Coaching Centre
Buying overseas
Converting between Australian dollars and other currencies, overseas card fees, GST on imported goods, VAT abroad, and deciding whether buying overseas is really cheaper.
Buying sneakers from a US website or paying for a hotel in Bali means dealing with another currency. The price in dollars on the screen is not what leaves your account. This section shows how to work out what really does.
Exchange rates
An exchange rate tells you how much of another currency one Australian dollar buys, such as A$\$1$ = US$\$0.66$. Rates change every minute, so the rates in this section are examples.
- Australian dollars to foreign currency: multiply by the rate.
- Foreign currency to Australian dollars: divide by the rate.
The exchange rate is A$\$1$ = US$\$0.66$. (a) Change A$\$500$ into US dollars. (b) A hoodie costs US$\$205$. Find its price in Australian dollars.
Fees and GST on imports
Two extra costs catch people out:
- Most Australian bank cards charge an international transaction fee, often about $3\%$ of the amount, even when the website shows Australian dollars.
- Since 2018, overseas sellers must add GST of $10\%$ to goods worth $\$1000$ or less sent to Australia. More expensive items pay GST and possibly duty at the border.
Lucas buys a pair of sneakers for US$\$180$ plus US$\$25$ shipping, at A$\$1$ = US$\$0.66$. GST of $10\%$ is added, and his card charges a $3\%$ fee on the total. The same sneakers cost $\$329$ in a Sydney store. Which is cheaper?
Check Example 2. Then find the exchange rate at which buying overseas and buying in Sydney cost about the same.
Turn the card fee off. How much did it add? Who else might have to pay it when they shop online?
Spending overseas
Many countries have their own consumption tax. The UK and much of Europe add VAT (value added tax), often $20\%$, and New Zealand has a $15\%$ GST. Prices there usually include it, so the tax inside a price is found the same way as Australian GST: for $20\%$ VAT, divide the price by $6$ ($20$ parts out of $120$).
Going the other way, tourists leaving Australia can claim back the GST on goods over $\$300$ bought from one shop, through the Tourist Refund Scheme at the airport.
Your turn
A hotel in Paris costs €150 a night. The rate is A$\$1$ = €0.60. Find the cost of $3$ nights in Australian dollars, including a $3\%$ card fee.
Show the working
One night: $150 \div 0.60 = \$250$. Three nights: $\$750$. Card fee: $0.03 \times 750 = \$22.50$. Total: $\$772.50$.
A$\$1$ = US$\$0.64$. Find the cost in Australian dollars of an item priced at US$\$96$.
$96 \div 0.64 = 150$, so A$\$150$.
A$\$1$ = US$\$0.65$. How many US dollars do you get for A$\$800$?
$800 \times 0.65 = 520$, so US$\$520$.
A$\$1$ = NZ$\$1.09$. Change A$\$250$ into New Zealand dollars.
$250 \times 1.09 = 272.50$, so NZ$\$272.50$.
The rate is A$\$1$ = ¥96.5. To change a price in yen into Australian dollars you should:
Each A$\$1$ buys ¥96.5, so the number of Australian dollars is the yen price divided by $96.5$.
A card charges a $3\%$ international transaction fee. Find the fee on a purchase of A$\$420$.
$0.03 \times 420 = \$12.60$.
A jumper in London costs £96 including $20\%$ VAT. How much of the price is VAT, in pounds?
The price is $120\%$ of the pre-VAT price, so the VAT is $\dfrac{20}{120} = \dfrac16$ of it: $96 \div 6 = £16$.
A$\$1$ = €0.60. A hotel costs €150. Find the cost in Australian dollars.
$150 \div 0.60 = 250$, so A$\$250$.
An overseas website sells a game worth A$\$310$ to a buyer in Australia. How much GST must be added?
$0.10 \times 310 = \$31$.
Exam style: Headphones cost US$\$240$ including shipping. A$\$1$ = US$\$0.62$. GST of $10\%$ is added, and then a $3\%$ card fee is charged on the total. Find the total cost in Australian dollars.
Convert: $240 \div 0.62 \approx \$387.10$. Add GST: $387.10 \times 1.1 = \$425.81$. Add the fee: $425.81 \times 1.03 \approx \$438.58$.
Exam style: At what exchange rate (US dollars per A$\$1$) would an item costing US$\$150$ cost exactly A$\$240$?
Australian dollars $=$ US dollars $\div$ rate, so $240 = 150 \div r$ and $r = 150 \div 240 = 0.625$.