Aus made fabrics taxed twice

9 December 2009

The wind-up of a duty concession scheme in June 2010 will result in the double-taxing of garments made overseas from Australian-made fabrics, according to the TFIA (Council for Textiles and Fashion Industries of Australia).

Since 2000, imported garments that used Australian-made fabrics have been granted a duty concession under the EOAP (Expanded Overseas Assembly Provisions) scheme. But after June 2010, when the scheme is scheduled to wind up, Australian garment manufacturers will be penalised for using locally made fabrics in garments they assemble overseas.

This meant such manufacturers would be taxed twice on Australian-made fabrics, TFIA executive director Jo Kellock said; first in the form of GST on the purchase of Australian-made fabrics, and then again in the form of import duties on assembled garments that use the fabrics. The double-tax impost would make these Australian-made fabric products uncompetitive in a highly price sensitive market, she added.

Meanwhile importers who used fabrics produced overseas would only be charged a single 10 per cent tariff on the assembled garment and would pay no GST.

The end of the EOAP scheme threatened innovative collaborations between local firms such as garment manufacturer Andorra Australia and fabric manufacturer ABMT, both based in Melbourne.

"Andorra and ABMT have collaborated over the past 15 years to develop specialist fabrics such as ultra-lightweight merino wool blends for thermal base wear and an aloe vera infused cotton-Lycra blend designed to add softness and freshness to undergarments. These garments [pictured] are sold in Target and Target Country stores Australia-wide."

"We'll be paying 10 per cent GST on the fabric we purchase from ABMT and then another 10 per cent on that same fabric when it is imported from overseas in the form of the assembled garment," confirmed Andorra Australia general manager Andrew Goulopoulos.

"We have worked with ABMT for many years to develop these new fabrics in response to market trends," he added. "Working with a local manufacturer in this development process has been convenient and efficient, but this partnership is now being threatened by the extra tax penalty we will incur for using an Australian product."

Kellock concluded there was "no justification for removing this concession for Australian garment manufacturers who are keen to use Australian fabrics. We should be using every lever to encourage them, not making it harder."

 

 

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