iPhone SE: how much 'Australia tax' has Apple added to the price?

iPhone SE: how much 'Australia tax' has Apple added to the price?

The new iPhone SE comes with the cheapest launch price of any iPhone yet, but that hasn't changed the pain Australians feel when we see the price we're expected to pay compared directly to the American price Apple executives announced on stage.

The iPhone SE will launch starting at $679 for the 16GB version in Australia — a fair bit more expensive than the American price of $US399 which, converted to Australian dollars, is just $526.

To be fair, the American figure doesn't include sales tax, while the Australian one does. So we should add 10 per cent GST on top of the American price for a more reasonable equivalent.

But that still only takes it to around $579 — $100 cheaper than the real Australian RRP.

The iPhone led the company to soaring valuations and accounted for nearly two-thirds of Apple's revenue in the past year.

The iPhone led the company to soaring valuations and accounted for nearly two-thirds of Apple's revenue in the past year.

Photo: Bloomberg

Carry out the same sums with the more expensive 64GB version of the phone and you'll also find a difference of $105.

While the bulk of the shock in seeing a $399 price tag next to $679 is down to exchange rates and taxes, it's clear that Australians are still being asked to pay more than Americans for the new iPhone — a practice so well recognised in the consumer technology space it has spawned its own nickname: the 'Australia tax'.

Of course, the phrase is not entirely accurate — at least not in this case — because it's the same story in other territories as well. In the UK, where their currency has also fallen against the US dollar, the 16GB iPhone SE will cost the equivalent of $679 — the exact same price Australians pay.

A cynic might say that Apple is merely hiding behind the obfuscation of currency exchange to jack up prices and maximise profits outside its home market of the US. Yet the truth is likely more nuanced.

The company surely builds some amount of currency assurance into the price, for example. Since Apple makes its revenue in US dollars and can't go tinkering with the iPhone price every day to reflect the changing exchange rate, it wants to ensure a financial crisis doesn't have its Australian iPhones suddenly selling for significantly less than its American ones.

Another factor might be that Australians (and Brits) are simply willing to pay a little bit more for smartphones than Americans, and do so pretty much across the board. Average wages are higher here than in the US, after all.

By that same token, tighter rules and regulations here in Australia mean Apple undoubtedly has to pay the employees at its local Apple Stores a higher wage than it does its US retail workers, and it also probably spends more to comply with consumer guarantees.

As for whether or not the size of the Australia tax is growing? It is. But again, it's all down to that pesky exchange rate.

While the price of iPhones in Australia has always been higher than in the US, the price increase from model to model — at least between the 4s in 2011 and the 6s in 2015 — has kept step almost exactly with the changes in the exchange rate.

It would be unfair to add the SE to this table. Owing to the fact that it's a mid-range product rather than a high-end one, there's not really anything to compare.

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Tim Biggs

Tim is the editor of Fairfax's technology sections.

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