has required foreign firms to levy GST on sales of digital products and services since October 1.

However, it has put the idea of extending the tax to physical imports that fall under the usual tax-free threshold of $400 on ice because of the practicalities.

Deloitte tax partner Allan Bullot said the Australian approach announced on Friday was ‘‘brutally pragmatic’’, in that it was designed to capture GST from most large foreign firms with the least number of changes to the country’s border regime.

If successful, it could pave the way for New Zealand to extend its GST rule change from digital services to also include physical goods, he said.

‘‘If they did the equivalent in New Zealand they could probably bring this in tomorrow from a Customs perspective,’’ he said.

However, it remains unclear what proportion of foreign firms will play ball with the new Australian regime.

PwC tax partner Eugen Trombitas believed it had a good chance of working well enough to be judged a success. But he said Australia’s move was brave.

The ‘‘worst case scenario’’ was that foreign firms ignored the rules or that they got mired in confusion – for example, over exactly who in the supply chain was responsible for levying the tax – delaying the introduction of similar changes in New Zealand.

Bullot estimated there might be hundreds of New Zealand firms that would have to levy GST on sales to Australians from July because of the rule change.

‘‘If you are a high-grade food supplier that has got a boutique market selling sun-dried tomatoes into Australia then potentially you will be caught by this if you are selling to the end consumer.’’