Computer Wares Get A Hard And Soft Slug
The Age
Friday June 23, 2000
Desktop computers should be marginally cheaper from July 1 but software will be more expensive, and there is some mystery surrounding what will happen to the prices of peripheral devices such as scanners and CD writers.
That's the likely effect of the GST on retail sales of computing equipment when wholesale sales taxes are dropped from midnight on June 30, and the entire range of computer products becomes liable to the 10 per cent goods and services tax.
Most retailers expect it will take several weeks to bed down the system, partly because freight and other overhead charges will also change as a result of the new tax.
These may produce economies in their operations that could be passed on in the form of price cuts, although they are not expected to be large.
Adding to the uncertainty of some future prices is the fluctuating exchange rate of the Australian dollar against the US dollar, in which almost all computer hardware and software is now priced, regardless of its origins.
Several dealers said they were now seeing wholesale prices rising as a result of the recent all-time low in the dollar rate and this was, inevitably, pushing up street prices.
The other area of consumer computing likely to see notable change as a result of the GST is in charges made by Internet service providers, from large players such as Telstra, Optus and Primus down to small neighborhood and specialist ISPs.
They, too, will have to levy the 10 per cent GST on their fees, as will the cable and telephone companies supplying the lines.
Broadly, therefore, the cost of accessing the Internet will rise by 10 per cent, or about $3 a month, for many users.
Later, if overhead savings filter through from the telecommunications carriers, discounts may appear, but they are not expected to be more than a few percentage points.
The few small ISPs offering ``free" services are all believed to have factored the GST into their advertising rates and are expected to continue as before.
Hardware and software distributors and retailers are still working out precisely how the tax will affect individual items because, previously, different rates of sales tax were applied to different kinds of items.
Computers attracted 19.8 per cent, which should mean they will be slightly cheaper come July 1. But software, which was previously all but free of sales tax, will come under the GST, making it about 10 per cent dearer.
More mysterious is the likely fate of those peripheral devices that usually are supplied with bundled software.
Most scanners, for instance, come with imaging software such as a ``light" version of Adobe Systems PhotoShop or Photo DeLuxe programs.
The scanner makers buy this from the software developers at favorable rates, much below normal retail prices. Under the old wholesale tax system, the hardware and software components of such packages were taxed as separate items.
However, according to industry sources, some distributors were in the habit of telling the tax man that the software constituted a larger part of the overall cost than the hardware.
That approach meant that the hardware-software bundle attracted a lower overall tax bill because a higher proportion of the total value was assessed at the software rate.
But with the flat-rate GST, such negotiations will not be possible and some wholesalers have been busy re-evaluating and repricing their goods. How the change will affect retail pricing will depend on the kind of deal the distributor had previously struck with the Tax Office.
But for many computer dealers the GST has been quite a bonanza. Small businesses, many of them previously not registered, have suddenly discovered the need to enter the computer age.
They have come shopping clutching their $200 vouchers from the government and have bought computers, printers and accounting packages.
One Melbourne dealer who preferred not to be named said: ``This GST has been great for us. The $200 vouchers have been an incentive for small business people to buy computer packages and the shop has been full of them, traipsing through to look at software packages such as M.Y.O.B. and QuickBooks, seeking help on what they might need. Our sales volume as a result has been very significant."
Ups and downs
* Computers down 9 to 11 per cent
* Software up by 10 per cent
* Peripherals: (scanners etc): some up, some down by up to 10 per cent
* Internet service providers up by 10 per cent
© 2000 The Age
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