Australian Customs and the budget

Customs will never dominate the headlines on Australian budget night, but this does not mean that there are not measures in the budget that impact the customs and global trade community.  Buried away in the budget papers are increases in penalties, increases in fees paid by importers and interesting predictions about the level of duty collections over the next 4 years.

A quick review of the budget papers reveals the following 10 relevant trade related measures:

1.     Penalties to increase – Fines for most customs offences are measured in penalty units.  The amount of penalty units will increase from $170 per unit to $180 per unit.  Most infringement notices for companies are set at 45 penalty units, meaning a $450 increase in penalties for most strict liability offences.

2.     Impact of FTAs (Free trade agreements) – Customs duty on items other than fuel, alcohol and tobacco is estimated to fall from $2.95 billion in 2014-15 to $1.72 billion in 2018-19.  Most of this fall can be attributed to duty savings under the China, Japan and Korea FTAs with the balance relating to the drop in the rate on clothing in textiles from 10% – 5% on 1 January 2015.

3.     Duty on vehicles – We may not have a local industry in 2019 but we are still expected to have customs duties.    Estimates of duty in 2018/19 on passenger motor vehicles is $450 million.  This seems a high amount for consumer to pay to protect a local industry that will have left the country by 2018.

4.     GST on cross border transactions – Legislation will be introduced to apply GST to internet sales of digital products.  This will not impact goods, and in particular, goods under the low value threshold.  Australia has committed in recent FTAs not to apply duty to intangible cross border transactions.

5.     Taxing of multinationals – The Government will target 30 multinationals wich it is alleged are involved in profit shifting.  Profits can be shifted via a variety of methods.  Where those methods relate to the cost of goods (such as overcharging) or the payment of royalties or license fees, reversing those profit shifting strategies may have customs implications.  The relationship between customs duty and transfer pricing has always been difficult, and this budget promises to put the issue again in the spot light.

6.     FTA promotion – Expect to hear a lot about the recent FTAs with the Australian Trade Commission and DFAT receiving an increase of $25 million over the next two years to promote FTAs.

7.     Managing Biosecurity Risks – The Department of Agriculture will receive increased funding to manage the risks of an increasingly complex global supply chain.  Increased activities will include assessing and auditing offshore supply chains and increased surveillance or sea and air cargo terminals.

8.     Import processing charge – The Government expects that changes to the import processing charge will result in additional revenue of $107 million over 4 years.  Part of the changes will cover trade related reform (presumably the Trusted Trader program), remove different charges based on post/air/sea and increase the cost of manual declarations.

9.     Broker licence charges – License charges for brokers, depots and warehouses will be restricted with increased licence renewal charges and a new warehouse licence variation charge.  These new charges will commence from 1 January 2016.

10.   Australian Border Force – The major customs development was announced last budget with the merging of Customs and immigration.  The Government is banking on the new Department of Immigration and Border Protection to be efficient.  It has budgeted savings of over $40 million per year to be achieved by the merger.

The budget shows a trend – importing goods is becoming less about payment of duty.  It is budgeted that non-excise equivalent duty will fall by nearly 50% over the next 4 years.  At the same time we will see other charges increase, such as import processing charges, license fees and penalties.

The decrease in duty does not mean that the role of a broker is any easier.  However, when there is less duty to manage it does become harder to demonstrate the benefits to clients.  One outcome of increased compliance activities and the proposed introduction of the Trusted Trader Program is that a high level of trade compliance will be rewarded, even if it does not have a duty impact.

Source and all credit to Hunt & Hunt Lawyers / Freight & Trade Alliance