New Australian goods and services tax (GST) measures to capture services of a digital nature provided to Australian consumers are now in effect and more are on the way. Australian consumers should expect to pay more for these services!
The Australian GST is similar to the value added taxes (VAT) of other countries where VAT is payable on sales of most products and services ultimately made to consumers. In Australia the GST rate is 10% so that 1/11th of the amount that Australian consumers pay for most products and services is payable to the ATO.
GST on imported services and digital products
Since 1 July 2017 GST has been payable on sales of imported services and digital products made directly to Australian consumers. This GST measure is aimed at businesses like Netflix that have no physical presence in Australia but provide services to Australian consumers via a digital platform.
Non-Australian businesses that may need to register are generally either of following:
1. A business that sells imported services or digital products to Australian consumers; and
2. An operator of an electronic distribution platform (EDP) or online marketplace, such as an app store that supplies imported services or digital products to Australian consumers.
Note: this measure does not apply to sales made directly to Australian registered businesses making purchases solely for their business use.
GST on low value imports
Another new measure – with effect from 1 July 2018 – imposes GST on the importation of ‘low value’ physical goods.
This measure treats the sales of goods valued at AUS$1,000 or less as subject to GST if the goods are purchased by Australian consumers and brought into Australia with the supplier’s assistance. EDPs will be treated as suppliers if the goods are purchased through an EDP and brought into Australia.
This measure does not apply to the importation of goods valued at over AUS$1,000 or consignments of multiple goods with a total value over AUS$1,000. In these cases, GST is payable by the importer at the border under existing GST rules.
Again, this measure does not apply to sales made directly to Australian registered businesses making purchases solely for their business use.
Simplified GST registration
Businesses within either of the above categories are required to register for Australian GST only if their total sales connected with Australia is AUS$75,000 or more per year. Registration can be by either the standard GST registration process or a simplified process introduced specifically for non-Australian businesses.
The simplified GST registration process is recommended as it is does not require proof of identity and is much quicker. Negatives of this registration process is that businesses cannot claim any GST credits for expense incurred in Australia and cannot issue GST ‘tax invoices’.
GST on online hotel bookings
Another new GST measure that is on the way potentially extends the GST regime to offshore sellers of Australian hotel accommodation. Announced in the May 2018 Federal budget, this measure will apply from 1 July 2019 if introduced.
The measure will ensure that offshore sellers of Australian hotel accommodation are treated in the same way as Australian sellers for GST purposes. Currently, offshore sellers of Australian hotel accommodation do not have to include those sales in their total sales when calculating whether it is above or below the AUS$75,000 GST registration threshold. This measure will remove the exemption, ensuring the same treatment for both offshore and Australian sellers of Australian hotel accommodation.
This article has been co-authored by Melanie Newman, Tax Consulting, HLB Mann Judd Sydney.