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Import tax (GST)and Customs Valuation in Australia

Discussion in 'General Yachting Discussion' started by JLAUST, Nov 13, 2014.

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  1. JLAUST

    JLAUST Guest

    Hi All my first post here after years of enjoying and reading the informative info of Yacht Forums I've finally joined. My motivation today is I'm finally ready to get back into Blue water cruising after a absence of over 15 years. I just had a chat literally minutes ago with a colleague in Florida and he has just told me he might have identified the perfect Exploration boat suitable a long voyage I've been considering for some time. Not to get side tracked....so as my title reads ....GST and "Customs Valuation" Im concerned that the 10% GST which is calculated by Customs in Australia, based on of course what I paid for the boat and all costs incurred on getting it to my home Port of Brisbane eg fuel, crew costs etc etc will be dramatically out of proportion with the Boats Purchase value once I have what I feel is a necessary Full refit in the States. I've heard many stories where Customs here can really do a number on you if their Perceived Value of whatever?Art/Cars (in his case a Boat) can be way beyond what you paid for it. Its like if you make a good deal and or catch a bargain because of timing, negotiations etc it seems to have little bearing to them? I'm expecting to purchase the vessel for approx. USD 800 k with a conservatively estimated budget USD 1.5m/2 to get the boat to where I'm satisfied ..Now! What can I do to pay GST on the 800k "Purchase Price" prior to spending possibly 3 times that on Refit improvement's before arriving in Aust? Can I contact a Australian government office in the States to asses the boats purchase value? Will they accept the costs of the refit as having no bearing on the purchase value?One positive is I get to avoid Import duties of 5 % as the boat was built in the States and our Free Trade agreement (FTA) gives me that break.. Any advice would be much appreciated and Please don't suggest talking to my Accountant as most of us will know Accountants and Boating Expenses don't go well together .
  2. RER

    RER Senior Member

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    The boats I've shipped from the USA to AU have been assessed on arrival with valuation confirmed from submitted documents. I've never heard of it done in the USA.

    It is possible that you could be challenged upon entry however I've not had it happen. I've had some nervous owners though. Typically the boats have been filled with more stuff than you'll find on Santa's sleigh.

    Since you don't want me to suggest talking to your accountant I'll just suggest you don't get tax advice from Internet forums.
    Last edited: Nov 13, 2014
  3. Capt J

    Capt J Senior Member

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    I know nothing of this. But, how would they find out about your refit? Why not do everything on the refit except paint the exterior. Then have it painted once it's there. If people see a yacht with poor exterior paint, they generally assume all of it is old.
  4. Kafue

    Kafue Senior Member

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    Welcome to YF JLAUST.
    I have brought a few boats over from the US and never had an issue.
    Be as honest as is reasonably possible...in other words, if you are going to spend another $700,000 on a $800,000 purchase, I would not put down the initial purchase price of the boat on the form. Be reasonable.
    You will be up for GST (10%) on insurance, shipping and other costs involved in the transaction. However, I doubt very much that a customs agent will board the vessel and estimate the cost of a refit. As long as you don't push the envelope to the extent where a blind man can see through the mist.
    Keep receipts and how you get them and the sums thereon are your concern!

    A big issue when importing is AQIS. Which is Quarantine. they are extremely concerned about importing pests from the US (meaning BUGS, not citizens) or South America, Asia etc. So make sure the timber used in the refit is in good order. Same with the original fittings. Avoid getting an insecticide spray in the US as it is likely the Australian Quarantine will not be satisfied with it and demand another treatment, plus the chemicals can be a problem with wiring and headliners over a long period.
    For the easiest and safest way to satisfy AQIS, hire Elders Pest Control and INSURE that you get the Beagle DOG to go through the vessel. I don't kid you.
    When I imported my 58' Offshore, I refused to have the tent over the boat or allow the authorities to spray poison. Imagine the affect of this on my family and the boat fittings over the years!
    Instead I stood my ground and finally AQIS accepted the Beagle going through the boat and finding no termites or other bugs.
    By the way, the guy who I bought the Offshore from was a true gentleman. We got on extremely well during the transaction and he found out that my wife and I enjoy good wine etc. So he filled the boat with the finest (really!!!) French and Californian wine plus LITRES of good rum and whiskey. As it turned out, I was on board the boat when it was craned off the cargo ship and my friend (crew) and I went direct to the Marina in Mackay, North Queensland. First thing in the morning we fuelled up and set off for the Gold Coast. About 2 days into the trip I get a call from Australian Customs asking me where I was, they wanted to go over the vessel and check it! I politely said where I was and they "ordered'" me back to Mackay. I refused and "asked" them to meet me at home on the Gold Coast. It was their stuff up and they knew it. It all ended happily. HIC!!!
    Good luck Mate. If I can be of any assistance, just PM me.
    Cheers,
    George
  5. JLAUST

    JLAUST Guest

    Hi All and thankyou for your kind efforts in replying.. Your advice is much appreciated.Its been an interesting morning with a number of conversations taking place with Customs, various Tax consultants and Surveyor's both in Australia and the States. It seems the more people we talk to the more confusing and contradictory it all becomes. Sydney Customs have suggested the Purchase docs FTA and all incurred transportation expenses are "USUALLY"??(interesting choice of words) adequate for them to calculate GST. Brisbane on the other had has said on top of everything else a full assessment of the refit costs will be required and a Australian valuation for the vessel will then be calculated. The Survey chaps were just as contradictory. As expected my Accountants think the possible expenses incurred on a Boat that could theoretically be valued at more than 300/400% above its initial purchase price on arrival in Australia should be reason enough to run. This is the problem....The ATO here likes to leave everything as grey and confusing as possible. I feel these days its getting harder if not impossible(to use you analogy George) to see through the mist of the Tax system here until its too late or your forced to just walk away. I'm simply not getting any clear defined protocols from them?. Getting hit with a extra 2 to 300 k in port would be insulting not to mention completely against the principles of Boat ownership. I will keep doing more homework and figure this out.. I'm sure there's away to minimise this,
    ps George I hope it was Bundy you were given from the previous owner. He sounds like a great fellow to have done business with. Nice to see a Aussie Gold Coaster here to welcome me ..Thanks by the way. Cheers for now
  6. olderboater

    olderboater Senior Member

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    The law/regulations look very clear to me. Now that doesn't mean the implementation of them is consistent.

    Privately imported yachts are generally valued using the transaction method of valuation when purchased overseas new or second-hand for export to Australia. Circumstances where we may use an alternative method of valuation include such situations as where:

    -the yacht was constructed by owner/labour;
    -the yacht has been extensively modified since purchase;
    -the purchaser and vendor are related parties and that relationship has influenced the purchase price; or
    -the original purchase price is too far removed in time.

    In these instances the yacht will have to be valued by a marine surveyor in Australia. This valuation will be based on the market value and as such will include elements such as customs duty and GST. We'll have to deduct these elements plus overseas transport from the local valuation.


    Where the yacht is sailed to Australia, overseas freight will be determined having regard to essential sailing costs incurred under the most commercially viable conditions. Such costs would include sailing expenditure necessarily incurred while the vessel is actually sailing (and entering and leaving) those ports of call on the most commercially viable route. It would not include any in port expenditure related to the vessel's period of stopover.

    Where supported by sufficient/reliable information, essential sailing costs would also include:

    -cost of maps, charts pilot books, light/radio lists, etc.
    -crew's hire/wages or forage allowance in lieu
    victualling or food costs (does not include tobacco and alcoholic beverages)
    -bunkering or oil/fuel costs.

    This is an indicative rather than exhaustive list, if you have any doubts or queries seek further information from a Customs Information and Support Centre 1300 363 263.

    It really seems straight-forward to me. It's generally purchase price but in circumstances such as yours or any other where the purchase price is not indicative of the true value then it's market value as determined by a surveyor in Australia.

    You pay based on the value of the boat when imported. It seems that the only issue is you just don't like the answer. I think Kafue's advice was good, a reasonable valuation. But you start playing games with the valuation and you're at significant risk in attempting to avoid a legally due tax. The information I posted is directly from their web site. Tax is due on the value of the imported boat. There's no ambiguity in that regard.
  7. Capt J

    Capt J Senior Member

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    I'd also like to add that a 10% tax really isn't a whole lot in the scheme of things. Quite honestly a $1.5 million refit on a $800k vessel is not going to make the vessel worth $2.3 million (majority of the time). Will it make it worth more, yes. So basically they will tax the boat on what it is honestly worth - all shipping expenses. Kafue has imported several yachts to Australia and told you to give a relatively honest valuation on what it's worth, pay the tax on it, and you shouldn't have any problems. If you try to be greedy and steal from the government then you will generally get bitten in the behind.
  8. K1W1

    K1W1 Senior Member

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    I have watched this thread with interest as I was somewhat curious as to the sense of spending almost double on a boat that you paid for it regardless of any further costs of transport or import that might come along later.
  9. olderboater

    olderboater Senior Member

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    Both Capt J's and K1W1's comments bring up good points. Ok, you buy the boat for $800,000, Spend $1,700,000 refitting it. Spend $100,000 shipping it. Now it's worth perhaps $1,500,000 so you pay tax of $150,000. That means an additional $70,000 based on the refit. Now it could survey higher but doubt seriously it would sell for more, and certainly not what you have in it. Seems like the additional $70,000 would be a very minor concern compared to the entire exercise.
  10. Liberty

    Liberty Senior Member

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    May we ask what sort of boat you are looking at?
  11. JLAUST

    JLAUST Guest

    Hi yes its a 1970 custom built 27 m expedition. She was originally built with ABS/Ice Class, U.S Navy specs
  12. olderboater

    olderboater Senior Member

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    Well, how you choose to spend your money is your business except then don't come trying to figure out a way to escape appropriate taxes. I seriously doubt on that boat they will value it anywhere near what you spend on it.

    That said, I can't grasp spending $2.5-2.8 million on a 45 year old 27 meter boat.
  13. Capt J

    Capt J Senior Member

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    I can on an ABS/ICE classed expedition yacht. That boat was built to a standard way above normal yachts. Think of something like Bart Roberts. It's a ship and not a yacht. So to spend that kind of money to make it a yacht could be worthwhile and it's a true "go anywhere" expedition yacht. When you compare it to let's say a new Nordhavn of the same size, for 3 times the amount, and you still don't have an ice-classed yacht.
  14. K1W1

    K1W1 Senior Member

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    I would be very wary about taking on something that age, if it were built for the Navy you might find yourself in a very costly and time consuming Asbestos removal before you can start any of your planned refit/upgrades.

    Regardless of how well it was built there has been 45 yrs of wear and tear on it, don't fall in love with an impossible dream, there are examples of this to be found the world over languishing in yards
  15. karo1776

    karo1776 Senior Member

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    Oh... up late and reading about my favorite subject... taxes. I have no information or experience in Australian taxes. But makes one wonder about registering offshore might be a solution. Also, there are refit yards in AU so why not buy cheap... get it to AU import and pay then do the refit.

    In the EU and France you can shop the tax situation. However, my preference is to pay for the services of a Notaire and and pay the tax at the time of purchase using those services. Doing it that way guarantees the taxes are correctly and fairly paid for the purchase when it is purchased... and the Notaire's seal has the authority of Court's Order. The have in the US terms the authority of a Superior Court or a Federal District Court or the Tax Court in matters of property, inheritance, business assets, business / Corporate law and taxes for acquisition and property... but though they are publicly sanctioned they are private entities and actually handle the legal aspects of the transaction as a service... best of both worlds. The other advantage is the seal has the effect of the effect of insurance as to mistakes in money... they mess up and they pay! Besides I have learned my lesson... after getting a boarding tax inspection and getting caught out... no more.

    Generally, tax authorities love to get a chance to appraise value and it can be less or more depending on the individual situation. I find it is get it done at time the money changes hands... there can be no question of Fair Market Value.
  16. Kafue

    Kafue Senior Member

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    Now I think with that advice you should have a reality check! The Asbestos issue is something that I and most of us would never have considered and may well be the reason this vessel is for sale at such an attractive price, at least to you. Having been in the construction industry fo many years, I know how strict the regulations are regarding the removal of this material. On a large yacht, the costs would be enormous, or worse still, you may not be allowed to import it at all.

    I won't make a judgement on whether it makes sense to spend twice as much on a boat to refit it to your needs as there is very little "sense" in boating, except to us "fanatics" who stopped counting costs for sanity sake.
    There is a Huckins for sale in Florida that I have been considering for over a year that I would be spending at least double the purchase price on a refit, IF only I could convince my wife to go to a classic 72' yacht.

    As to the tax concerns you have, I believe that the more you complicate and manipulate the issue the worse it will be for you. In Florida there is a tax similar to our GST, unless the vessel is being exported (not sure about the other States). So how will you get this rebate if you don't declare the US costs on your Customs documentation?

    Also in case you are not aware, when you make a false declaration on your Income Tax Return it is illegal and you will be heavily fined, BUT, when you get caught not paying GST, that is a criminal offence and far more serious.

    I'll stick to being an "accidental bootlegger" (just in case a Customs officer is trolling this post...), as happened with the import of my Offshore. The allowance for alcohol is a few litres, yet what was on the boat when I accidently shoved off from the cargo ship, was enough alcohol to last us 12 months! Followed by a long dry out session.
  17. JLAUST

    JLAUST Guest

    Thank you all for your excellent reply's..There is defiantly a lot more to think about here than I originally considered.(Particularly it being an older vessel) A survey is being conducted as I write.. As far as costs go its still quite reasonable purchase.. I may be over estimating the refit costs but have always had the opinion that if you Buy a poor conditioned boat expect to pay almost double the purchase price if not more to bring it up to top standard. It makes it a lot less shocking when your budget spend triple to what most refit facilities sometime quote initially. Still my concern is not so much the GST of 10% on its purchase and refit costs its the horror stories I'm told at the club and by some importers having butted heads with a overzealous Customs valuer stamping triple the purchase price on the boat after its sailed into port . Not that I want to get into any spats here but I have some comments for Older Boater and Capt J.. As I appreciate your comments Gentleman I have to disagree on a couple of points..Firstly.... Older Boater your comment (Tax is due on the value of the imported boat. There's no ambiguity in that regard) Of course there's a great deal of "ambiguity" where a customs valuation is concerned??? for exactly my points above? There very easily could be a huge hit taken here if any of the scenarios of a (over valuation) come to fruition, and Capt J your quote (If you try to be greedy and steal from the government then you will generally get bitten in the behind.) No ones being greedy here.."Tax Minimization" is completely Legal "Tax Avoidance" isn't.. I always pay my fair of taxs here. As for being "Greedy" you should look at the Australian Government's Tax policies. On that note Thank you again Gentleman for all your comments and opinions Its always good to hear other points of view Thus the reason I've always enjoyed reading this site. I'm presently travelling on business in China and sometimes find it hard to sign into foreign sites pending what province I'm in. I will try and pop back with some updates concerning the Survey..
  18. olderboater

    olderboater Senior Member

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    I quoted the rules as they exist and to put my comment into perspective I said, "The law/regulations look very clear to me. Now that doesn't mean the implementation of them is consistent." And I later said "The information I posted is directly from their web site. Tax is due on the value of the imported boat. There's no ambiguity in that regard."

    There is no ambiguity in regard to the fact the tax is on the value of the imported boat and in a case like yours that is "as determined by a marine surveyor." I also gave you the number to call. So very definitively some of your questions were answered. No, it can not be valued in the US prior to the refit. Yes, it is based on the value upon arrival in Australia after all refit costs. I also posted separately that the value very well might be less than what you spent. And I gave you the number to call. The answer as to how the regulations read is clear and seems you just don't like that so lash back at the one who took the trouble to actually find the definitive answer on their web site. I also noted that the tax you're so wanting to "minimize" is very minor in terms of your total expenditure on the boat.

    Now, like any marine survey the resulting value may be one you disagree with, but the fact remains that the regulations read with extensive refit a marine survey upon arrival in Australia. Very straight forward. I can't help it if you don't like that.

    Now in the years it takes you for the refit, who is to say the regulations won't change. Good luck with the purchase if you make it.
  19. Capt J

    Capt J Senior Member

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    It's real simple, after it is refit in the US have a well known and accredited marine surveyor come out and assess the boat a real world value in writing, if it's the same surveyor you used for the purchase, then generally they don't charge a whole lot to basically look at what you updated and give a value. Most all of the customs agents are pretty fair and so long as your fair with them.

    You could come across an overzealous police officer who falsely arrests you driving down the street, and it does happen I'm sure, but the odds of it happening are extremely slim.
  20. Savasa

    Savasa Senior Member

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    The only suggestion I can add to the excellent advice already provided is whatever information you get from any Australian authorities, get it in writing with any necessary specific offered interpretation of the information also in writing so IF an issue arises you have a hard copy of both the information and the interpretation on hand. The courts don't really react well to hearsay.
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