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  • » Bullion Baron: Screw the Taxpayer - ATO Compels GST on Bullion

#1 2016-05-31 21:38:50

Bullion Baron
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Bullion Baron: Screw the Taxpayer - ATO Compels GST on Bullion

61_bullion_baron_header_ss.gif

Iceblue's (pseudonym) face screwed up as he read the letter in front of him. It was early March and the Australian Tax Office (ATO) had just written advising of an upcoming audit they intended to conduct on his business, South Gippsland Bullion (SGB). They noted their intent to inspect transactions covering the last several years of trading. He was probably thinking "Why me?" (wouldn't we all under such circumstances), but he may also have been aware that many other bullion dealers have faced similar scrutiny over the past 12-18 months with an industry wide series of audits being performed.

When the audit results arrived in mid May, advising that goods and services tax (GST) should be applied to the bullion products SGB sold, it would leave Iceblue with no choice but to close his doors (figuratively speaking given it was primarily run as an online business). The wording of the letter is ambiguous to say the least. It throws into question an assumed understanding in the bullion industry of what products should have GST applied... Read More

CONTINUED: Screw the Taxpayer - ATO Compels GST on Bullion

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#2 2016-05-31 23:29:13

SpacePete
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Re: Bullion Baron: Screw the Taxpayer - ATO Compels GST on Bullion

Very good article. Thanks BB.


The law's duty is to protect the innocent, not to make them prove their innocence.

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#3 2016-06-01 02:17:39

errol43
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Re: Bullion Baron: Screw the Taxpayer - ATO Compels GST on Bullion

Does that mean that all 10 ozs, kilo bars go up in price by 10%.?

Also $10 ozs kooks etc.?

Regards Errol 43

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#4 2016-06-01 02:29:39

Bullion Baron
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Re: Bullion Baron: Screw the Taxpayer - ATO Compels GST on Bullion

errol43 wrote:

Does that mean that all 10 ozs, kilo bars go up in price by 10%.?
Also $10 ozs kooks etc.?
Regards Errol 43

If the ATO targets these products and says they are not 'precious metals' for the purpose of GST then presumably so. I will be contacting the Perth Mint soon to see if they can offer any insight.

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#5 2016-06-01 04:06:24

bordsilver
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Re: Bullion Baron: Screw the Taxpayer - ATO Compels GST on Bullion

Bullion Baron wrote:
wrcmad wrote:

Why is neg gearing IP GST on investment bullion such an issue?
Is it an envy thing? A tall poppy syndrome? Or just a "they have more than me, so it must be wrong" thing?
There are far more pertinent and costly tax loopholes than neg gearing GST on bullion.
Such as small business owners doing quite well on their loss-making venture and doubling up on welfare?

From my perspective it's one policy government can change which should reduce speculative investment and improve affordability for home owners true bullion buyers, but it's not a one policy fix/solution either.

Why should government be expected to improve housing affordability? Because government controls all aspects of the property money market, including setting the rules on:

Where and what you can build use.

Taxes involved in construction of new stock.

Tax policies which affect demand (allowing negative gearing, CGT discount).

Grants and concessions to certain groups of buyers.

What foreign investors/temp residents can buy.

Interest rates through an independent body (RBA).

Lending standards (APRA).

Which businesses can create the money used to buy property.

Immigration policy.

etc etc etc

When government centrally manages a market in this fashion don't you think they have a duty to keep a certain level of balance between different pools of buyers? Don't you think investors have been running a bit hot (particularly so in Melbourne and Sydney)?

wink


Anyone who lobbies a government in order to get the government to ban something is in my view an undesirable person. And I mean anyone. - Kris Sayce

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#6 2016-06-01 05:44:10

Bullion Baron
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Re: Bullion Baron: Screw the Taxpayer - ATO Compels GST on Bullion

Not sure what your point is bordsilver. I've made it pretty clear in the past that I think assets should be (and already are in many cases) treated differently based on purpose and need.

To the best of my knowledge investors buying bullion isn't depriving someone else of a basic human need for reasonable cost.

Your clever 'fixed it' makes 0 sense.

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#7 2016-06-01 05:53:02

Ipv6Ready
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Re: Bullion Baron: Screw the Taxpayer - ATO Compels GST on Bullion

Let's ignore the past for a second. Can some clarify....

Ie when I sell to a dealer in the future, would the dealer credit me GST, or would they charge me GST for the service of buying back the bullion or art bar as ato would call it?

For example

June 2016 I buy 1 ounce at spot for $20, the dealer charges me $22

One year later the spot is still $20

I sell back to the dealer at spot for $20 and they charge me $2 GST mean I get $18?


Looking for 40 pre1944 shilling details in the link
http://forums.silverstackers.com/topic- … -worn.html

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#8 2016-06-01 06:14:32

SilverDJ
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From: Australia
Registered: 2014-11-01
Posts: 2,488

Re: Bullion Baron: Screw the Taxpayer - ATO Compels GST on Bullion

Bullion Baron wrote:
errol43 wrote:

Does that mean that all 10 ozs, kilo bars go up in price by 10%.?
Also $10 ozs kooks etc.?
Regards Errol 43

If the ATO targets these products and says they are not 'precious metals' for the purpose of GST then presumably so. I will be contacting the Perth Mint soon to see if they can offer any insight.

Buying from a dealer will attract 10% GST if this all goes down, yes, but buying from private individuals (e.g. via ebay and gumtree) will not.
It will suddenly make the ebay prices quite realistic again, unless they just go up too just because they can.

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#9 2016-06-01 06:15:41

Davros10
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Re: Bullion Baron: Screw the Taxpayer - ATO Compels GST on Bullion

more likely they pay you $20 which includes $1.81 GST?


"Last night as I was sleeping, I dreamt-marvelous error!-
that I had a beehive here inside my heart.
And the golden bees were making white combs
and sweet honey from my old failures"         Antonio Machado

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#10 2016-06-01 06:17:26

SilverDJ
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From: Australia
Registered: 2014-11-01
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Re: Bullion Baron: Screw the Taxpayer - ATO Compels GST on Bullion

Ipv6Ready wrote:

Let's ignore the past for a second. Can some clarify....
Ie when I sell to a dealer in the future, would the dealer credit me GST, or would they charge me GST for the service of buying back the bullion or art bar as ato would call it?

No, GST is not applicable on private 2nd hand sales which is what this, and you as the seller are not registered for GST, therefore you do not charge them GST (they can't charge you GST buying it, it's the seller that is obligated to charge GST is applicable)

For example
June 2016 I buy 1 ounce at spot for $20, the dealer charges me $22
One year later the spot is still $20
I sell back to the dealer at spot for $20 and they charge me $2 GST mean I get $18?

Unfortunately correct.

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#11 2016-06-01 06:30:11

SpacePete
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Re: Bullion Baron: Screw the Taxpayer - ATO Compels GST on Bullion

Ipv6Ready wrote:

June 2016 I buy 1 ounce at spot for $20, the dealer charges me $22

One year later the spot is still $20 ...

That may result in people holding silver longer, until the spot price increases enough to cover the original GST paid. I am wondering if that would reduce the dealers buyback business.

It seems like GST would slow down the movement of silver between hands and have a negative impact on businesses who specialise in bullion products that attract GST. Ultimately it may result in less tax as businesses activity is reduced.


The law's duty is to protect the innocent, not to make them prove their innocence.

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#12 2016-06-01 07:06:54

SilverDJ
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From: Australia
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Re: Bullion Baron: Screw the Taxpayer - ATO Compels GST on Bullion

SilverPete wrote:

It seems like GST would slow down the movement of silver between hands and have a negative impact on businesses who specialise in bullion products that attract GST. Ultimately it may result in less tax as businesses activity is reduced.

A most likely scenario.
Private sales will skyrocket, retail will drop.
Unallocated (and maybe allocated if GST free) should see a decent pickup as a result.

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#13 2016-06-01 07:23:18

BuggedOut
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Re: Bullion Baron: Screw the Taxpayer - ATO Compels GST on Bullion

I find it very interesting the actual coin series that has attracted this attention.

There is a message here from TPTB.

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#14 2016-06-01 09:34:04

goldpelican
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Re: Bullion Baron: Screw the Taxpayer - ATO Compels GST on Bullion

Ipv6Ready wrote:

June 2016 I buy 1 ounce at spot for $20, the dealer charges me $22

One year later the spot is still $20

I sell back to the dealer at spot for $20 and they charge me $2 GST mean I get $18?

No, you get $20.

The dealer would get an input credit for 1/11th the purchase price, i.e. $1.81 to claim on their BAS. You still get the full $20 if they pay spot. The GST is an internal accounting matter for them. As a private individual, you get charged GST on the cost of goods or services, not on what you receive for goods or services.

The irony of this finding against SGB is that it makes even more items suitable for the existing alleged GST scams where input credits are improperly claimed, or GST is charged without remittance by "missing traders". A commonly held opinion in the industry was that the ATO was likely to prohibit claiming any input credits on scrap in order to curb the GST shenanigans that happen in the supply chain to a refiner of secondary market metals (e.g. scrap recycling). They've just hinted that they are instead broadening the supply of metal that is subject to abuse.

Ask yourself why a scrap dealer can pay 106-108% of spot of scrap gold, but can sell refined gold for 101-103%. Show me another industry where you can profitably pay more for raw materials than the finished product without a government subsidy. In this case the subsidy is "GST input credits" straight out of the ATO coffers.

By throwing the industry's 13 year understanding of how GST applies to investment precious metals under the bus, the ATO has just thrown open the floodgates to even more GST abuse by those who perpetrate it. This will potentially lead to scrappers paying 110% of spot for generic "unaccredited" bullion in order to produce "accredited" silver bullion bars sold at 105%, and even more existing gold will now fall into the input-credit category, just when pretty much the legitimate Australian scrap supply was in its death throes. The taxpayer will lose again, and the exact problem the ATO is trying to (rightfully) stamp out will spread.

A big question here - what does a SMSF trustee do with bullion already held that the ATO now deems "unaccredited"? There would be hundreds of millions of dollars of sales of the types of bullion to SMSF trustees on a GST-free basis that would be affected by the findings against SGB - if the ATO is now going to declare these items are subject to GST - good luck sorting that mess out.

Just a reminder that https://www.ato.gov.au/Business/GST/Whe … free-sales mentions precious metals as a GST-free supply - obviously this is not a legal text, but in the context of a list of other retail services such as childcare, medication, educational courses and duty-free shopping, it's just another supporting data point that the ATO in the past has not differentiated between sales into the domestic market versus the international institutional market as a criteria for GST-free status.


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 2016-06-01 10:06:47

alor
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Re: Bullion Baron: Screw the Taxpayer - ATO Compels GST on Bullion

ship it overseas whatever is left smile since the GST discourages domestic buyers.  sad

or setting up free ports, where the goods is kept in the ports warehouse pending forever to be ship out of the country.


Hear Say See -> N o t h i n g
May this stacking hobby be my blessing smile

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#16 2016-06-01 12:21:38

HoldMeTender
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Re: Bullion Baron: Screw the Taxpayer - ATO Compels GST on Bullion

Well let's assume the ATO is reading this, hopefully with an interest in learning what the precious metal industry and stacking community thinks about the issue.

No-one here is arguing that proofs or similar collectibles should not be subject to GST, but the existing interpretation that bullion coins should be tax-free is supported across the board.  Exactly what defines a bullion coin may need to be clarified, but the entire industry would be harmed if lunar coins, annual series and the like were discouraged by changes to the tax rules. 

As Bullion Baron points out in his article, even higher-priced releases from smaller mints are often priced based on spot price (albeit with a higher fabrication premium reflecting the actual cost of production) - and further, ALL Perth Mint bullion products are valued in the same way, as spot + a chosen premium.  What happens afterwards in the secondary market should be completely irrelevant to the tax treatment at the time of initial sale. 

I think the ATO needs to weigh up the economic and social risks of any proposed changes, and find a solution that is workable and (most importantly) unambiguous.


All that glitters is not gold...
...but all that is gold glitters!

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#17 2016-06-01 12:41:49

projack
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Re: Bullion Baron: Screw the Taxpayer - ATO Compels GST on Bullion

HoldMeTender wrote:

Well let's assume the ATO is reading this, hopefully with an interest in learning what the precious metal industry and stacking community thinks about the issue.

This is very confusing, simple because not very clear guidelines what is bullion coin/round now.
Even some older bullion bars can be very collectable today originally sold in investment grade and form.
When I started to buy silver nobody payed extra for any bullion cons, not even lunar proofs once back on the second hand market. What should be matter is the original manufacturing intention. With so much products and producers to choose from today the so called 'added characteristics' is just marketing tool to draw attention for survival. If some sells in bulk these so called 'added characteristics' rounds or coins no premiums will be paid anyway form dealers. Differentiate between the sell of one coin or thousands for GST justification is simply stupid.


The US dollars and Treasury debt called "risk off" because the global fiat system can only survive as long as that remains the case.

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#18 2016-06-01 16:40:32

tozak
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Re: Bullion Baron: Screw the Taxpayer - ATO Compels GST on Bullion

^

If you scrap Copper, Stainless Steel, Lead, Brass etc. you only get paid the GST if you have an ABN

If you sell Bitcoin to an exchange you only get paid the GST if you have an ABN

Why if you sell scrap jewellery then would you get paid the GST without an ABN? this makes no sense? Is there some sort of exemption for requiring an ABN?


The whole world only one block apart

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#19 2016-06-01 16:57:24

goldpelican
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Re: Bullion Baron: Screw the Taxpayer - ATO Compels GST on Bullion

HoldMeTender wrote:

What happens afterwards in the secondary market should be completely irrelevant to the tax treatment at the time of initial sale.

Disagree - what happens afterwards in the secondary market should be completely driven by the tax treatment at the time of initial sale. If Perth Mint sells a bullion coin into the market GST-free as an input-taxed supply, then it should remain GST-free through it's entire downstream lifecycle. The ATO findings against SGB are that SGB should have determined items to be collectibles, and charged GST accordingly - despite them being sold from the mints and the wholesalers as GST-free items. Completely at odds with how GST is supposed to work. A dealer simply cannot subsequently decide "oh this particular Lunar coin is becoming collectible, I'll change it from an input-taxed to taxable supply" when the form of the coin has not changed. The tax status of precious metals can only change when the item changes form, i.e. during refining or fabrication.

Let's not forget that for years Perth Mint sold Kookaburra 1oz silver coins with a flat $10 AUD premium for many years after GST was introduced - even when spot was well under $10 AUD. All GST-free sales on an input-taxed basis, so the arguments about the size of the premium in relation to spot don't stack up based on industry-leader examples since day 1 of GST introduction. They were still sold relative to the spot price. There's never been guidance from the ATO in regards to "how much" premium over spot is acceptable.


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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#20 2016-06-01 17:03:32

iceblue
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Re: Bullion Baron: Screw the Taxpayer - ATO Compels GST on Bullion

BuggedOut wrote:

I find it very interesting the actual coin series that has attracted this attention.

There is a message here from TPTB.

At first I thought the same thing, but no, the entire industry is under scrutiny. Dealers that have never stocked our items have also been called up for Audit.
Glad we are not scrap gold buyers! That is what is putting the industry under the microscope.

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#21 2016-06-01 17:05:04

tozak
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Re: Bullion Baron: Screw the Taxpayer - ATO Compels GST on Bullion

Opens up a whole can of worms, you may be lucky enough to dig through a bullion dealers old stock and find a 2008 Koala or 2008 Kook which they may sell you at their normal price being so many dollars over spot however a coin dealer may have the exact same items marked at $99.95 each and sitting on a shelf gathering dust. Both coins were sold for the same price from The Perth Mint, also sold as bullion from bullion dealers but as time has past coin dealers will sell these as collectables now? The whole thing is a mess now because it's not what the item is it's how it's sold.


The whole world only one block apart

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#22 2016-06-01 18:07:05

bordsilver
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Re: Bullion Baron: Screw the Taxpayer - ATO Compels GST on Bullion

Bullion Baron wrote:

Not sure what your point is bordsilver. I've made it pretty clear in the past that I think assets should be (and already are in many cases) treated differently based on purpose and need.

To the best of my knowledge investors buying bullion isn't depriving someone else of a basic human need for reasonable cost.

Your clever 'fixed it' makes 0 sense.

If you don't get it I probably can't explain it to you. The government has no right to treat any asset class differently. As soon as you say they can then you are opening the door to them manipulating that asset for political (or corrupt) purposes and once you open the door on one asset class then there is no logical reason for them to not get involved in every asset class. By your own housing analogy there is zero real reason for them to not target precious metals in whatever weird and wonderful ways that people can dream up.

Trying to be "reasonable" about the level of intervention is to fall for the argumentum ad temperantiam. Slippery slope argument and you're already on it.


Anyone who lobbies a government in order to get the government to ban something is in my view an undesirable person. And I mean anyone. - Kris Sayce

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#23 2016-06-01 18:12:27

SpacePete
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Re: Bullion Baron: Screw the Taxpayer - ATO Compels GST on Bullion

bordsilver wrote:

If you don't get it I probably can't explain it to you. The government has no right to treat any asset class differently.

What if the government has a different definition of "asset class" than you?


The law's duty is to protect the innocent, not to make them prove their innocence.

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#24 2016-06-01 18:14:15

bordsilver
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Re: Bullion Baron: Screw the Taxpayer - ATO Compels GST on Bullion

SilverPete wrote:
bordsilver wrote:

If you don't get it I probably can't explain it to you. The government has no right to treat any asset class differently.

What if the government has a different definition of "asset class" than you?

What do you mean?


Anyone who lobbies a government in order to get the government to ban something is in my view an undesirable person. And I mean anyone. - Kris Sayce

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#25 2016-06-01 18:50:37

Bullion Baron
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Re: Bullion Baron: Screw the Taxpayer - ATO Compels GST on Bullion

bordsilver wrote:

If you don't get it I probably can't explain it to you. The government has no right to treat any asset class differently.

Asset classes should be treated differently because they are inherently different. For example a reason property may be treated differently to a stake in a company:

"Men did not make the earth. It is the value of the improvements only, and not the earth itself, that is individual property." - Thomas Paine

If we go down your slippery slope then animals (which can be assets) should be treated no differently to people.

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