GST on Digital Products

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In the 2015 Federal Budget handed down in May, new rules were announced (commencing from 1 July 2017) to impose GST on “inbound intangible consumer supplies” made to Australian consumers (popularly known as the “Netflix tax”). These new rules aimed to collect GST on an increasing number of online services such as music and video download and streaming supplies, targeting the engagement of a BAS agent may facilitate compliance with these rules.

Updated exposure draft legislation was released last month, seeking to clarify the operation of the new rules and incorporating feedback from its first release.

The updated exposure draft:

  • Provides for carve out’s to allow the Treasurer to determine some supplies to be GST-free or input taxed (e.g. health and education supplies).
  • Clarifies the requirement for overseas suppliers to take “reasonable steps” to identify whether a supply is being made to an Australian consumer. Reliance on data from usual business systems is now generally sufficient, and where applicable overseas suppliers should obtain the customer’s ABN.
  • Sets out the compliance obligations of “limited registration entities” (which have simplified reporting obligations but no entitlement to input tax credits), stating that they will have quarterly reporting periods.

In addition to the new rules for digital products, the draft legislation also introduces changes to the “connected with Australia” and other cross-border transaction rules, including making the test for when an enterprise is carried on in Australia more consistent with the practise relating to “permanent establishments” under tax treaties.

The Exposure Draft and Explanatory Material can be found on the Treasury website.

*Correct as of November 2015

Disclaimer – Kreston Stanley Williamson has produced this article to serve its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas in this article, you must seek advice about your circumstances. Liability is limited by a scheme approved under professional standards legislation.

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