GST on Digital Products

Current as of November 2015

 

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 were aimed at collecting GST on an increasing number of online services such as music and video download and streaming supplies.

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 practice relating to “permanent establishments” under tax treaties.

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

 

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