Thread: GST on Imports

I heard Gerry Harvey rabbiting on about this an ABC radio. He mentioned Amazon a number of times and his whole point seemed to be that local overheads were so much higher and he simply could no compete with Amazon.

It is interesting to not that a 16Gbyte Ipad , a fairly universal product, can be had for 529 US on Amazon (plus shipping etc.) and for 629 AUS at Harvey Norman.

For that difference, probably less than 50 bucks, I really cannot see too many people buying from Amazon, Then of course you have the problem that Amazon won't ship an Ipad to Australia.

I think Gerry Harvey has a totally different agenda, perhaps some sort of tax break for setting up an off shore online store.


What really pisses me off is when Australian distributors whack up the price of products beyond reason. I want to buy a Milescraft router pantograph. Made in China for a USA company, sells in the USA for 40 -50 bucks US. I can get it landed here for less that 70 AUS. The local distributor in Perth wants $155 plus shipping. The shipping from Perth is almost as much as from the USA. I would be willing to pay , probably $110 inc. shipping to buy it locally but not the way over inflated price they are asking.

Gerry Harvey and his mates at Myer and Timbecon can get.......

Regarding the "$1000 limit" on GST free imports.
It's not really a limit.
It costs the Government money to assess, collect and bank GST levied on imports.
At some point the amount of GST (and import duty where applicable) collected is less than the cost of collection so why spend tax dollars for nothing.
The "why bother collecting it" level is currently set at $100 -- which translates to $1000 in terms of actual goods
This could be changed up or down at the stroke of a Minister's pen

The move to an online shop operating out of China is really about putting the orders as close to the supply of goods as possible. At the moment, HN imports goods in bulk as a wholesaler, then distributes those goods to the francishes. All this time the goods are waiting to be sold to the consumer. It takes cash out of the business and leaves them exposed when the dollar goes up.

This move will free unsold inventory, and basically mean that any goods shipped will be already paid for by a consumer. Quite a good business model, albeit about 5-10 years behind the times, so certainly not revolutionary...

and yes...I have bought stuff from the states in the last few years, and thanks to online ordering and PayPal, often shipment occurs next day...

Amazon sources much of its products from USA based importers and manufacturers. Gerry Harvey hopes that most Australians don't know this. He can compete on price but chooses not to because his franchise system demands too many middle men in the retail chain.

However, the Aussie profit margin also seems to be way over the top for most goods. For example, identical washing machines and fridges in Asia and the USA sell for less than half they do here. Its not freight cost that does it but it is the importers and retailers ability maximise prices in the absence of any alternatives.

Competition is the only way we we see prices approaching reasonable levels. This is starting to happen in the flat screen TV market which I think is due to a couple of factors

1. Importers such as Kogan and other retailers selling direct

2. The flat screen TV market is maturing and is relatively saturated with many homes already owning flat screen TVs. Prices have to drop if they want to entice consumers to trade up.

Its doubtful we will be lucky enough to see similar price drops in other market segments unless there is more open competition from overseas.

The dilema for Government is the impact on GST and income tax revenues. If Myer and HN do well they may well pick up some extra company tax but will not pick up tax on Hong Kong employees wages or GST under the current regime on most purchases (not to mention unemployment benefits to any Aussies laid off). If it really takes off the revenue will have to be made up somewhere so one way or another and that will be through the tax system somehow.

Originally Posted by Big Shed

Bill Shorten was on the ABC News tonight and emphatically stated that there would be no change to the GST regime for imports or that the limit would be lowered.

He repeated himself several times and stated that our local retailers would have to learn to compete with internet sales as they were a fact of life.

So it seems that issue has been laid to rest and Mr Harvey will have to live with that.

I saw that and was genuinely surprised and pleased. Call me pessimistic, but I think it might have a lot to do with a government on a minority and more to do with voter backlash.

But that aside, hopefully it is and will remain buried.

Originally Posted by Waldo

But that aside, hopefully it is and will remain buried.

Let's hope so or we'll be paying twice - once for the GST on items of less than $1000 and again through the tax system for the money lost in collecting it.
Cheers,
Jim

I think Myer's scheme will come unstuck in a number of places. Firstly, Myer will be looking to charge you full retail less GST, plus freight - the end cost is lilkely to be quite high.

If they try to cut freight costs by importing in bulk, I'd expect Customs to hit the entire container load with a GST assesment as it is a single shipment from one supplier (Myer China) to a single customer (Myer Distribution Au.) not individual shipments.

If Myer also set up a Post Office in China for shipping, with every order separate, then it would not take much for Customs to make a declaration that the whole thing is an attempt to avoid tax by Myer (which it obviously is) and subpoena all relevant documents, hit Myer with a GST bill plus penalties.

Originally Posted by bsrlee

I think Myer's scheme will come unstuck in a number of places. Firstly, Myer will be looking to charge you full retail less GST, plus freight - the end cost is lilkely to be quite high.

why do this?
full retail covers their stock holding and retailing costs in Australia plus their profit margin.
If something they sell here for $50 only costs $5 in China, why not sell it on-line for $20?
if shipping is $15, the customer who is paying a total of $35 still thinks they have saved $15 -- a bargain compared to Australian retail -- plus they have "saved" $5 in tax (GST)
Myer who might have cleared $5 in profit when selling the item in Australia (after overheads), has now made $15 in profit (300% profit in accountant's speak) -- the only loosers are Government revenue, Westfields who miss out on their "share" of Myer's turn-over and the reduced number of wharehouse and part-time sales jobs at Myer.

If they try to cut freight costs by importing in bulk, I'd expect Customs to hit the entire container load with a GST assesment as it is a single shipment from one supplier (Myer China) to a single customer (Myer Distribution Au.) not individual shipments.

this is what happens now

If Myer also set up a Post Office in China for shipping, with every order separate, then it would not take much for Customs to make a declaration that the whole thing is an attempt to avoid tax by Myer (which it obviously is) and subpoena all relevant documents, hit Myer with a GST bill plus penalties.

it's not Myer who is avoiding the tax it's the customer. When you buy something from Myer, you are liable for the GST, Myer just collects it on behalf of the Tax Office.
Similarly, if you sell something to Myer, you are liable to pay the GST on the supply, and if you can't prove you will -- i.e. you don't have an ABN -- Myer is obliged to withhold 10% of the payment.

I don't see how a Myer or Harvey Norman on-line store in China would be any different to any of the existing Hong Kong or US on-line retailers

I don't think Myer is looking to save GST or duty. 10% saving for most goods is hardly worth the effort of buying overseas.

Rather, they will be looking to cheaper Chinese warehousing and labour costs to make up the price difference. That is to say, they will save a ton of money by employing Chinese people instead of Australians.

The Customs and GST laws are quite complex and who has liability upon imports depends on which incoterms the contracts are expressed i. ie whether the contracts are FOB, DDS, etc

For example, an FOB (Free on Board) contract is what we normally sign up to when ordering goods from overseas. We pay freight on top of the price of the goods and bear the risk for the transportation ( for which we can insure or make claims against freight companies)

A DDP contract (delivered duty paid) is where the seller takes all the risk and pays for duty etc. But they will have to charge GST in Australia regardless of price.

I don't know what Myer are planning but I know enough about our Customs and Taxation authorities to know that if Myer plan on bringing in shipments of goods for thousands of individuals, they will take a very close look to see if they are indeed acting as an importer in their own right. In any event, a wholesale avoidance of GST and duty will almost certainly lead to legislative changes designed to tax the goods as if they were imported through the normal channels. This is what usually happens when a company decides to commercially exploit tax concessions designed for individual citizens.

I see we are now to have an "enquiry" in to internet sales, the usual cop-out for governments that won't (or can't) make a decision.

It was interesting to to see some of the figures being quoted by the previous ACCC enquiry. Apparently they found that only 3% of total internet sales came from the internet, and they estimated that 50-80% of that came from Aust based internet sites.

So all this kefuffle is about, at best, 1.5% of total retail sales not being subject to GST.

Makes a mockery of the statements by Mr Harvey.

There were a couple of people being interviewed (one from Choice) and both stated that the retail scene is changing rapidly and that the local retailers have been extremely tardy in recognising this.

In my experience, if I buy something from overseas the saving amounts to far more than the 10% GST. In fact I have just paid for an order for more than $US400 worth of tooling. If I had to pay the 10% GST on this on arrival I would still be way in front over the same items purchased at local tooling places. Some of the items in that order are about a third of the local price.

I now buy most of my books from overseas, again for a far bigger saving than the 10% GST, most are priced including postage to Oz and they get here in 7-10 days. I am not aware of any Oz bookseller that can, or will, compete with that.

I have never spoken to anyone that buys from overseas internet sites that does so because they save 10% GST, the postage alone would amount to more than that!

I fully agree with Fred and others. If GST was the only difference, nobody would bother with overseas online purchases, unless the item cannot be obtained in OZ. When I purchase online the saving is usually in the order of 50 - 70 percent after shipping is included.
Regards
Les

It wont change, its just to much effort on the governments behalf to levy it.

Example if you bring something in to australia through the postal service, the limit is 1000 aud including shipping before you start paying any duties or penalties,

So basically the government has already set a base line that below this amount (1000)its not worth there time, however private import companies like fedex etc the amount before it attracts duties is something like 250 dollars including shipping, so the government couldnt be bothered collecting on amounts up to 1000 but they will enforce any private company to do any on amounts above 250.

Typical government, hence why I said it wont change

If this is all about avoiding the GST it just isn't worth the effort, Gerry. I'll just pop down to the local and have it in my hand today, thank you. 10% be damned. People do it because the cost difference justifies the action.

Watching a current affairs show about Gerry Harvey operating undercover recently shows him whingeing about his sales staff talking about dropping prices too soon in the deal. He has missed a very important point here. If you are not prepared to seduce your customers with price deals and fast, they will look elsewhere for someone who will. The sale would already be lost. I am one of these types of customers.

Then there is the lost opportunity of the upsell. Not as easy to do this over the net. How many of us have been to HN and bought - let's say a computer.

"Sir, you should really consider a Flexirent deal. Save your cash and rent." But it's 2x the price! "Your benefits outweigh the cost (runs through the 2000 point benefit checklist)....and your ABN will make it tax deductible (note this point). You should also consider extended warranty for $xx. Put that on the invoice and you get - to really protect yourself you should buy a $200 surge protector and upgrade the anti-virus, etc, etc.... We have already pre-approved your credit to cover all this."

So if you're not too switched on at the time, you have just bought a $2500 computer and committed yourself to spending nearly $6000 on the whole exercise. Not much price deals available on credit terms. But if you only had $2500 cash, you still have to commit to a finance deal to cover the rest.

A year later you're telling yourself what an idiot you were for being sucked into a BS deal, looking for the money for the next horrendous repayment installment.

I think this is where much of the profits come into this industry. Buying over the net simply doen't do this as there is no salesman to apply the pressure.

I have since learned never to shop at places like HN for big ticket items as it is usually cheaper elsewhere if you use your commonsense and you get the added bonus of no one pushing the bulls**t add ons. In short I don't trust myself anymore to even step in the door, just in case. I was one of those dills that got caught once. Incidentally, in my situation, my ABN did not get me any tax deductions for the deal at the end of the day.