Platinum Freight Management CEO Peter McRae debates the challenges and opportunities of our diving dollar.
While the Australian Customs $1000 tax free threshold is under the microscope, particularly in relation to its proposed lowering, I felt it timely to point out a small, often overlooked detail about importing that can have a significant impact on individuals buying online from overseas retailers and also SMEs importing very small factory orders.
It might also see a swing back to buying local for those who would otherwise find a cheaper deal from an international checkout.
This small detail will grow in significance for retailers even more if in time the tax-free threshold is lowered.
Speaking for now however, it all centres around another critical issue facing Australian businesses and consumers at present, the falling and fluctuating Aussie dollar.
Let me start with an example.
A buyer fills her cart with fashion items to the value of $US750. Satisfied with the exchange rate which is more like $AU986 today, she clicks Buy and confirms shipment.
But our dollar falls further before the clothing leaves its origin. Plummeting as it has been of late, after a lengthy stable period of high value that has given consumers a sense of false security, the buyer could be forgiven for forgetting all about the $1000 tax-free threshold and assuming that her outfits will cost the exchanged figure she checked, give or take a few dollars.
What she may not understand is that a global shopper’s credit card is charged the day the stock leaves the port, which is usually several days after the day she clicked Buy. Between the date of decision and the date of paying, the dollar can fall quite a lot, as we’ve all read in any newspaper lately.
By the time this parcel lands at Australian customs, it exceeds the $1000 tax free threshold, meaning it gets stuck at Customs, now incurs a minimum $150 more in fees (5% duty fees and 10% GST). This fee comes in a bill to the buyer. And to make matters worse, she won’t receive the parcel until the bill is paid, and could incur additional Customs holding fees. At that point she would call a Customs broker and ask for their help, a small cost, but again a cost to the consumer.
The purchase now breaks budget and the buyer wishes they’d known about or considered the charges before purchasing. This is an easy mistake to make, particularly if you’re not familiar with the way importing works, or if you don’t usually spend such amounts for outfits online.
But if, and in my opinion when, the tax-free threshold for imports is lowered, consumers won’t need to buy a big ticket item to fall prey to these unexpected charges. We’ll see 19-year-olds spending their hard-earned dollars on the latest jacket from London suddenly needing to call a broker to explain their second bill and help them navigate the import through Customs. It will happen across all retail channels.
Moving forward, it will help for everyday Australians to consider themselves individual importers in the global marketplace, and as such, it is time for all to become aware of Customs law in its most basic form, and also to buy with the old phrase Caveat Emptor again at top of mind.
Know your costs, know the fees and make an informed decision about buying locally or internationally. This catch will continue to snag small operators and individuals for as long as our dollar remains unstable and again if the threshold changes.