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#1 2015-07-22 23:22:34

Bullion Baron
Silver Stacker
From: Adelaide
Registered: 2009-09-14
Posts: 7,325
Trades :   139 
Website

Bullion Baron: How About Fair GST Treatment For Bullion?

61_bullion_baron_header_ss.gif

In an article I was reading yesterday about the GST-free threshold for imported goods, which postured support for a lowering the cap from $1000 to $20, there was a video containing this message from Craig James (CommSec's Chief Economist):

"Certainly we believe this is a fair tax because if it is the case that people are traveling overseas and over the net to buy goods, bypassing Australian goods. Well really the same goods should be charged the same price whether you're buying overseas or getting it domestically."

There has also been recent talk of raising the GST in Australia from 10 to 15%.

As a proponent for small(er) government and less taxes I'm not particularly fond of the latter suggestion, but I do concur with James' view that a fair tax should see comparable goods charged the same amount of tax. Not only for consumer goods, but also for investment assets. This is one area that bullion (as an investment asset) is short changed... Read More

CONTINUED: How About Fair GST Treatment For Bullion?

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#2 2015-07-23 03:01:30

danman49
Silver Stacker
From: Adelaide
Registered: 2012-07-19
Posts: 3,985
Trades :   487 

Re: Bullion Baron: How About Fair GST Treatment For Bullion?

Not the main point of your thread but pertinent anyway is the cost of capturing the extra GST both to the government and the consumer.  When I have bought over $1000 in bullion from overseas I have had to pay around $50 to have the item "processed" through customs (though if it is travelling via one of the big shippers the fee seems to already be covered in the freight cost).  If this fee actually represents the cost of processing an item, as it is supposed to, then either the government or the consumer will have to pay this on any items over a new threshold.  So your $20 item will either cost you $70 or make the government a loss of $48 once the $2 GST is taken from the processing cost.   

As an example if your Granny in the UK sends you a gift over $20 in value then you could end up paying $50 in fees and a couple of dollars in GST OR the government could collect a couple of dollars in GST and lose $50 in processing time OR I guess you could just say "no thanks" and never know what Granny sent you.  The last option would probably also leave the government covering processing fees, though maybe not quite as high (I believe the old $200 gift concession was repealed, but could be wrong).   On the good side this would definitely increase the number of unclaimed mail auctions.

On another tangent it would also create a considerable number of customs/postal jobs or the new processing times for packages would make the present Christmas delays a fond memory!

Last edited by danman49 (2015-07-23 03:09:15)

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#3 2015-07-23 03:47:35

ag_n_au_in_oz
Member
From: Australia Victoria
Registered: 2015-01-13
Posts: 89
Trades :   12 

Re: Bullion Baron: How About Fair GST Treatment For Bullion?

I thought you could not tax money and those round 50's are still money ?

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#4 2015-07-23 04:08:15

Bullion Baron
Silver Stacker
From: Adelaide
Registered: 2009-09-14
Posts: 7,325
Trades :   139 
Website

Re: Bullion Baron: How About Fair GST Treatment For Bullion?

ag_n_au_in_oz wrote:

I thought you could not tax money and those round 50's are still money ?

If they are trading above their face value, then they are trading on commodity value, not as money.

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#5 2015-07-23 05:23:02

ag_n_au_in_oz
Member
From: Australia Victoria
Registered: 2015-01-13
Posts: 89
Trades :   12 

Re: Bullion Baron: How About Fair GST Treatment For Bullion?

Bullion Baron wrote:
ag_n_au_in_oz wrote:

I thought you could not tax money and those round 50's are still money ?

If they are trading above their face value, then they are trading on commodity value, not as money.

If you can make any sense of this let me know

http://law.ato.gov.au/atolaw/view.htm?d … 6202/00001

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#6 2015-07-23 05:31:03

spannermonkey
Silver Stacker
From: Vic or pissed
Registered: 2010-06-04
Posts: 14,656
Trades :   228 

Re: Bullion Baron: How About Fair GST Treatment For Bullion?

ag_n_au_in_oz wrote:
Bullion Baron wrote:
ag_n_au_in_oz wrote:

I thought you could not tax money and those round 50's are still money ?

If they are trading above their face value, then they are trading on commodity value, not as money.

If you can make any sense of this let me know

http://law.ato.gov.au/atolaw/view.htm?d … 6202/00001

I know somebody who put it in front of a judge
He was told " I could argue it either way "
But at the end of the day it will go in favour of the Gov roll


EXIT STAGE LEFT

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#7 2015-07-23 05:41:13

Big A.D.
Silver Stacker
From: Sydney
Registered: 2009-10-29
Posts: 6,449
Trades :   52 

Re: Bullion Baron: How About Fair GST Treatment For Bullion?

ag_n_au_in_oz wrote:
Bullion Baron wrote:
ag_n_au_in_oz wrote:

I thought you could not tax money and those round 50's are still money ?

If they are trading above their face value, then they are trading on commodity value, not as money.

If you can make any sense of this let me know

http://law.ato.gov.au/atolaw/view.htm?d … 6202/00001

When cash has a numismatic value, it's more "stuff" than it is "money".

Finding interesting stuff in your change is just something that happens when you're exchanging money with other people. You don't get a tax credit for handling money like everyone else does every day, even though you might increase your chances of finding something interesting by handling a lot of it as a business.


I am the Leafy Sea Dragon.

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#8 2015-07-23 05:58:49

wrcmad
Silver Stacker
From: Northern NSW
Registered: 2012-01-02
Posts: 6,109
Trades :   118 

Re: Bullion Baron: How About Fair GST Treatment For Bullion?

We already have a healthy, active, underground cash market for bullion which many use to fly under the  ever-tightening radar with regards to a number of various taxes.... Why would GST be any different?


Anything is possible, but not everything is probable.  wink

Manipulation..... If you want to continually subscribe to this idea then get out of precious metals. Only a fool would play a game that is completely rigged. As you still are in the game, I would say that you are not completely convinced of the manipulation ...

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#9 2015-07-23 07:02:32

willrocks
Silver Stacker
From: Yesterday
Registered: 2012-05-10
Posts: 7,635
Trades :   29 

Re: Bullion Baron: How About Fair GST Treatment For Bullion?

The do-gooders will be the undoing of Australia.


"You can ignore reality, but you cannot ignore the consequences of ignoring reality." - Ayn Rand

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#10 2015-07-23 07:12:47

Bullion Baron
Silver Stacker
From: Adelaide
Registered: 2009-09-14
Posts: 7,325
Trades :   139 
Website

Re: Bullion Baron: How About Fair GST Treatment For Bullion?

wrcmad wrote:

We already have a healthy, active, underground cash market for bullion which many use to fly under the  ever-tightening radar with regards to a number of various taxes.... Why would GST be any different?

Not really sure what you are saying here? Dealers should engage in dodgy under the counter transactions to avoid charging GST on bullion products that should have it applied?

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#11 2015-07-23 07:31:27

FlashInThePan
Member
From: Australia
Registered: 2011-01-02
Posts: 308
Trades :   

Re: Bullion Baron: How About Fair GST Treatment For Bullion?

BB
I like your comparison to stocks in relation to bullion and the removal of GST on lower purity PM alloys.
I don't think they will ever tax investment bullion, there associate bankers will nor be happy and will leave that window open.

IMHO Taxation has nothing to do with fairness.
It relates to jurisdiction and your status/capacity in relation to that jurisdiction.

On another point, the Govt make large purchases themselves overseas, justified on the basis of expenditure reductions.  (Submarine defence proposals with the Japanese over local manufactures for example)  And using Govt practice as the benchmark, so too can the people confidently conduct there private business since the law is to be applied equal to all.

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#12 2015-07-23 07:33:06

wrcmad
Silver Stacker
From: Northern NSW
Registered: 2012-01-02
Posts: 6,109
Trades :   118 

Re: Bullion Baron: How About Fair GST Treatment For Bullion?

Bullion Baron wrote:
wrcmad wrote:

We already have a healthy, active, underground cash market for bullion which many use to fly under the  ever-tightening radar with regards to a number of various taxes.... Why would GST be any different?

Not really sure what you are saying here? Dealers should engage in dodgy under the counter transactions to avoid charging GST on bullion products that should have it applied?

tongue


Anything is possible, but not everything is probable.  wink

Manipulation..... If you want to continually subscribe to this idea then get out of precious metals. Only a fool would play a game that is completely rigged. As you still are in the game, I would say that you are not completely convinced of the manipulation ...

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#13 2015-07-23 07:42:15

Bullion Baron
Silver Stacker
From: Adelaide
Registered: 2009-09-14
Posts: 7,325
Trades :   139 
Website

Re: Bullion Baron: How About Fair GST Treatment For Bullion?

By the way I am sure some dealers do that (have purchased some 22k coins at prices less than 10% premium over spot), but would be nice to have it all above board wink

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#14 2015-07-23 11:05:24

goldpelican
Administrator
From: Aust/USA
Registered: 2009-06-29
Posts: 17,986
Trades :   153 
Website

Re: Bullion Baron: How About Fair GST Treatment For Bullion?

ag_n_au_in_oz wrote:
Bullion Baron wrote:
ag_n_au_in_oz wrote:

I thought you could not tax money and those round 50's are still money ?

If they are trading above their face value, then they are trading on commodity value, not as money.

If you can make any sense of this let me know

http://law.ato.gov.au/atolaw/view.htm?d … 6202/00001

That ruling is about whether someone can claim a GST input credit on say a $2 Purple Coronation coin they sourced at the bank for $2, then later resell for $4 through their coin shop. That's actually a real-world example - Gold Stackers sourced a few thousand dollars worth of such coins in mint rolls (just dumb luck and an eagle eye when we received bulk change for use in the business), and we resold a large number of them. We couldn't claim an input credit on the supply, but we had to charge GST when selling.

So a 1966 50c coin - if a dealer buys it as "goods" at market value, say $7.70, they can claim an input credit of 1/11th the purchase price (70c) if it is sourced from a non-registered supplier (i.e. a private individual). It's no longer money as it was not acquired at face value - it has become "goods". 10% of the final sales price (e.g. 80c of $8.80) is then payable to the government as GST, but this is offset with the credit. So the government receives 10c GST, which just happens to be 1/11th of the gross markup (8.80 minus 7.70). Simples.

Now if the dealer found a round 1966 50c coin in his till, it was received as money, not goods - so no input credit (i.e. 1/11th of 50c) is claimable. Once he flips it into stock though for resale it is no longer considered money, but has become "goods", at which point GST must still be submitted from the final sales price - so if it was sold for $8.80, the full 80c GST must be remitted to the government. No input credit applies, as it was sourced as money, not goods.

Short answer - I am yet to see evidence from the ATO that legal tender sold at market value on a spot plus premium basis is exempt from having GST charged as part of the sale price, as it is sold on a goods basis, not a "supply of money" basis. Individual businesses may have sought and received rulings specific to their enterprise to the contrary though. I am aware of one coin dealer for example who gone the other way, and has sought and received a ruling to receive input credits on regular gold and silver bullion they buy back from the public, but they also have to charge GST on it when selling. Also means that they can't buy bullion from other businesses as it blows their business model's profitability not being able to claim an input credit on that supply. They buy everything from the public at spot, sell everything at 10% over spot, and get a net ~9.1% margin on their bullion trade. Simplifies their GST accounting, but limits their bullion trade to being just a portion of their overall business. Given they're predominantly a numismatics business, not a bullion dealer, it suits their situation.

Bullion Baron wrote:

By the way I am sure some dealers do that (have purchased some 22k coins at prices less than 10% premium over spot), but would be nice to have it all above board wink

No wink emoticon required. Why can you legally buy a GST item for less than 10% over spot from some dealers? Well, as demonstrated above, the input credit on the supply side offsets the GST charged on the disposal - so the net GST is only on the gross markup. A dealer buys a sovereign at spot, gets 1/11th input credit, sells the sovereign at spot plus 5% including GST, resulting in the actual GST payable being the same as 1/11th of the 5% markup.

That's enough free "how to be a bullion dealer" posting for today smile


My posts on Silver Stackers are either personal opinion or acting in the capacity of site administrator. Opinions offered do not constitute professional or financial advice.

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#15 2015-07-23 17:10:06

Bullion Baron
Silver Stacker
From: Adelaide
Registered: 2009-09-14
Posts: 7,325
Trades :   139 
Website

Re: Bullion Baron: How About Fair GST Treatment For Bullion?

Wink still required for some situations where I highly doubt GST was considered in the transaction smile

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