Tax you pay on online purchases

When you buy and ship from overseas

People shop around on the world wide web to have more choice and to look for more competitive prices. And why not? There is a wider choice of whiskies available via the web and prices tend to be substantially lower than in Australia. A number of established online retailers overseas subtract their local GST (in Europe often around 20%/Japan has 8%), which makes buying there more attractive. Buying overseas isn’t without its issues and some of us have been taken by surprise by hefty taxes and duties they had to pay once their beloved drams entered our shores.

Collecting custom duties and taxes is a normal process associated to international trade; it shouldn’t be demonised or seen as punishment. Instead, Whisky lovers need to be aware of what the taxman and the customs officer are likely to charge before committing to a purchase online.

What to expect:

Anyone you ask will tell you different stories on how much they paid (or didn’t) when shipping liquor to Australia. The reason for that is simple: It depends if/to what degree customs is able to determine the content of your shipment and the wholesale value of the goods you receive. There are three options:

  1. You get really lucky – Customs don’t identify your shipment as liquor and you receive the shipment at your doorstep without paying any taxes or duties.

  2. You get lucky – Customs identifies the content of your shipment as liquor, but don’t determine the precise value. The will then send you an invoice and likely apply a default value (which they typically put rather low) to determine how much duty & tax you pay. In this case duty and customs often amount to 30-44$ per bottle. This typically occurs for smaller (1-2 bottle) shipments when your package is sent privately (via friends/family etc.) and no invoice is included.

  3. Customs have your purchase invoice and you pay the full tax and duty amount as per current regulations. Depending on how much you bought and how much you spent, this can become quite expensive. You pay this full amount when your online retailer uses an international forwarding agent such as DHL or UPS. Larger shipments and those that clearly come from a liquor merchant are likely going to fall under this category. I’ve also been in situations where Customs insisted on receiving the original purchase invoice plus proof of money transfer (this happened when one retailer tried to ‘be nice’ and labelled the bottles as ‘collectible glassware’ while having his whisky-shop logo plastered all over the delivery-carton). Not a good idea!

Crunching Numbers:

Those who fall under point three will already know the drill: Customs will send you a NOTICE OF ASSESSMENT per post where the exact duties and taxes to be paid are listed. It’s not always easy to decipher the small print and abbreviations, so let me break it down for you:

Basically, there are three major components to the duties and taxes you pay for overseas whisky imports:

  1. Duty on alcohol (which is 83.84$ per litre of pure alcohol)

  2. An import duty of 5% on the wholesale price, and

  3. 10% GST (which is based on the wholesale price + shipping cost + import duty + duty on alcohol)

As an example: If you bought a Springbank 21 (at 46 ABV/Vol) for 320 AU$ from an overseas retailer (and you paid 50 AU$ for shipping), Customs is likely going to charge you:

Duty: 83.84 x 0.7 x 0.46 = 27 AU$

Import Duty: 320 x 0.05 = 16 AU$

GST: (320+50+16+26.65)/10 = 41.25 AU$

In Total this is 84.3 AU$ for duty and taxes

Then there is more to consider:

You sometimes need to deal with service fees from the shipping agents. If an overseas retailer uses DHL or UPS you nearly automatically will get charged an extra 10 or 20 $ & GST for ‘their services’. This is probably one of the most annoying additional fees of the entire transaction. I am yet to come across any agent who deserves that money. On the contrary, I often get frustrated due to delays occurring when these agents get involved, or even major mistakes made by them, leading to incorrect and highly inflated charges. So in case of our delicious Sprinbanker, the price has gone from 320 AU$ to potentially up to 477 AU$ (depending on shipping fees and your luck with customs).

We are not done yet! If the combined wholesale value of your imported goods sits above AU$ 1000,- you also pay an additional import duty of AU$ 83,-.