Australia is poised for a significant tariff reform set to roll out on July 1st this year.
Nearly 500 burdensome tariffs will be eliminated, spanning a diverse range of imported goods such as toothbrushes, hand tools, fridges, dishwashers, clothing, and menstrual and sanitary products. With the government identifying $2.2 billion worth of imports, businesses are projected to save over $3 million in reduced tariffs and nearly $30 million annually in compliance costs. Considering a 4% foreign exchange (FX) cost, the FX expenses for the listed transactions amount to over $91 million, surpassing compliance costs more than threefold.
This sweeping initiative marks the most substantial unilateral tariff reform in over two decades. The primary aim of these reforms is to alleviate compliance costs, streamline bureaucratic processes, facilitate smoother business operations, and ultimately bolster productivity. Despite these tariffs not directly protecting Australian workers and businesses, they have necessitated navigating convoluted red tape and bearing compliance costs, which the reforms seek to alleviate.
“It’s good to see the government move to make imports more affordable for Australian consumers and businesses, but the elephant in the room is the high cost of the foreign exchange to make these overseas purchases. If the Treasurer acted to make the market for FX payments more transparent and competitive then we wouldn’t just be saving millions, but billions,” said Jack Pinczewski, APAC Government Relations Lead at Wise.
The government will remove this burden by abolishing almost 500 different tariffs, so that businesses can keep their compliance costs down and focus on what they do best. In this one package of reforms, we will abolish 14 per cent of Australia’s total tariffs. Removing these tariffs will streamline approximately $8.5 billion worth of annual trade and save business over $30 million in compliance costs each year. Examples of products subject to the removal of the five per cent customs duties include:
- Washing machines with annual imports worth over $490 million, raise less than $140,000 in revenue per year.
- Fridge freezers with annual imports worth over $668 million, raise less than $28,000 in revenue per year.
- Tyres for agricultural vehicles, tractors or other machines with annual imports worth over $102 million, raise less than $10,000 in revenue per year.
- Protective footwear with annual imports worth $160 million, raise less than $112,000 in revenue per year.
- Toothbrushes with annual imports worth over $84 million raise less than $22,000 in revenue per year.
- Menstrual and sanitary products with over $211 million worth of annual imports, raise less than $3 million in revenue per year.
- X ray film with over $160,000 in annual imports, raise less than $200 in revenue per year.
- Chamois leather with $100,000 in annual imports, raise less than $1,000 in revenue per year.
- Pyjamas with almost $108 million in annual imports, raise less than $120,000 in revenue per year.
- Fishing reels with over $50 million in annual imports, raise less than $140,000 in revenue per year.
- Rollercoasters with over $16 million in annual imports, raise less than $40,000 in revenue per year.
- Dodgem cars with over $2 million in annual imports, raise less than $15,000 in revenue per year.
- Ballpoint pens with annual imports worth over $57 million, raise less than $95,000 in revenue per year.
- Toasters with annual imports worth over $49 million, raise less than $1,000 in revenue per year.
- Electric blankets with annual imports worth over $31 million, raise less than $5,000 in revenue per year.
- Bamboo chopsticks with over $3 million in annual imports, raise less than $3,000 in revenue per year.
By eliminating nearly 500 tariffs, the Albanese Government aims to simplify Australia’s trading system and significantly reduce compliance expenses for businesses, particularly smaller enterprises. This move comes as a culmination of successive trade agreements that have rendered most goods eligible for duty-free importation. However, businesses have still been burdened with proving eligibility for existing tariff preferences and concessions, costs that are often passed on to consumers. The removal of these tariffs is expected to streamline approximately $8.5 billion worth of annual trade and save businesses over $30 million in compliance costs annually. Examples of products slated for the removal of customs duties include washing machines, fridge freezers, agricultural vehicle tires, protective footwear, toothbrushes, menstrual and sanitary products, among others.
Furthermore, the alignment of tariff policy settings with changes made to the GST will see tariffs on menstrual and sanitary items abolished. Consultation on the proposed reforms is currently ongoing, with submissions open on the Treasury website until April 1st, 2024.
Treasurer Jim Chalmers has underscored the significance of these reforms, emphasizing their potential to slash red tape, enhance productivity, alleviate burdens on small businesses, and reduce the overall cost of doing business. He noted that while these tariffs impose regulatory burdens and inflate the costs of imported goods, they offer minimal protection to Australian workers and businesses.
Keep up to date with our stories on LinkedIn, Twitter, Facebook and Instagram.
