Fashion online: Selling to Australia

transcript

Fashion – Selling Online to Australia

Joanna Olivera, Trade Development Manager

Presentations- UKTI Australia: Joanna Olivera, Trade Development Manager

- General overview of Australia- E-commerce and Fashion sectors in Australia- Trends and Drivers behind growth of e-commerce- Adapting the way you sell- How can we help?

- Guest presenter: Ned Shelton, Founder and Managing Director, Starting in Australia Pty Ltd

- Q&A session

Why Australia?

- Over 1,000 UK companies

- Very similar business, legal and regulatory culture

- Best performing OECD country economically, with good growth prospects

- Sophisticated, literate and multicultural market

- Strong Australian dollar making UK goods and services more affordable

- Closely linked to fast growing Asia-Pacific nations

An Overview of Australia

- Australia is an island continent and the world’s sixth largest country- Population is 23 million - All states/territories have separate governments, sitting under federal government with regulations varying between them- Largest and most populous cities are Sydney and Melbourne- Capital city - Canberra

Overview of E-Commerce in Australia

- Shift from traditional retail to online retail

- Australians spent AU$14.2 billion in 2012-13

- AU$7 billion was spent on overseas online shops last year

- Australia has over 16 million people active online

- 62% of online users purchase goods and services online on a regular basis

- The Australian uptake to E-Commerce has been very fast

- Online sales grew 90% from 2010 to 2011

Opportunities for growth in E-Commerce

- Online sales in Australia are set to continue to grow exponentially over the coming years due to;

• Roll out of National Broadband Network

• Rise of M-Commerce – 53% of Australian mobile users use a smart phone

- Strong Australian dollar and rise in disposable incomes

Trends & Drivers behind E-Commerce

- Australian consumers are attracted to online shopping for three main factors; 1) lower prices 2) convenience 3) speed of delivery 4) a wider range of goods than available from bricks and mortar retailers

- Goods under AU$1000 bought overseas do not attract 10% GST

Fashion Sector

- Demand for niche products

- Shift away from mass manufactured and standardised products

- Demand for quality and uniqueness

- Reflects popularity of mid-price and high-price niche items

- Strong growth in menswear and childrenswear

- Australians have demonstrated a strong appetite for foreign brands

UKTI Australia

Adapting the way you sell

Adapting your website for Australia

- Simplify customer service processes

- Forms need to allow for international addresses and information, e.g. post codes

- Answer enquiries promptly and be mindful of time difference

- Keep website and product listings up-to-date

- List prices in AUD and note that Australia uses the metric system

Adapting the way you sell

-Companies that ‘internationalise’ their websites dramatically increase their chances of obtaining overseas business

- Credit card payments are popular and other secure payment systems, such as PayPal are becoming increasingly common

- Focus on site security

Shipping and Returns

- Seamless checkout to reduce shopping cart abandonment

- Clear information on time frame for delivery and cost

- Companies offering free or reduced cost freight generally have an advantage over their competition

- Efficient and clear returns policies

Fulfillment Houses

- A solution for companies is to use the services of a fulfillment house to distribute product orders

- Viable for the companies with strong market demand

- Note that it is rare for a fulfillment company to provide its own courier services

Local Factors

- A British company does not need to have an Australian Business Number (ABN) to sell products to Australia online

- Australian domain names cannot be reserved.

- A company must register its business to operate in Australia and then will have an Australian Company Number to have a com.au address

- Goods and Services Tax (GST), at a rate of 10%, applies to most imported goods over a A$1,000 threshold

UKTI Australia

How we can help?

How can UKTI help your business?

- Carry out in-depth research on the market and research local contacts to your specifications (OMIS)

- Help you attend trade fairs and missions

- Product launches and PR and marketing support

- Whatever you need to succeed in the market!

E-Commerce Sector Report

- A detailed sector report which expands on the topics featured in this presentation may be purchased from UKTI Australia

- Features trends, tips on selling to Australia and Case Studies

- Will provide a background that will allow you to make a reasoned and logical analysis of opportunities and the realistic potential for your product in Australia

Contact Details

Joanna Olivera

Trade Development Manager

UKTI Australia

Email: joanna.olivera@fco.gov.uk

Further information:

- Ask questions at the end of this webinar or follow the conversation on LinkedIn

- Keep in touch with the latest Australian business opportunities

- Follow us on twitter @uktiaustralia

Guest Presenter:

Ned SheltonFounder and Managing DirectorStarting in Australia Pty Ltd

Q & A Session

Joanna OliveraTrade Development Manager(Creative Industries, Fashion and E-Commerce)UKTI AustraliaEmail: joanna.olivera@fco.gov.uk

Ned SheltonFounder and Managing DirectorStarting in Australia Pty LtdEmail: N.Shelton@StartingInAustralia.com.au

21© Ned Shelton 2013

By Ned SheltonManaging Director, Starting in Australia Pty Ltd

N.Shelton@StartingInAustralia.com.au www.StartingInAustralia.com.au

www.SheltonsGroup.comPhone +61 2 9089 8792

UKTI: Selling on-line to Australia –

23 October 2013, from 9.30am (UK time)

www.StartingInAustralia.com.au 22

Sheltons – established in 1994 in Europe Offices in Denmark, Cyprus, Malta and Australia Areas

Sheltons International Tax Training Institute (Sheltons-SITTI)

Local and international tax Corporate services (all accounting, company secretarial

work, tax, legal and accounting compliance, providing directors, registered office, company secretary, ++)

Australian office (Sydney) – not ‘Sheltons’ but ‘Starting in Australia’

‘Sheltons’ & ‘Starting in Australia’

Working exclusively with foreigners doing business in Australia – existing and planned

Services Tax advice & compliance, legal and company

secretarial Full range of accounting services, GST & payroll admin Providing local director and public officer Business advice, intro to trusted partners & suppliers +

Specialists – many specific issues apply to inward investor, not known to locally operating advisers

Independent – work well with your UK accountants and lawyers

Understand the UK (and many other countries) Cost efficient – one stop but specialist shop

Starting in Australia Pty Ltd

Pure export – do nothing Customs and GST issues AUD 1,000 exemption – per consignee/addressee No GST on import if GST-free in Aus (e.g., wheelchairs,

food, clothing) Customs duty important GST payable at customs clearance – unless

arrangement made for monthly/quarterly payments in arrears

Selling on-line - phases

Pure export – use .com.au domain Need an Australian entity or trade mark registered in

Australia Does not necessarily cause profits to be taxable in

Australia Useful (in searching) – and in reassuring the Aus

customer

Pure export – use .com.au domain + marketing in Australia Normally still not taxed in Australia on profits– even if

have own full-time staff here conducting marketing

E-commerce - phases

Australia – 30% (flat, not progressive)– Applies to Aus subsidiary’s profits and to Aus branch’s

profits– Proposed reduction to 28.5%

UK – 23%– 1 April 2013, 23% (21% from 2014 and 20% from 2015)– small profits rate (SPR) 20%

Australia – pay about 50% more in tax than the UKTypical planning: earn the profit in the UK rather than Australia

UK vs Australia – company tax

Branch (‘permanent establishment’)

ABC Ltd

Branch

ABC Ltd has a branch in Aus

Australia

Branch (‘permanent establishment’)

Taxed at 30% Do you have a branch (‘Permanent

establishment’ (PE)) in Australia – deliberately – or accidently? It matters.

‘A branch’ – general term, often used in the context of company law

‘Permanent establishment’ (PE) – a tax term If UK business has a PE in Australia – taxed in

Australia on the ‘business profits’ (i.e. trading profits) attributed to the PE

PE arises if there is a certain type of physical presence in Australia

Branch (permanent establishment)

Examples of a PE in Australia (i.e. gives rise to 30% Australian tax on the profits): An office generally trading / carrying on business Selling through an (unrelated or related) agent – if

that agent is mainly working for the UK principal UK business ‘has a building site or construction or

installation project in [Australia] or supervisory or consultancy activity [in Australia] connected with such a site or project, but only if that site, project or activity lasts more than 12 months;’

Example of no PE (no Australian tax): Export to Australia via unrelated importer Sales rep who simply introduces customers to the

UK business head office Renting a warehouse (for storage and delivery of

your goods) Have staff – if only performing marketing activities

The profits from an Australian PE are most likely exempt from tax in the UK if UK business is a UK company

What is best – to have a PE in Australia or not? UK corporate tax - lower than Australian tax Thus: best to not be taxed in Australia – thus only pay

23% or less in UK – rather than 30% in Australia Also: not being taxed in Australia means reduced tax

compliance burden in Australia, avoids ‘discussions’ on transfer pricing, etc.

(If the Australian tax rate was less than the UK, best to have a PE here)

UK tax – re Australian branch

Australian subsidiary

ABC LtdABC Ltd has a subsidiary in Aus

Australia ABC Pty Ltd

30% corporate tax (flat, no progression) Profits calculation roughly similar to UK company No dividend withholding tax on the distribution of

the 70 (i.e. 100 less tax of 30) UK Co potentially exempt from UK tax on the

dividend of 70 received (exemption method) Thus: from the 100 pre-tax Aus profits, UK Co

receives 70 cash > UK tax (of nil) Gain on sale by UK Co of shares in Australian

subsidiary – potentially exempt in the UK

UK tax - with Australian subsidiary

UK corporate owner (of sub or PE), tax aspects: No PE preferred – less tax in total – and no/less

Australian tax compliance burden PE vs. subsidiary – little difference (30% Aus tax in both

cases, probably no UK tax on dividend from sub or on PE profits)

UK corporate owner, non-tax aspects: Far easier to do business in the form of a subsidiary – if

significant interaction and transactions in Australia (e.g. employing staff, renting property, marketing, interaction with local customers)

Running a business with no branch (PE) or with a branch – cumbersome

Costs (legal, tax, accounting) – best to have no PE; PE vs. subsidiary: costs about equal

Depends on the case

No PE vs. PE; PE vs. subsidiary

Can be formed in a day / on the spot No minimum share capital needed Must have

an Australian resident director (company law) and an Australian resident public officer (tax law)

Strict responsibilities for both Small companies

do not need to prepare financial statements (FS) or be audited, ie annual accounts/FS do not need to be published with

ASIC (= UK Companies House)

Must always file tax returns GST (= VAT) quarterly for small turnover

Forming & running an Australian company

UK Co – branded apparel (niche/prestige market) Initially - no effort put in to in selling in Aus, but

relatively strong on-line sales in Aus via UK site To capitalise:

Started a subsidiary in Sydney Opened a shop in Sydney (planning for Melbourne) Held promotional events Managed to get in to some large national outlets

(department store and clothing shop chains)

Role of subsidiary/shop – primarily to promote the direct sales form the UK company to a) direct on-line customers and b) via the national outlets

Relevant case study – 1/3‘CoolClient’

One-off up-front work Advised on whether branch or subsidiary Formed the company (subsidiary) Provided Australian resident director and public officer Advised on important practicalities re import, GST,

customs duty Reviewed shop lease, arranged necessary insurances,

provided template for employment contracts, advised on wages to be paid to shop staff

Assisted developing systems and procedures re finance and accounting

Relevant case study – 1/3‘CoolClient’ – how we assisted

On-going work GST (VAT) administration Monthly management accounts Fortnightly payroll administration Set up payments for approval in banking system Ad hoc advice and assistance (staff termination,

company car for senior employee, visa issues, tax aspects of repatriation of profits, emergency assistance after shop break in)

Relevant case study – 1/3‘CoolClient’ – how we assisted

UK Co – special products for horse health Aim: to sell primarily on-line (to Australian horse

owners) Process

Started a subsidiary in Australia Employed one sales person

Relevant case study – 2/3‘HorseProductClient’

One-off up-front work Formed the company (subsidiary) Provided Australian resident director and public officer Advised on important practicalities re import, GST,

customs duty Advised on how to urgently obtain an ABN Advised on fulfilment houses and logistics regarding

goods from overseas ordered by Australian customers Worked with Australian bank to facilitate on-line

payments

Relevant case study – 2/3‘HorseProductClient’ – how we assisted

On-going work (so far) Fine tuning import procedures (cash flow aspects,

ironing out hitches in the import process) GST (VAT) administration Regular compliance work

Relevant case study – 2/3‘HorseProductClient’– how we assisted

UK Co – selling Indian produced consumer products

Aim: to sell primarily on-line to Australian consumers and to retail outlets

Process Did not involve an Australian presence

Relevant case study – 3/3‘Client C’

One-off up-front work Urgently obtained an ABN Fee: AUD 500

On-going work N/A

Relevant case study – 3/3‘Client C’ – how we assisted

Thank you, that’s all for this time!