Amazon purchases and new GST Rules

[Fuzzie]

I'm pretty sure Amazon is capable of calculating different taxes correctly for various states in the US so I don't think calculating GST for Australian shipping addresses is really going to be that challenging for them. I suspect they just want to force every Australian onto the local portal.

I'm more concerned about the per package fee proposed by the Home Affairs Department on parcels. This will mean my $1.20 widget including postage (plus GST of .12, {will they also charge GST on the shipping cost portion?}) from China will now attract an additional $5 Home Affairs handling fee. How is it going to be collected? Why doesn't the Government just add the 10% GST charge at the same point? Given we have tax treaties with a lot of countries, will any overseas VAT paid be credited against GST to be paid locally? If not isn't that double taxing?

[AlexS]

The alternative would be to go back to the old days, when we used to have to pay import duty before collecting imports from the customs depot in Elizabeth St. in Sydney.

[dai sensei]

Not really sure what is going to happen, but the new tax frameworks are for less than $1000 value items, it has already been applied to items over $1000 for the past year. Anyone got any experience of how it effected those items in the past 12 months, i.e. did they go up by 10%/20%/300% ?

[chemfish]

Simple answer - Markup doesn't equal profit.

If I buy 100 widgets for $100, and then sell them to you for $200, I've made $100 profit right?

NO!

I made a $100 contribution to my fixed costs, like rent, office equipment, wages, electricity, etc. Only once I've paid for all those underlying fixed costs do I start to make a profit.

I think everyone understands these basics.

But, when a company like Harvey Norman that operates in the hundreds of millions of dollars of net income (ie after wages, tax, electricity etc) and is run by a billionaire is complaining about unfair competition........

It should be noted that these stores will also happily undercut smaller local competition, by just enough to win the sale. No one in business sells for a common and fair margin, you sell at the highest price you can, if the small local store is buying a tv for $1000 and selling at $1500 and you are buying the same thing for $400 you don't sell at $900, you sell at $1450.

[cava]

I haven't really been following this issue, apart from the big headlines, but is there any limit that the GST is not imposed? ie <$50 etc

[dai sensei]

I haven't really been following this issue, apart from the big headlines, but is there any limit that the GST is not imposed? ie <$50 etc

My understanding is no, all purchases will attract tax, but I have no idea how it is going to be enforced. Maybe China will just make everything free but charge for postage

[ian]

I haven't really been following this issue, apart from the big headlines, but is there any limit that the GST is not imposed? ie <$50 etc

from memory it's supposed to be
>$1000 (goods + Shipping), 10% GST as per current arrangements -- i.e. collected at the border
$300 to $1000 (goods + shipping), 10% GST collected at point of sale, or point of on forwarding if you use a freight forwarder like Shipitto.
<$300, GST free.

[ian]

I'm pretty sure Amazon is capable of calculating different taxes correctly for various states in the US so I don't think calculating GST for Australian shipping addresses is really going to be that challenging for them.

As I understand the US sales tax regime, tax is only payable where the retailer and customer reside in the same state. And collecting and paying the tax is the retailer's problem.

Again as I understand the new "rules", Australia is making Amazon responsible for collecting the tax for all goods bound for Australia where the sale is transacted or the retailer accessed through Amazon.com, amazon.co.uk, etc

[FenceFurniture]

from memory it's supposed to be
>$1000 (goods + Shipping), 10% GST as per current arrangements -- i.e. collected at the border
$300 to $1000 (goods + shipping), 10% GST collected at point of sale, or point of on forwarding if you use a freight forwarder like Shipitto.
<$300, GST free.

I've just looked through as much of the ATO and Home Affairs websites as I can stand for one session, and I've seen no mention of $300 whatsoever. No mention of $50 either.

However, what does stand out time and time again is that if the goods are >$1000 then the GST (and any applicable Import Duty) will be charged at the border, just the same as it currently is. That is to say that the retailer/freight forwarder etc DOES NOT charge the GST and forward to the Govt, but the receiver will be sent a First Notice by Aust Post, pay the GST and Duty, and then the goods will be released by AP for delivery.

What is not clear, or even mentioned by those sites, is what happens when purchasing from a retailer who DOES NOT sell more than $75,000 pa to Australia and who is sending a package that is less than $1000. Apart from eBay, Amazon, Lee Valley and perhaps a few dozen others, this will include a helluva a lot of retailers who are sending stuff here.

I can see giant cock ups coming out of this. For example, I have dealt extensively with Shipito over the years. Trying to get them to understand anything more complex than 2 + 2 = 4 is virtually impossible. I can just see them saying that GST has to be paid to them for ALL parcels, inc those >$1000. That will mean that Home Affairs will also demand GST upon arrival, the customer will have to claim the first GST back from Shipito, who in turn will deduct it from their next GST return to the Aust Govt.

Yeah right. That should go very smoothly indeed. Shipito are masters of hiding behind private agreements. For example they say Knives can't be carried by TNT, but TNT Australia says that's OK. Shipito then says "our agreement with the agent here says no". Same deal with wooden items or parts coming via Aust.Post.

[FenceFurniture]

Furthermore, I believe that the legislation has been designed to make retailers overseas completely uninterested in sending stuff to Australia unless it is >$1000. What retailer wants to faff around collecting tax for the Aust Govt? For the amount of sales they might make in a year I think they'll just forego that share of the market that they MIGHT have.

THAT is really what Harvey wants. Overseas retailers collecting and paying GST is of no benefit to him whatsoever - no increased sales for him there. He thinks that if it is too hard for the overseas retailers then we will be forced to purchase from him.

John Elliot response to that!

I will go to even greater lengths to not purchase from him.

[ian]

I've just looked through as much of the ATO and Home Affairs websites as I can stand for one session, and I've seen no mention of $300 whatsoever. No mention of $50 either.

the $300 might have been an assessment or assumption in a Productivity Commission report on the issue.

[ian]

I can see giant cock ups coming out of this.
snip
I can just see [overseas retailers] saying that GST has to be paid to them for ALL parcels, inc those >$1000. That will mean that Home Affairs will also demand GST upon arrival, the customer will have to claim the first GST back from Shipito, who in turn will deduct it from their next GST return to the Aust Govt.

Yeah right. That should go very smoothly indeed.

yeah right, it will go very smoothly indeed

we'll all end up paying double GST.

better get ready to write to Malcolm, your MHR and Senators and don't forget comrade Bill

[ian]

I believe that the legislation has been designed to make retailers overseas completely uninterested in sending stuff to Australia unless it is >$1000. What retailer wants to faff around collecting tax for the Aust Govt? For the amount of sales they might make in a year I think they'll just forego that share of the market that they MIGHT have.

THAT is really what Harvey wants. Overseas retailers collecting and paying GST is of no benefit to him whatsoever - no increased sales for him there. He thinks that if it is too hard for the overseas retailers then we will be forced to purchase from him.

John Elliot response to that!

I will go to even greater lengths to not purchase from him.

here here

[q9]

I think everyone understands these basics.
But, when a company like Harvey Norman that operates in the hundreds of millions of dollars of net income (ie after wages, tax, electricity etc) and is run by a billionaire is complaining about unfair competition........

It wasn't really directed at HN, but HN is a different thing altogether. Amazon will kill him and he knows it. Like clockwork for the last 6+ years, about 6-8 weeks out from reporting season he's out there bleating about tough conditions, unfair advantages that competitors have, etc.

Then along comes Amazon which takes away the overheads of retail storefronts...welcome to the future.

[aldav]

Half the problems to do with excessive markups in Australia, particularly on specialist goods, are due to our small market and relative isolation.

A local importer negotiates an exclusive contract with a manufacturer to be the only supplier of the manufacturers goods in Australia. The importer acts as the distributor to the local retailers. The manufacturer won't deal with any other importer and also has in place agreements with their overseas wholesale agents to not supply Australian importers. The local distributor now has a chance of moving the product without having to hold it for an extensive time because he has tied up the whole Australian market, if you want it it has to go through him. The problem with this model from the consumers point of view is that there is another level in the supply chain that needs to make profit out of the goods. By the time the item gets to the consumer the price has gone up to four times what the distributor originally paid for it.

A retailer directly imports some specialist goods, they have only one or two outlets. Because of the combined constraints of our market size and their size they are unable to buy at the best price. On top of that because of their size they end up taking longer to sell the stock. Buying stock and holding stock for extended periods costs money. So relative to bigger markets the price goes up.

Any of the bigger retailers, particularly those with huge advertising budgets, are able to buy at the right price and sell at much bigger margins. I don't know why anybody ever buys anything from Harvey Norman. Take the example of Brand Name beds, lets say Sealy, you can buy the same bed at multiple retailers (yes I know it will have a different model name label on it - but it's the same bed). If you can't get it for 30% less than the price that Harvey Norman wants for it you're not trying.