Leaders take first step in GST changes

Retailers believe they'll be back on a level playing field after the nation's leaders supported plans to make internet shoppers pay more for some foreign goods.

At the two-day gathering, the leaders agreed to broaden the GST to include overseas online transactions under $1000.

"That effectively is bringing the current tax system into the modern age," NSW Premier Mike Baird said after the Australian Council of Governments (COAG) meeting in Sydney on Thursday.

The leaders did not rule out making other changes to the GST.

The $1000 threshold exemption on foreign goods was established when the GST was introduced in 2000 and at a time when online shopping was in its infancy.

Bricks and mortar retailers in Australia have long complained about the exemption.

Retail Council chief executive Anna McPhee said the decision was an important step forward in ensuring goods and services consumed domestically were taxed in the same way.

There have been previous discussions about abolishing the threshold but this had been rejected as being too expensive to administer - the cost of collecting GST would be higher than the additional revenue it created.

Federal Treasurer Joe Hockey has said that as a result of consultations with the UK and several other jurisdictions, he believes there is a new way of collecting the GST on imported goods and services.

This will be discussed further next month when Mr Hockey meets his state counterparts.

A special leaders retreat of Prime Minister Tony Abbott, premiers and chief ministers on Wednesday discussed Mr Baird's proposal of raising the GST from 10 per cent to 15 per cent.

This move, and a proposal from some Labor states to raise the Medicare levy to finance future health needs, remain on the table for further consideration.

The meeting agreed that more work was needed to find the funds needed for health in the future, estimated to be at least $35 billion a year by 2030 out of a total overall $45 billion budget shortfall.

Mr Abbott said his preference was the consideration of GST issues, rather than a simple increase in the Medicare levy.

"The GST is a joint exercise by the Commonwealth and the states, whereas the Medicare levy is simply a commonwealth tax," he said.

Australian Chamber of Commerce and Industry boss Kate Carnell said the leaders had taken the right approach by keeping all options on the table to get the best outcome.

Shadow treasurer Chris Bowen reminded the prime minister that he promised on 33 separate occasions before the last election not to change the GST.

"Today you confirm you'd prefer to increase the GST by 50 per cent," Mr Bowen said in a statement.

"Today you confirmed that you will continue your attack on low and middle income earners by directly adding to their cost of living."