Online purchase duty under scrutiny
With Christmas just around the corner many kiwis will be purchasing online to take advantage of the strong New Zealand dollar and the lack of queues.
The rise in online shopping is putting considerable pressure on retailers’ slim margins. Various retail groups continue to lobby for GST and duty to be payable on all privately imported goods regardless of their value.
Customs imposes duties and collects GST on goods imported into New Zealand. If the GST and duty to be collected by Customs is less than $60 the charges are waived. Generally this means the maximum value of goods that can be imported tax free is $400.
The threshold was introduced as a practical solution to address the cost of collecting small amountsof GST and duty where it was outweighed by the revenue raised. The New Zealand Retailers Association believes that this “tax break” for online shoppers detracts from the retailers’ ability to compete in the market.
With the effects of the economic financial crisis lingering, consumers are looking for bargains. Retailer loyalty does not rate highly amongst many consumers. It is not unusual for consumers to physically shop in New Zealand to find the desired item before purchasing online GST free.
Across the ditch the Australian government is also considering reducing its tax free threshold so that GST and duty will be imposed on goods valued at over AU$30. At present most overseas purchases costing less than AU$1,000 are GST exempt.
The move is to help level the playing field so that the Australian retailers can compete with overseasmarkets. Success in Australia may put pressure on New Zealand to follow in order to compete with kiwi’s increased level of online shopping.
Interestingly New Zealand Customs has recently launched “What’s My Duty” an online calculator to enable Kiwis to estimate the duty and GST they will need to pay when buying goods from overseas.
It may be worth a look before you make those online Christmas purchases.
- Greg Harris is a specialist tax partner in the Hamilton office of Deloitte.