Goods bought online from overseas will attract the 10 per cent GST under a deal struck by the country's treasurers.
Business groups have welcomed the decision, saying it will level the playing field for Australian companies.
From July 1, 2017, overseas suppliers will need to charge, collect and remit the GST for digital and physical products.
But only vendors with Australian turnover of $75,000 will need to register and charge the GST.
The state and territory treasurers failed to agree on taking the GST off feminine hygiene products.
"It's their tax, it's their revenue," federal Treasurer Joe Hockey told reporters in Canberra on Friday after the meeting.
"Any changes to the base or changes to the rate of the GST need the unanimous decision of the states and territories."
The treasurers, who will meet again in October, agreed to a wider look at tax reform.
Mr Hockey admitted the GST change on online sales could affect hundreds of overseas companies and be difficult to enforce.
But "global pressure" will ensure big players such as Amazon take part in the system, he said.
When asked if the step broke the coalition's pre-election promise not to make any changes to the GST this term, Mr Hockey said it is an "integrity measure" and will start in 2017 after the next election.
It also has the agreement of Labor states and territories, he said.
The treasurers agreed to keep all reform options on the table through later talks on changes to the Medicare levy and further work on the GST.
Retail Council chief executive officer Anna McPhee said the change will ensure the system is fair and efficient, while delivering extra revenue to the states.
The council's modelling shows GST collections could rise more than $1 billion in 2015-16 and $1.7 billion in 2020-21, with collection costs of just $37 million.
CPA Australia chief executive Alex Malley said there are "significant uncertainties" around a model that relies on securing the support of big players and hoping behaviours trickle down to smaller players in the international market.
"Dealing with the elephants is one thing, the mice quite another," he said.
Mr Hockey said tax office staff will travel around the world to sign up vendors.
