GST free threshold removal effect on shoppers and overseas bike shops

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GST free threshold removal effect on shoppers and overseas bike shops

Postby AUbicycles » Thu May 24, 2018 6:37 am

On July 1, the GST free theshold on items purchased (and imported) from overseas where the value is less than $1000 is being removed.

There are no changes to items / imports above this amount - by otherwise it means that the overseas retailers have to register with the Australian Tax Office (ATO), charge and collect the 10% GST on sales to Australian customers.

There is a $75,000 threshold so businesses with low sales volumes are excluded and it is important to highlight that duty and customs processing fees are not levied, so it is essentially an additional 10% price increase for customers who order from major overseas online retailers for with orders less than $1000.

I have some formal responses from the Australian Tax Office who are the government department who are responsible and administering this. That's right, Australian Customs are not involved (except for probably checks / compliance... but not collection).

All of the ATO responses are in the following article which provides some good detail on this topic:
How will the July 2018 removal of the GST free threshold affect Australian Cyclists, Bike Shops and Overseas Retailers


Obviously this affects all imports so is not specific to cycling though in the article it touches the implications on Australian cyclists. Hope that you find this useful and look forward to questions and discussion. In advance, for very specific questions, it may be necessary to direct these to the ATO.

One topic of interest is when is the best time to buy if you do like to purchase overseas (before or after the changes), how the overseas retailers react and comply and whether the strong online Australia bike shops take any further action or run marketing efforts to promote or capitalise on the changes.

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Re: GST free threshold removal affect on shoppers and overseas bike shops

Postby 10speedsemiracer » Thu May 24, 2018 8:00 am

Good work. Answers the questions I had.
Thanks.
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Re: GST free threshold removal affect on shoppers and overseas bike shops

Postby march83 » Thu May 24, 2018 9:23 am

So given a bit of time I'm sure some vendors will just say that it's too hard to keep paperwork for the Australian government so they just won't bother selling to us which will be a shame. Some smaller ones I imagine will just ignore the requirements because they're practically impossible to enforce. Larger ones will bear the brunt (amazon, etc).
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Re: GST free threshold removal affect on shoppers and overseas bike shops

Postby find_bruce » Thu May 24, 2018 10:54 am

march83 wrote:So given a bit of time I'm sure some vendors will just say that it's too hard to keep paperwork for the Australian government so they just won't bother selling to us which will be a shame. Some smaller ones I imagine will just ignore the requirements because they're practically impossible to enforce. Larger ones will bear the brunt (amazon, etc).

Actually I suspect that there will be 4 classes of companies
  1. The compliant who collect the GST & remit it to the Australian Government
  2. As you say those who think its too much trouble & won't ship to Australia
  3. The lazy who won't bother collecting the GST
  4. The unscrupulous who will collect the GST but don't remit it to Australian Government
The whole thing reeks of an exercise in futility. The ATO is unlikely to know who is exporting more than $75,000 to Australia, in relation to the 3rd & 4th categories, there is sweet FA that the Australian government can do about it.

Think of it this way - you are sitting at home in Australia, using Australia Post to send your widgets around the world, when you get an email from the Elbonian Department of Taxation saying you owe them $30,000. Are you going to pay up? They may well get a judgement against you in the Elbonian Courts, but so what ?

The cynic in me suggests the Government know this is hopeless & will either drop it or replace it with a customs charge payable by Australians

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Re: GST free threshold removal affect on shoppers and overseas bike shops

Postby march83 » Thu May 24, 2018 11:12 am

Yeah, it's futile. If the process costs the ATO money to administer then it loses funds overall so they've pushed all the administration onto other entities. Most of those entities have no interesting in adhering to rules that basically can't be enforced as you say. The whole thing is a bit of a joke, really.
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Re: GST free threshold removal affect on shoppers and overseas bike shops

Postby Neddysmith » Thu May 24, 2018 11:22 am

To me it just looks like a token to effort appease the wingers like Gerry Harvey complaining about overseas online purchasing costing them profit of their overinflated prices in the first place. Cant see this changing much, if anything use more services like forward shippers to get things through the system.

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Re: GST free threshold removal affect on shoppers and overseas bike shops

Postby Jmuzz » Thu May 24, 2018 11:31 am

find_bruce wrote:The cynic in me suggests the Government know this is hopeless & will either drop it or replace it with a customs charge payable by Australians


Actually my suspicion is that they will just start charging excessive processing fees on non pre-taxed (identified by QR barcode) packages after the initial rollout is accepted.

What that will mean is that buying from a non compliant seller will cost the buyer $10+ in customs processing fees.
Australian buyers will soon learn to ensure that the overseas seller formally agrees to comply, therefore if the seller does not comply then item is not as described and CC/PayPal will deal with refund.

Compliance will be very simple through PayPal, which already dominates anyway. It is very easy to automate in the PayPal process and spit out a barcode or serial number on the address sticker declaring that Australian tax has been collected.
AliPay will do the same for the China stuff.

If overseas sellers want Australian customers (the fact they have free shipping policies proves they do) then they will make the minor effort to collect the tax and print the barcode, which will be extremely minor if PayPal implements it at their gateway.

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Re: GST free threshold removal affect on shoppers and overseas bike shops

Postby Jmuzz » Thu May 24, 2018 11:48 am

I have a CRC box in front of me now, and note they already use AusPost postage paid QR and barcode system.
It has not been sent via a foreign Postal service, they already have it all inplace to put Australian postal stickers on them and that gets them out of the UK to our door.

No import papers or even item description and value declaration, it's all behind the AusPost barcode which customs scanners are processing and allowing to go through.

So nothing will change (besides taxed price). That barcode linked to AusPost database will declare that tax is paid and it will zip through the automated machine just like it does now.

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Re: GST free threshold removal affect on shoppers and overseas bike shops

Postby queequeg » Thu May 24, 2018 12:40 pm

As stated elsewhere, this is an ATO thing, not a Customs thing.

The import process for items under $1000 is not changing. In fact, Customs has done a massive buck pass and said that from their point of view, anything under $1000 value is assumed to have already paid GST and is treated as a domestic parcel

https://www.homeaffairs.gov.au/busi/car ... taxes/low-

The ATO is relying on overseas vendors to be registered for GST, and charging GST on any package being sent to Australia regardless of value.

If the overseas vendor is not GST registered and they send you a parcel under $1000, nothing changes. Your parcel will still come through GST free. Customs has clearly stated (as above) that they won't be collecting GST off low value imports.
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Re: GST free threshold removal affect on shoppers and overseas bike shops

Postby queequeg » Thu May 24, 2018 12:43 pm

Neddysmith wrote:To me it just looks like a token to effort appease the wingers like Gerry Harvey complaining about overseas online purchasing costing them profit of their overinflated prices in the first place. Cant see this changing much, if anything use more services like forward shippers to get things through the system.


ON that note, I have already seen an e-mail from ShopMate, which is Australia Post's venture for Freight forwarding, saying that from JUly 1st, they are required to charge GST on any parcels going to Australia via their service.

https://shopmate.auspost.com.au/our-rat ... -and-taxes
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Re: GST free threshold removal affect on shoppers and overseas bike shops

Postby jasonc » Thu May 24, 2018 1:00 pm

find_bruce wrote:Think of it this way - you are sitting at home in Australia, using Australia Post to send your widgets around the world, when you get an email from the Elbonian Department of Taxation saying you owe them $30,000. Are you going to pay up? They may well get a judgement against you in the Elbonian Courts, but so what ?

This. Register for GST. Collect 10% extra profit. Win
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Re: GST free threshold removal affect on shoppers and overseas bike shops

Postby BJL » Thu May 24, 2018 1:27 pm

Neddysmith wrote:To me it just looks like a token to effort appease the wingers like Gerry Harvey complaining about overseas online purchasing costing them profit of their overinflated prices in the first place. Cant see this changing much, if anything use more services like forward shippers to get things through the system.


Gerry Harvey is an idiot who has just shot himself in the foot. When I have to pay GST on online purchases, that's LESS money in my pocket to spend locally and also has to be made up somewhere else to pay my other bills. One way I can see to recover my loses is to buy even LESS locally and MORE online.

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Re: GST free threshold removal affect on shoppers and overseas bike shops

Postby jasonc » Thu May 24, 2018 1:43 pm

BJL wrote:
Neddysmith wrote:To me it just looks like a token to effort appease the wingers like Gerry Harvey complaining about overseas online purchasing costing them profit of their overinflated prices in the first place. Cant see this changing much, if anything use more services like forward shippers to get things through the system.


Gerry Harvey is an idiot who has just shot himself in the foot. When I have to pay GST on online purchases, that's LESS money in my pocket to spend locally and also has to be made up somewhere else to pay my other bills. One way I can see to recover my loses is to buy even LESS locally and MORE online.

It's worse than that. Rather than doing lots of little orders, you may do a couple of big ones and pay GST and duty. Include couches, washing machines, hifi equipment. The difference isn't 10%, it's 50%+
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Re: GST free threshold removal affect on shoppers and overseas bike shops

Postby Howzat » Thu May 24, 2018 2:42 pm

The idea that one set of shops has to collect GST and another set gets off completely scot-free was always untenable, even before people figured out that the policy amounted a 10% price penalty on local retailers.
Shopping at Harvey Norman may be optional - but death and taxes ain't. As long as we have a GST, then it's got to be the same basic ground rules for everyone.

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Re: GST free threshold removal affect on shoppers and overseas bike shops

Postby Thoglette » Thu May 24, 2018 3:14 pm

Howzat wrote:As long as we have a GST, then it's got to be the same basic ground rules for everyone.

+1 (e.g. I don't think a single software or "content" contract that I have includes GST. Why set up shop in .au just to pay an extra 10% of tax?)

I've said it before and I'll say it again: the banks (and paypal etc) should be collecting GST + "tax scheme equalisation levy" (of about 3%) on all money sent overseas.

The banks already know whether you're sending money to an ABN account or overseas. Indeed, they already stiff you for a "forex fee" (plus a lousy exchange rate) if you pay in anything other than AUD.

If you have a genuine reason not to be paying GST + TSEL (e.g. grandfathered capital returns or genuine overseas expenses) then feel free to claim it back in your BAS/tax return. Or get a ruling from the ATO before hand.

It's incredibly simple; the banks are currently very likely to cooperate and it would generate oodles of cash. Without causing any real pain. What's not to like?
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Re: GST free threshold removal affect on shoppers and overseas bike shops

Postby AUbicycles » Thu May 24, 2018 3:36 pm

Having the banks collect is a very bad idea - this is now moving it over to private entities who will put in automation and guesses which will create problems. Not to mention they will add their own additional processing fees.


Customs still appear to have a processing role

BNA Article wrote:ATOP: When a business charges GST, they are required to ensure that correct information is provided to customers and included on import documents for the goods. They will ask their transporters or customs brokers in the country of export to collect this information and make sure it is provided to transporters or customs brokers in Australia. There is a field on both the self-assessed clearance declaration (with tariff lines) and the import declaration to include a GST exemption code of PAID, where relevant.

You can see the specific requirements for documentation, here: Requirements once you are registered.


Essentially a seller is identified as registered to collect GST, this amount should also been in the invoice document and the shipment is marked.

The gap is the under $75,000 because this will be a significant amount and how the tracking and enforcement will work in practice is a slight mystery. If customs can accurately track the sender - they can make a guess that they go over the threshold. If they can't accurately track the sender and record shipments against that name, this is a loophole.

My concern is that Australia is a small market in the grand scheme and I am positive that some companies will find it all too hard and simply block sales... whether or not the items can be purchased in Australia and this will be a disadvantage to consumers. An example - Canyon Bikes didn't sell to Australia customers for many years because they said to me that the couldn't resolve all of the legal issues surround sales to Australia (in this case, it is about EU customer rights and protection and whether Australian customers get the same returns policies). Until they felt it was viable - they didn't sell to Australians.

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Re: GST free threshold removal affect on shoppers and overseas bike shops

Postby LateStarter » Thu May 24, 2018 3:48 pm

I don't know about other's experience but my impression is that the days are long gone where buying os resulted in a significant saving. Seems when I was buying 10 years ago you could get top line stuff (eg Ortlieb) from os for 30-40% of the Australian price with a much larger range of options as well. More recently os manufacturers have been pressured by their distribution chain to not allow shipment to Australia unless for near the Oz RRP. On lots of os sites items are just not listed if your delivery country is Australia or you get a message saying shipment can't be made. On other sites the items are available but for miraculously almost the identical (including GST) Aust online price. Shimano cassettes / chains from os seem to have doubled in the last year but still half the LBS price fortunately.

Lucky I seem to have already got just about everything I need eh ? ;-)

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Re: GST free threshold removal affect on shoppers and overseas bike shops

Postby BJL » Thu May 24, 2018 4:14 pm

LateStarter wrote:I don't know about other's experience but my impression is that the days are long gone where buying os resulted in a significant saving. Seems when I was buying 10 years ago you could get top line stuff (eg Ortlieb) from os for 30-40% of the Australian price with a much larger range of options as well. More recently os manufacturers have been pressured by their distribution chain to not allow shipment to Australia unless for near the Oz RRP. On lots of os sites items are just not listed if your delivery country is Australia or you get a message saying shipment can't be made. On other sites the items are available but for miraculously almost the identical (including GST) Aust online price. Shimano cassettes / chains from os seem to have doubled in the last year but still half the LBS price fortunately.

Lucky I seem to have already got just about everything I need eh ? ;-)


It's funny, isn't it? When it comes to worker's wages, 'it's a global economy and Australia has to be competitive', but when shoe's on the other foot and it comes to retailers, oh.

:x

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Re: GST free threshold removal affect on shoppers and overseas bike shops

Postby 10speedsemiracer » Thu May 24, 2018 5:00 pm

My take on this is that local online sellers will reap the benefits as a result of the gap closing a bit between the OS online seller and the local online seller. Imagine the big ones like Wiggle/CRC, Evans, Merlin etc are already set up for stuff like VAT so GST won't be an issue for them rather will just increase the price for the buyer accordingly. But sellers like BikeBug, Pushys, BoA and Cyclingdeal etc, who as local businesses are all GST compliant, will all benefit by our essentially forcing a 10% price increase on OS sellers.

Whether those OS sellers elect to remain compliant and remit to the ATO is a whole different issue and will probably never be apparent to us as buyers in any case.

Sadly, this does nothing for the LBS or other bricks/mortar businesses, despite Gerry Harvey's simplistic and regressive mindset believing that regulation and interference is the way to 'fix' the issue. Where a gap in the market becomes evident, someone will eventually fill it, So while this may see OS online sellers suffer a bit, this won't necessarily transmit into $s being spent at local shops, rather will see those same $s going to local online instead of OS online.

Personally have been using the local onlines for a while now as I would prefer my $s to stay in Aus, but also to avoid the delivery timeframes.
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Re: GST free threshold removal affect on shoppers and overseas bike shops

Postby jasonc » Thu May 24, 2018 6:10 pm

10speedsemiracer wrote:But sellers like BikeBug, Pushys, BoA and Cyclingdeal etc, who as local businesses are all GST compliant, will all benefit by our essentially forcing a 10% price increase on OS sellers

You forgot something. These are businesses. Supply and demand. You have reduced supply (by increasing cost). Which means that Prices will go up locally.
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Re: GST free threshold removal affect on shoppers and overseas bike shops

Postby 10speedsemiracer » Thu May 24, 2018 6:25 pm

jasonc wrote:
10speedsemiracer wrote:But sellers like BikeBug, Pushys, BoA and Cyclingdeal etc, who as local businesses are all GST compliant, will all benefit by our essentially forcing a 10% price increase on OS sellers

You forgot something. These are businesses. Supply and demand. You have reduced supply (by increasing cost). Which means that Prices will go up locally.


Thought about that, but don't think it will occur. Rather, I think that the local onlines will view this as an opportunity to claw back market share from entities like Wiggle/CRC, and resist the temptation to jack up pricing, although maybe am being too optimistic.
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Re: GST free threshold removal affect on shoppers and overseas bike shops

Postby AUbicycles » Thu May 24, 2018 7:05 pm

jasonc wrote:You forgot something. These are businesses. Supply and demand. You have reduced supply (by increasing cost). Which means that Prices will go up locally.


It would be good to understand this more deeply and what you mean or how it applies. Local online retailers purchase wholesale and the original imports fit within the exiting rules of being over $1000 (as a consignment) and the appropriate GST and duties (as applicable) are applied.

The change also mean that overseas brands who are selling to wholesales have no actual change - the two effects are:
- Overseas sellers have to comply
- Australian customers (may) now be charged 10% on the overseas purchase of low value goods.

----


Regarding Australian online retailers, in the article I note that they have made significant inroads and the percentage of local sales surged as these retailers became more competitive. The gap between overseas pricing and local pricing shrunk for a number of products / segments. There are a number of reasons for this but the effect is that local bricks and mortar as well as online business can, in theory, be more competitive on price.

One thing which a lot of the cycling industry underestimate is the strength of Australian online bike shops... so when a local bike shop points the finger at overseas business - they also need to point another finger at Australian online business as well and at the changing market. In other words, a lot of the competition is local.

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Re: GST free threshold removal affect on shoppers and overseas bike shops

Postby eeksll » Thu May 24, 2018 10:06 pm

wonder if products will be un-geoblocked now.

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Re: GST free threshold removal affect on shoppers and overseas bike shops

Postby fat and old » Fri May 25, 2018 6:43 am

eeksll wrote:wonder if products will be un-geoblocked now.


:lol: Wishful thinking.

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Re: GST free threshold removal affect on shoppers and overseas bike shops

Postby Jmuzz » Fri May 25, 2018 8:07 am

queequeg wrote:The import process for items under $1000 is not changing. In fact, Customs has done a massive buck pass and said that from their point of view, anything under $1000 value is assumed to have already paid GST and is treated as a domestic parcel.


During phase one.

But don't be surprised that when the majority of parcels coming in are GST compliant they flip the switch and start intercepting everything.
Currently impossible because there are just too many. But when majority are cooperating it becomes easy to turn the thumbscrews on the remainder.
Objective will be to force the retailers to comply since customers will abandon them when they get slugged with a customs processing fee on top of GST.

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