State Premiers have reached an agreement with the Federal government over the imposition of GST for online purchases under $1000. The new tax will be applied to international vendors who have (until now) avoided the tax by not being subject to Australian law.

The premiers of NSW, Mike Baird, and Queensland, Annastacia Palaszczuk, were asked to ‘review their potions’ on how they wish to charge the tax. Possibilities may include an increase in GST and/ or Medicare levy.

State leaders are expecting the options to be decided upon before the end of the year, so that any vendor, no matter where they are in the world, will have the tax applied equally by all states.

Australian businesses have long complained about being at a disadvantage. Their having to pay GST while international competition didn’t meant they were unable to compete on price.

Consumer groups are divided at the announcement.

Many see it as a loss for consumers, while at the same time admitting it levels the playing field for Australian businesses.

Much was made about the efficacy of imposing such a tax on low cost ($1000 or less) goods. With many financial experts warning collecting the tax could cost more than the revenues gained.

The Australian Tax Office has found a solution by urging politicians to pass into law the obligation of all international vendors to collect and pass on the new tax (much like personal tax) or risk penalties.

The big question is what will happen to the billions of dollars expected to be raised through the newly applied levy.

State leaders have already made it plain they want their share of the pie.

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