Home – New Forums Logistics Australian companies have items posted from overseas to avoid GST

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  • #981847
    Anon
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    I have only realised the extend of this because I have been trying to buy a phone online from Australia which I can also claim the GST back on. But so far 5/5 of Australian websites I have contacted have told me their phones are all sent from Hong Kong – And these are big sites like Kogan/Mobicity. I find it very misleading because there is no obvious mention of this on any of their websites.

    Is this just a way to for these companies to avoid buying GST on all their orders?

    #1133265
    Divert To Mobile
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    The short answer to your question is no.
    If you buy from an Australian business you pay gst but the business doesnt keep it, they have to give it to the ato. likewise when they pay gst on what they sell, they claim it back from the ato. Its a circle so that only the end user is really paying gst to the ato.

    Why do they ship from china? the stuff is made there and the people your buying from dont hold any stock.

    Steve

    #1133266
    Anon
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    Divert To Mobile, post: 151390 wrote:
    The short answer to your question is no.
    If you buy from an Australian business you pay gst but the business doesnt keep it, they have to give it to the ato. likewise when they pay gst on what they sell, they claim it back from the ato. Its a circle so that only the end user is really paying gst to the ato.

    Why do they ship from china? the stuff is made there and the people your buying from dont hold any stock.

    Steve

    They are Australian websites and their products are GST exclusive (although not mentioned on their websites). Their products are GST exclusive because when someone places an order on their website, the item posts from China and not Australia

    Is this how they allow them to be a GST free sale – meaning they are not paying any GST to the ATO.

    #1133267
    CindyK
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    Hi,

    I can’t help with your dilemma, but I can say that whether or not GST is supposed to be included in a sale has a number of defining factors that are not effected by where the product is shipped from. The GST is related to the selling companies activities, place of business, turnover etc so their GST status depends on things like:

    • total revenue of the company
    • which country the company is registered in
    • where the actual money is earned (ie. does it go into an Australian bank account) etc

    And a few more as each companies position can be different. No doubt you will find some are attempting to not declare their income correctly, but just as many are probably acting inside the appropriate legislation.

    #1133268
    Anon
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    I got it now… for example Kogan. They are an Australian website business… But they also have Kogan HK registered in China. All website sales and money through their Australian website is put through their China account to allow them to avoid paying Australian taxes/GST.

    #1133269
    CindyK
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    :)

    It might be that they are doing it to avoid Australian GST but it is just as likely that they are doing it to expand their enterprise internationally without the additional cost of more offices, licences and registrations in each country.

    No doubt they sell to many countries, as do a great number of Australian companies. In that you pay the applicable taxes and are subject to the laws of where you are registered. If we sell to a French citizen/business but are registered in Australia – we are not avoiding the local French tax – we are declaring our income already in Australia and not then subject to another tax on top. If the buyer is from Australia – they claim the GST but in the French scenario as the buyer is not entitled to claim on our GST and we are not entitled to charge their tax – it becomes a GST free transaction for the purchaser (not the seller in their individual country, mind you, who still has to observe the local laws and applicable taxes).

    Have a great day!

    #1133270
    LucasArthur
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    CindyK, post: 151403 wrote:
    :)

    It might be that they are doing it to avoid Australian GST but it is just as likely that they are doing it to expand their enterprise internationally without the additional cost of more offices, licences and registrations in each country.

    No doubt they sell to many countries, as do a great number of Australian companies. In that you pay the applicable taxes and are subject to the laws of where you are registered. If we sell to a French citizen/business but are registered in Australia – we are not avoiding the local French tax – we are declaring our income already in Australia and not then subject to another tax on top. If the buyer is from Australia – they claim the GST but in the French scenario as the buyer is not entitled to claim on our GST and we are not entitled to charge their tax – it becomes a GST free transaction for the purchaser (not the seller in their individual country, mind you, who still has to observe the local laws and applicable taxes).

    Have a great day!

    My head hurts 😮

    Jason Ramage | Lucas Arthur Pty Ltd | E: [email protected]   P: 61 3 8324 0344    M: 61 412 244 888
    #1133271
    James Millar
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    Anon, post: 151383 wrote:
    I have only realised the extend of this because I have been trying to buy a phone online from Australia which I can also claim the GST back on. But so far 5/5 of Australian websites I have contacted have told me their phones are all sent from Hong Kong – And these are big sites like Kogan/Mobicity. I find it very misleading because there is no obvious mention of this on any of their websites.

    Is this just a way to for these companies to avoid buying GST on all their orders?

    Yes this is a legitimate strategy to avoid GST being levied on the products at the retail level. Yes this is a big part of why they do it (10% is a big difference in tech products). It also changes the distribution / wholesale chain because they don’t have to buy from the Australian distributor that significantly inflates the price further. Yes they run separate entities to handle different aspects of the business – one being in Australia (admin front end elements) and one being offshore (handles fulfilment). Harvey Norman tried to do it to avoid GST but in some respects I think it was too little too late.

    Things will probably change when the consumer GST free importation threshold drops to $500 as this will eliminate most phones, ipads and electrical goods etc.

    Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900
    #1133272
    l0nglive
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    Although this is old, but I find it still relevant.

    Some of the mentioned sellers have bank accounts in Australia, they even say on the website “owned and operated in Australia”. How could they avoid tax? I recall anything made available to Australians must bear GST?

    #1133273
    LucasArthur
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    Are you asking how do they avoid tax or how do they avoid GST? May be 2 different queries?

    Also, just because one says owned and operated in Australia I am not sure how accurate some of these statements are.

    And how can they get away with not charging GST (which is how I am reading this post)? Is because the government allows a little leeway in importation, shipping and thresholds for individual importers (being the person buying it)!

    The trick, I believe, is that the stock never hits australia and under the business entity selling it and the person buying it is technically the importer as such.

    Hope that’s as clear as mud :)

    Jason

    l0nglive, post: 214592, member: 57029 wrote:
    Although this is old, but I find it still relevant.

    Some of the mentioned sellers have bank accounts in Australia, they even say on the website “owned and operated in Australia”. How could they avoid tax? I recall anything made available to Australians must bear GST?

    Jason Ramage | Lucas Arthur Pty Ltd | E: [email protected]   P: 61 3 8324 0344    M: 61 412 244 888
    #1133274
    l0nglive
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    Hi Jason,

    I’m interested in their method of avoiding GST. When they set up warehouse outside of AUS, I believe they are still liable to collecting GST because they do business in AUstralia, the goods are made available for Australians to buy. Do I miss anything from ATO website?

    It can’t be an import of good if an Australian business advertise, sell, collect payment, hire employees, and control the business on Australia

    Just hosting products overseas to be sent to AUS can’t make it GST free I believe.

    T”axable supplies

    10. The concept of supplies ‘connected with Australia’ is relevant to determining whether a supply is a taxable supply and subject to GST. Under section 9-5 you make a taxable supply if:

    (a)
    you make the supply for consideration; and
    (b)
    the supply is made in the course or furtherance of an enterprise that you carry on; and
    (c)
    the supply is connected with Australia ; and
    (d)
    you are registered , or required to be registered.
    However, the supply is not a taxable supply to the extent that it is GST-free or input taxed .

    11. Section 9-25 defines when a supply is ‘connected with Australia’. For the purposes of determining whether a supply is connected with Australia, section 9-25 makes a distinction between a supply of goods, a supply of real property and a supply of anything other than goods or real property. This is explored fully in the Ruling and Explanations sections of the Ruling.

    12. The connection with Australia is one of the elements required to be satisfied before a supply is a taxable supply. However, a supply is not a taxable supply to the extent that it is GST-free.

    GST-free supplies

    13. Broadly speaking, provided certain conditions are met, goods that are exported, or supplies of services or things other than goods or real property, that are for consumption outside Australia are GST-free.

    6 However, you can still claim an input tax credit for anything acquired or imported to make that GST-free supply.7

    #1133275
    l0nglive
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    Example 8 – Goods supplied by resident supplier and imported by resident recipient

    130. Joe decides to fit his car with specialised seat covers. He approaches Seat Co in Sydney to supply the seat covers. However, the seat covers have to be imported from Italy. Under the arrangements with Seat Co, Joe imports the seat covers into Australia and pays Seat Co for the goods once the seat covers are cleared through Customs. The supply of goods, specialised seat covers by Seatco to Joe, is not connected with Australia because the goods are not delivered, or made available to Joe, in Australia. However, Joe makes a taxable importation upon which GST is payable.38″

    This may explain it. In short, just set up a foreign entity, let that company do all the delivery then we are good. We can still collect payment and operate normally in Australia as long as we don’t source the product to Australia. It’s the customers who import them.

    #1133276
    LucasArthur
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    i am not an accountant, although personally i feel you are not really in a position to establish how these companies are set up. Most may operate within australia although they may also run an internationally registered company in the country you are speculating about.

    To be honest, i am more interested in why you want to know such a thing. If you are an importer and concerned they sell cheaper, you need to figure out a way to overcome it. If you are wanting to do this yourself, you should seek high paid legal and professional accounting advice.. or if its just out of curiosity i may suggest you go and enjoy a nice wine instead as you will never find the truth as most companies that do this will not expose the infrastructures they have in place to ‘mitigate’ tax obligations or else everyone would do it.. Similar to people wanting to import asking for free advice on where to find awesome supplier, most will not share this with you as its cost many thousands upon thousands of dollars and research to locate..

    Cheerio, maybe someone with much much much more expertise than me might chime in though..

    Jason

    Jason Ramage | Lucas Arthur Pty Ltd | E: [email protected]   P: 61 3 8324 0344    M: 61 412 244 888
    #1133277
    l0nglive
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    Because we entrepreneur may want to do the same. There is no way to compete with 10% charge on top of all merchandise.

    I agree with you about paying big $ for tax evasion service =))

    #1133278
    LucasArthur
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    Hi,

    Let’s be clear, I did not mention tax ‘evasion’ I said tax ‘minimisation’!

    It may be a language or interpretation issue although they two words have two very different meanings in this conversation :) please be conscious of this as most people, on here and elsewhere, would frown upon anyone ‘evading’ tax but helpful if trying to mitigate your tax.

    If you have to find ‘loop wholes’ in an industry to survive, it’s possible you may not. Meaning, if it is already too right profitability wise or competitive wise what is it other than price that will set you apart? When you start a business based on ‘price’ alone like some countries do, it can be quite hard.

    Cheers
    Jason

    Jason Ramage | Lucas Arthur Pty Ltd | E: [email protected]   P: 61 3 8324 0344    M: 61 412 244 888
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