Contact: David Prichard; ESV Group (New South Wales, Australia)
Online streaming, e-books and other intangible digital content sold by offshore vendors currently do not attract Australia’s Goods and Services Tax (GST). However, a number of proposed changes seek to broaden the GST to include these digital products and services.
GST ON CROSS-BORDER ELECTRONIC COMMERCE
The proposed changes would impose GST on offshore sales of digital content and intangibles to Australian consumers at the standard rate of 10%.
An ‘Australian consumer’ is defined as an Australian resident who is not registered for GST. The definition focuses on the consumer’s tax residency and not their physical location at the time of transaction.
The changes would apply to the sale of any ‘inbound intangible consumer supply’ from outside of Australia – i.e. anything other than goods or real property. This includes streaming and downloading of movies, music, apps, games and e-books, as well as other online services such as consulting and advisory services.
If enacted, these changes will be enforced on supplies that are attributable to periods starting from 1 July 2017. The GST expansion is expected to add $350 million to the budget over four years.
GST ON LOW VALUE GOODS
In addition to these changes, Australia’s State and Territory Treasurers have agreed to abolish the low-value threshold for GST on otherwise taxable importations to Australia.
This change would expand Australia’s GST to include overseas online transactions of goods under $1,000. This means that the online sale of goods by offshore vendors would be subject to GST, irrespective of the value of the good.
Again, the new rules will be imposed from 1 July 2017.
CHANGES AHEAD
Offshore suppliers of digital content and e-commerce entities will need to consider how the above changes might impact their business operations. Australia’s tax landscape is constantly evolving and overseas companies need to stay updated on their compliance obligations.
Should you have any questions in relation to the above, or Australia’s tax laws in general, please contact your ESV engagement partner on +61 9283 1666.
