Buyers can face hefty tax bills on online deals

Whakatane production engineer Tony Milne reckoned he was getting a good deal when he bought clothes and a mug to the value of US$284 online - until he was landed with a $134 bill from Customs.

The Retailers Association has been vocal in complaining that Customs only levies taxes if the GST and duty on purchases, combined, would come to more than $60, saying that is unfair to local shopkeepers. But as Milne discovered, the stakes are also high for consumers who accidentally go over the threshold.

All personal imports over $400 should attract Customs charges, but clothes are among a small number of items that still attract duty at 10 per cent, which means it is only possible to import $240-worth tax-free in any one go. Customs calculated the New Zealand dollar-value of Milne's consignment at $364.

After initially disputing the bill, Milne is taking it on the chin, realising he failed to factor duty into the equation. "I didn't realise there was a threshold at all until I got this letter from Customs. It wasn't a very nice surprise, that's for sure."

But he says online shoppers should also be aware Customs is consistently undervaluing the New Zealand dollar by 2 to 3 cents, compared with the Reserve Bank's mid-point valuation of the currency, which could tip some purchases over the limit.

A Customs spokeswoman confirmed it used a less-favourable exchange rate; the one at which government banker Westpac sells New Zealand dollars.

The relevant date for the currency conversion is when the package is cleared by Customs, rather than the day on which consumers bought the goods.

But the spokeswoman said Customs advertised the rates on its website 10 or 11 days in advance of them coming into effect, after which they applied for the following two weeks.

"This assists importers to factor in the duty and GST liability with a high degree of certainty."

Retailers' shipping charges are counted by Customs as part of the purchase price for GST purposes when it works out whether to levy taxes.

All purchases that attract GST and duty also draw a flat-rate Import Entry Transaction Fee and a biosecurity levy of $38.07 to help recover Customs' costs, explaining why Milne had to pay more than a third of the value of his consignment to Customs.

The fee is likely to rise 20 per cent to $46.89 in April to help fund an $80 million investment in a new Joint Border Management computer system.

"The fixed-fee isn't a big deal if you are importing a lot, but if you are paying a small amount like me, it is like 'Whoa'," Milne said.

Customs also charges GST on any duty it levies.

Customs' spokeswoman said it did not know how much it was collecting from GST and duty on personal imports. It relied on overseas retailers disclosing the value of the goods to find out what packages were worth.

Milne said in retrospect it would have been cheaper to split his purchase into two orders.


Purchase price: US$284.29

Shipping charge: Did not apply

Converted at NZ$0.78 @ US$1: $364

Duty at 10 per cent: $36.40

GST at 15 per cent (including GST on duty): $60.06

Import Entry Transaction Fee and biosecurity levy: $38.07

Total Customs bill: $134.53