Govt denies plans to block retail sites that don't pay GST

The federal government has denied the tax office intends to use a legislative loophole that would allow it to block access to overseas websites that don't collect the goods and services tax on products sold in Australia.

It followed a report by consumer group Choice this week which brought to light powers under the Telecommunications Act that would allow the government to force telcos to block access to foreign retail sites for the purpose of enforcing tax law.

Treasurer Scott Morrison last night said the powers had been around "for decades" and had yet to be used by the Australian Taxation Office.

".. there's nothing to suggest to me that this is something they'll put on the top of their list," Morrison said on Sky News.

Choice quoted an unnamed Treasury official as saying the loophole would be used as a last resort.

The government's so-called Netflix Tax Bill was unveiled last year and passed into law in May. It will see the 10 percent GST applied to all digital goods bought by Australians from overseas sites from mid-next year.

The ATO will ask companies that sell more than $75,000 worth of products into Australia, and not-for-profits selling $150,000 worth of goods, to register with the tax agency for GST collection.

The bill came as part of a package of policies and legislation intended to stamp out tax avoidance by multinationals operating in Australia, which included the government's decision to remove the $1000 GST-free threshold for locally-sold online goods by mid 2017.