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How changes to the GST will affect your online shopping

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Australians love online shopping. According to the Australian Bureau of Statistics, three out of four internet users make purchases online, with many of us attracted to the variety and convenience of browsing the web.

If you spend less than $1000 at a time, online shopping can certainly save you money. This is because online goods and services have a low-value threshold (LVT) of $1000, meaning that items that cost less than this are GST exempt.

There has been talk of lowering the LVT for quite a while now, with the treasurer, Joe Hockey, labelling the idea as the "Netflix tax" earlier this year. This is now set to become a reality, after a senate inquiry last week confirmed that the LVT will drop to zero from July 1, 2017.

gst online shopping

How will this affect me?

While it's uncertain at this stage how a 10% GST will affect online shoppers, the consumer group Choice predicts that it will increase the cost of small purchases.

Regulating online GST will involve many extra costs for both the government and international businesses.

In some cases, a small purchase could attract less GST than it would cost the government to collect, which Choice believes would lead to increased "collection" or "processing" fees for consumers. In the UK, the Royal Mail charges an £8 handling fee for parcels liable for tax.

This converts to around $17.50 Australian, which could substantially increase the costs for consumers. For example, if you were to buy a £20 item from the UK, you would pay £2 GST, plus an £8 fee, marking up the cost of the original product by almost 50%.

Is there a way of getting around it?

CNet.com.au, a tech website run by the American media network CBS, suggests that virtual private network (VPN) users may be able to dodge the GST bullet. VPNs disguise your online location, so if a website can't verify your location, it is assumed that a consumer with a VPN may not automatically be charged GST. Parcel forwarding services may also help you to avoid GST.

Long used to help consumers buy products that don't ship to Australia, forwarding sites can help you keep your Australian identity a secret.

That said, the federal government has almost two years before the tax is implemented to sort out all the kinks, so you can probably bet that if you try to dodge online GST it will catch up with you eventually.

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Steph Nash was a staff writer at Money until 2017.
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