All goods bought from overseas will face a 10 per cent goods and services tax from July 2017 under a landmark deal agreed to by state and territory treasurers.
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But the GST on tampons and sanitary products will remain after the treasurers from Liberal Party states including NSW argued against its removal, killing the idea.
At Friday's tax summit, the treasurers agreed that goods bought from overseas should face exactly the same GST as goods bought in Australia.
This means that foreign businesses with a turnover of less than $75,000 will be exempt from the requirement to collect it in the same way as are small Australian businesses.
Big businesses such as Amazon, Apple and Netflix will be asked to collect the tax. Mr Hockey said he expected most to agree. Apple already voluntarily collects Australian GST on sales through its iTunes store.
"We are going to have taxation officials travel around the world visiting these companies asking them to register for GST purposes," federal Treasurer Joe Hockey said.
"There could be hundreds of them. However, what we are able to do is to narrow down the number of high-volume goods vendors."
If things worked well, Mr Hockey might be able to bring in the new requirements early, before July 2017.
Victorian Treasurer Tim Pallas said the process would take years to bed down.
"Mr Hockey told us about 50 internet sales companies make up the vast majority of internet sales. Apparently many of them are prepared to do it, but it will take a long time to get this right, if ever," he said.
Mr Hockey said he had no idea of how much revenue the extra tax would bring, but it was certain to exceed the cost of collection because Australian officials would not be asked to open parcels to check whether tax had been paid.
The Retail Council said modelling undertaken by Ernst & Young showed the measure would raise more than $1 billion in its first year.
On tampons and sanitary pads, the treasurers split on party lines. All of the Labor treasurers supported exempting sanitary products from the GST, all of the conservative treasurers opposed its removal.
The exemption would have cost $120 million over four years.
"I am bitterly disappointed," Mr Pallas said. "The women of Australia have every right to feel dudded by the way the Commonwealth and the conservative states have dealt with this."
Under the GST rules, every state and territory needs to agree before the rate or coverage of the tax can be changed.
Mr Hockey undertook to further investigate a proposal by NSW to lift the GST rate from 10 to 15 per cent, and also a Victorian proposal to lift the Medicare levy from 2 per cent to as much as 5 per cent to fund the gap in state funding that will be left as the Commonwealth withdraws $80 billion of grants to state hospitals and schools over the next 10 years.
The meeting agreed that now was not the right time to cut real estate stamp duties because of the risk that it could further inflate already-high house prices. Mr Hockey commended the Labor government in the ACT for its courage in pushing ahead with plans to do so by itself.
