Australian technology tax is a golden rip-off

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opinion At the moment, the lucky country is luckier than most. With the Aussie dollar around the US$0.93 mark, its buying power is greater than the days before the Hawke/Keating government floated the dollar.

However, our friendly overseas IT suppliers must think that the currency is around US$0.63, or are bashing Australia with the greed stick.

Let’s look at the poster child of overprices: Apple. A 21″ iMac has a base iPrice of A$1599. The US price for the same computer is US$1190 (or A$1,285.91, based on conversion rate from xe.com yesterday).

Ok, there is GST, which works out at A$145.37). And there are other compliance costs like superannuation, payroll tax, withholding tax et al. However, the Australian price without GST still adds up to A$1453.63, A$167.72 more than the equivalent US price in Australian dollars.

Now, Delimiter has also ranted previously on the price of Adobe Creative Suite 5. Here is another breakdown based on the exchange rate yesterday, 27 April.

US Price A$756.00
GST (10 percent) A$86.94
Total A$842.94

Aust RRP A$1168.00

Aussie premium $325.06

Ouch!

Remember, the prices I am quoting are US retail pricing, which already has a profit margin built in. Even being generous and granting half of the Australian premium to cover compliance, shipping, staff and marketing costs in Australia, there can be little argument supporting the overcharging that the Australians are paying.

So what is to prevent you buying overseas? With software, almost nothing. Amazon will ship CS5 here for US$29.99, making it a total cost as priced yesterday of A$787.77 (a saving of A$380.23). When you add to this the fact there is no import duty payable on software, overseas buying becomes very attractive.

For hardware, it is more difficult. Australia uses 240v alternating current or AC (technically 230v with a +/- varience of 10 percent) and has a national standard plug that only Argentina and New Zealand also use (to see the wide plethora of electrical plugs, check out this Wikipedia article). Anything that plugs into a USB port (for example, an iPad) will work fine out of the box. But otherwise, some money will have to be spent getting power converters and plugs. Finding a retailer willing to ship overseas may also be an issue.

Can companies charge an Aussie technology tax? Yes. There is nothing illegal setting a high price here.

However, companies need to be aware that we are approaching a global market via the internet, global/bilateral trade agreements and common markets (Europe, NAAFTA and AUS/NZ for examples). Soon it will be harder to justify gouging for software, as competition from Amazon and online software retailers compete with Australian sellers with a better rate, and the age of digital downloads makes location meaningless.

Importing hardware will be harder, but not impossible. An easy example is that someone goes to the US, buys 10 computers and ship them home via freight/post. Assume a A$200 premium on each computer. Looking at Flight Centre, the cheapest Sydney to Los Angeles flight is A$1034 (plus taxes and charges). So you could still save approximately $100 on each computer. This will be even more attractive if Apple goes Aussie iGouging™ and makes the price of the iPad stupidly high compared to US prices.

Another unintended consequence of an Aussie premium will be piracy. When you can see a product being sold cheaper in another market, people may be less willing to pay the Aussie price. So piracy in this case acts as a market correction, supplying the demand not being satisfied by the market price.

This, of course, will add to the cost of software (and despite what software manufacturers say, a pirate copy does not equal one sale. There will always be people unwilling to pay for software, and people willing to purchase software at lower prices who chose not to pay the price set by sellers. This is first year economics).

What is your view on the Aussie technology tax? Have you found a way around it? Or do you pay it without any issues? Post your comments below, it will be interesting to see your thoughts on this matter.

Darryl Adams is a government worker and internet tragic. A former IT worker, he still pines for the days of IBM keyboards that go CRUNCH and the glow of green screens. He can be found on on Twitter or on Facebook. The views expressed here do not reflect the views of his employer, the ATO.

38 COMMENTS

  1. With respect to some Adobe products – their activation codes are locale specific. If your ‘language’ doesn’t match the activation of the software it won’t unlock. See http://www.mcelhearn.com/2009/08/11/adobes-asshole-license-system/

    I think the distinction goes right down to the flavour of English your system is set up for: i.e., American|British|Canadian|Australian-English etc.

    So if you buy an overseas version of the software it may not necessarily activate given these restrictions. Having said that a friend saved $100 AUD on a full version of Windows 7 by buying it from the US and hasn’t had any problems.

    • Personally I’m wondering if it would be legal to work around those restrictions somehow. It seems unlikely the Government would support restricting you per geography on your use of products which you have already purchased etc.

      • I did ask Microsoft via email and got the following response on the price difference. Remember the Australian pricing is on a download product. None of these reasons justify the difference that currently exists.
        ———————————-
        Dear Mark,
        Thank you for your response.
        Mark, you can reply directly to my response by clicking on the “reply” button on your e-mail program.
        Regarding the price difference, there are several factors that could contribute to price differences:
        • A primary factor contributing to pricing variations internationally is the exchange rate at the time of the initial product launch. Market fluctuation of exchange rates can occasionally alter the current market price.
        • Additionally, we see differences between local manufacturing, warehousing and distribution costs, which impacts regional pricing.
        • These local pricing differences are magnified when you take into consideration the costs associated with selling lower volumes of product and the associated economies of scale.
        • Local taxes also effect regional pricing
        Mark, I hope I was able to address your enquiry to your satisfaction. Should you have further questions relating to this enquiry or any additional enquiries, please let me know.
        Alternatively, for immediate assistance, you can contact one of our Microsoft Customer Service Representatives on 13 20 58 (Select Option 2 followed by Option 1) from Monday to Friday, between 8am – 8pm AEST.
        Thank you for contacting Microsoft.

        • > Mark, you can reply directly to my response by clicking on the “reply” button on your e-mail program.

          Crikey, how condescending can a person be?

        • Wow mark, well done!

          The warehousing, tax, and market size argument disapear when you download a product, however the exchange rate argument could be valid. Pricing decisions could be made months in advance and based on assumptions that can quickly be invalidated by the currency market.

          The problem here is that Msft is protecting their box market (I think), so the price would be the same, no matter the media sold, despite that digital is actually weaker as you don’t get printed media and install/backup disk. While it will piss off the supplier chain and retailers, if they price digital downloads as one market, even using the greenback as benchmark, the economies of scale kick in big time, with savings for MSFT and users both

        • Pffft…. Some MS products are THOUSANDS of dollars cheaper buying in the USA.

          They can’t argue shipping costs either, a lot of the time, (like eOpen licensing) you just get a login and a license string with a download link.

  2. Great example there Mark!

    I thought there may be issues like a region block John, if so, the ACCC may want to hear about it. From memory (IANAL) use of region codes are unenforcable as per DVD regions.

    Amazon has no issues on shipping software though, I checked. Hardware choices are limited by the look of it to USB dongles

    • > I thought there may be issues like a region block John, if so, the ACCC may want to hear about it. From memory (IANAL) use of region codes are unenforcable as per DVD regions.

      I applaud anyone able to get traction with the ACCC however I have little confidence that they are more than a toothless tiger. They have a track record of ignoring technology issues, sans Telstra of course.

  3. Hewlett Packard are proud of their Australia tax. Lets pick one of many possible examples:

    hp.com – EX490 pricing: US 550 ( = $610 @ .90 exchange rate)
    hp.com.au – EX490 pricing: AU749

    Given that country of origin is China and that the US pricing *includes* shipping, the AU$139 difference is actually understated.

    HP have their ‘reasons’, which I debated with them on Twitter (not the best forum, admittedly), but of course with no actual outcome. I only ever buy hardware overseas now, unless it’s 8 month old equipment that is being run out at massive discount in places like Capitol Square in Sydney.

    Happy to be contacted if you want links to the HP exchanges for followup.

    • It seems like virtually any vendor of any size has their Australian technology tax. Thank god for Capitol Square and outlets like it. My personal favourite is AusPCMarket, where I just bought a gaming spec PC for the office for like $905.

      The only way this issue is going to get resolved is by debating it on forums like Twitter and here — let the vendors know people are paying attention!

  4. These companies take advantage of people like me who pay for the “convenience” of a “clean” solution. Importing hardware from overseas might end up being cheaper, but I have to deal with an adaptor, warranty issues, etc. I feel that the price I pay for products in Australia is “tailored” to my needs as an Australian, as bullshit as that is. I’m a sucker of a consumer.

    The question is, what are we going to do about it?

    • Yeah I normally feel the same way Elly — and I like to support Australian companies. I guess the only way to do anything about it is to continue to write about this issue and harass the vendors. If enough people get agitated enough, a few of them will start to bend, although I think Apple won’t be likely to be counted in that number ;)

  5. Not only technology.

    Casio F-91W watch: Walmart $US13, cheapest price in Melbourne $A45

    Samsonite briefcase: Boston $US75, David Jones $A400

  6. Maybe Delimiter could contact the major vendors mentioned in this article for their response to this pricing.

    The other thing to consider is the relative size of the Australian vs US markets; 24ish mil vs 350ish million people. Not as many people to buy tech means greater risk in selling tech means having to charge a higher price to cover the risk? In the case of hardware, I guess there are some fixed costs associated with importing, etc that prices are being aggressively ‘padded out’ to make room for.

    • Re: risk, what possible risk is there to Apple selling a product in Australia compared with the US? Australians know at least as much, if not more about Apple products. The scale shouldn’t impact the price when for both countries, the products are made in Korea or China etc.

      And yup, we’re definitely going to contact the vendors and ask them about it. We have spoken to Adobe (http://bit.ly/9BKTOM) and Microsoft (http://bit.ly/co3Bo4), but it’s worth asking the others.

  7. @James Webster its the line Microsoft gave me when I asked (market size – packaging etc ) :)
    However with more and more software becoming available via download the market size becomes less of an argument as does the packaging and importing costs.. Localisation of software in the case of something like VS 2010 also is not an issue. I can buy the USA version from Amazon and get it shipped here without issue which is what I will probably do.

  8. It is not really a technology related issue. Such a tax is rampant with low tech items like the humble calendar at Xmas time. Have a look on the back. They will have $US9.95 price tag, and be $AU19.95 or even more, right there next to the US price. Jeans are another example. I can buy brand name jeans in the US for around $US35 (plus sales tax) which cost around $AU100 inc GST, here in Australia. I agree with James and that the size of the market is a factor, as is the value of local support, which means all other things being equal we may have to pay a slight premium for some goods. But that doesn’t account for the price differentials being discussed here in my opinion.

  9. It would seem it’s more of an ‘aussie’ tax than just technology… someone explain why I can find return flights from san francisco to australia for about USD$800 (airlineconsolidator.com) but the cheapest comparable flights (being a good aussie and flying qantas) I can find starting here and going back (filling the same bloody seats) start at A$1200 (airlineconsolidator.com,webjet.com.au,zuji.com.au,travelocity.com,vayama.com etc etc…).

    Is the government subsidising this? what’s going on?!?!

  10. Having contributed to or controlled technology purchasing for numerous organisations over the last 10 years I could not agree more with your findings. In numerous cases this has extended to hardware and peripherals which I have been able to source at prices below what local retailers have been able to buy.

    This additional cost not only hurts the hip pocket but continues to hold Australia back from matching the technical innovation of the rest of the world. Without access to software and hardware at reasonable prices the development of Australian businesses is held back as is the demand and hence supply for greater infrastructure and services to Australians. I won’t say that this is the cause of our backward nature but it is certainly a contributor and has now given way to organisations to exploiting that fact.
    The most recent example I can think of is Windows 7 Pricing. Windows 7 is now regionalised and can only be licensed by region.

    The US version of Windows 7 Professional costs US$299 ( 323.490 AUD @ 1 AUD = 0.924295 USD)
    The Aussie version is AU$449. That’s a 38.8% margin hike!

    I am going back to my cave to chisel out my next email.

  11. Renai, software and hardware coming into the country falls foul of the import duty, the GST and the exchange rate. Import duty you can take up with customs, but @decryption can probably tell you what that set him back with the recent importation of ipads.

    The exchange rate is never what the current rate is at, not after the GFC. Manufacturers usually keep the exchange somewhere a bit lower than current, just as a buffer. if the exchange rate falls to the high 80’s, they will still be able to possibly have the same price.

    The last thing is that the retailers can set the price they sell at – either the suggested retail, or slightly under. They have to be mindful of competitors being cheaper, so the pricing fluctuates all the time.

    using xe.com is great for a money transfer, but not much chop for predicting current prices – there are many other factors involved, ranging from the manufacturer’s import and freight costs, the distribution and storage of the products, the costs associated with the distribution, the reseller’s / retailers margin. Maybe it is cheaper overseas, but is the apple price comparing apple store US with apple store AU?

    There are many sequences to getting a product to the shelf to be able to buy it. There is the manufacturer, with their margin, the distributor, with their margin, and the reseller, with their margin. There is freight, from the manufacturer and the distributor and possibly the retailer / reseller as well. Internal transfers create freight charges as well.

    • There is no custom duty on hardware or software. I did confirm with Customs as part of this story.

      I was supprised, Duty would be my first guess why there is such a disparity of prices.

      Exchange rate is slightly different. In olden days people will buy OS currency in bulk. i dont know in this day and age with electronic payment systems like swift you need to hedge currency anymore. Intresting question

  12. one other thing, who remembers how much tax we paid for software prior to GST? anyone?

    Nothing. software, licensing or box was exempt. hardware had 22%, but software (and that included game console software) was tax free.

    so if we used to pay 22% on hardware, and now pay 10%, where did that other 12% go?

    I can tell you that it didn’t go to resellers, it didn’t go to distribution. The manufacturers did drop the pricing, but not a full 12%. Why didn’t we get a full 12%? because manufacturers had to take into consideration the GST in their processes.Administrative costs actually went up to cover the new tax and the methods of collection. And the govt got some back, in import duty. The only organisations who have been consistent in profit and pricing over the years are the Couriers…

  13. It’s no surprise really, companies are opportunistic. If Australians have always perceived the cost of X being $100, as a company you’d be stupid to modify that just because it now costs YOU less. The only thing changing this now is as explained above, we no longer HAVE to buy in Australia.

    Oh well, once the planet becomes united and we have one currency called credits, we’ll be able to buy our Teleporters at the same price as the Americans :D

  14. […] Australia, if you’re not aware, isn’t a backwards country where we ride kangaroos around, all live on farms and are all Crocodile Dundee. Far from it, in fact. We love our technology. We love it a lot. Yet you and many other technology companies a) neglect us completely or b) price gouge and make a tidy profit (Ohaithar, Adobe!). […]

  15. The Australian technology tax on Apple products doesnt look so bad today!

    After the Aussie dollar crapped itself…. its actually now cheaper to buy an ipad in Australia than it is in the US. (even with GST factored in).

    If you factor in a basic US sales tax…. its MUCH cheaper to buy here.

  16. I buy everything from amazon.com or the cheapest USA vendor. I then ship it via my USA postal box to OZ. Even with purchasing some items in states like NY (with extra taxes), it still works out more than $50AUD cheaper than buying it locally.
    Breaks and returns? Hardly ever happens, but most companies honour a global warranty. Win-win.

  17. I called Dell, & was quoted AUD$220 for a memory module that goes for US$50.99 in the US. I’ve lodged a complaint with the Dell sales team over the issue.

  18. I’ve had to call Dell several times – each time I’m promised a callback but it never happens. Also CSRs lie that they’ll stay on the line when transferring me, and not so much as ‘sorry for the inconvenience.’ Shockingly poor customer service. I’m not giving up though.

  19. Some firewall software we purchase, (just a license key is emailed to you) is usually at least 30% more in Australia than the USA or even Canada and Europe.

    Recently got a quote of around $7500AUD and in the USA around $5000. Thats for a emailed string of numbers and letters.

  20. I’ve finally got some traction with Dell; one of their CSRs is following up my complaint with management, & will be getting back to me:

    I attempted to purchase a Dell 2GB memory module for my wife’s laptop,
    an XPS M1210. I found the module online here:

    http://accessories.us.dell.com/sna/productdetail.aspx?c=us&l=en&sku=A0821571

    I was pleased with the price, which is US$59.99 for the SOHO segment.

    However I discovered that your US website doesn’t allow shipping to
    Australia. I attempted to find an equivalent on the Australian
    website and failed, so I called your Sales department.

    The CSR advised me that the RRP of a _slower_ module in Australia is ~
    AUD$220. He also advised me that fitting the 2GB module in
    conjunction with the existing 512MB module would require me to disable
    Dual Channel memory, but that that would impose _no_ performance
    penalty.

    So, I have several complaints:

    – I feel as though I narrowly escaped being ripped off. The CSR was
    nice enough to bring the price to my attention because I mentioned the
    US price, but if I had not first Googled the component and mentioned
    the US price, I’d have no idea that I was being gouged to the tune of
    $160 on a $60 component!

    – The CSR either lied or guessed about the performance benefits of
    Dual Channel memory. While it is true that, in some applications, the
    measured benefit is small (typically ~ 5%) it is significant in
    memory-intensive operations.

    I also have two enquiries:

    – Is there any way I can buy a memory module for my wife’s laptop
    that is as fast as your US model, and at a price that’s at least
    comparable to your US price, taking into account such things as
    exchange rate, shipping, and tax?

    – Is this instance unusual, or does Dell a matter of course charge
    Australians several times the going US price, for slower components?

    Thanks for your time, & I look forwards to your response.

  21. Just purchase the memory module from a local IT store or from Ebay.
    There is nothing magical about Dell one’s.

    If you’re uncertain, take the module out of your laptop and put it into folded clean sheet of A4 paper or, (preferably an antistatic bag).

    Take it down to the computer store and ask for either a larger one or an extra one if you have a spare slot.
    Some Dell laptops have one memory module hidden internally on the mainboard and ONE user accessible slot, others have both slots accessible.

    Alternatively go to the Dell web site and find the support section, enter the service tag there and look for System Configuration. It will tell you in detail all the components on your machine, print it and take that to the computer store.

    You can find your service tag on the base of the laptop.

    Regards,
    Simon.

  22. Thanks for the advice, but you should know that the Dell units are in fact magical – they are incapable of generating excuses :-)

    The background is that I had the mainboard of the XPS replaced outside of warranty due to a (well publicised) faulty GPU issue with that unit. See:

    http://www.fluidscape.com/Dell_NVIDIA_GPU_Fault.html

    This means that I’m reluctant to fit anything but official Dell components to the laptop. If the new GPU dies, I don’t want anything getting in the way of another replacement.

  23. Now that the AUD is above the USD and has been for some a month or so (1.09 on yesterday’s ABC news report) looking at the IPads online at the Apple store we see Ipad2 64BG wifi only version we find AU pricing is $100 more at $799 while on the US store it is $699. There is a certain amount to be said for the prudence of building in a safety margin against the erratic Australian currency movements for the local importers but this is now that the AUD is well above the US (of which the majority of international trade is conducted) it is becoming an out right rip off.

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