Australia’s Goods and Services Tax: the considerations and impacts to businesses

In the 2015-2016 Federal Budget, the Australian Government proposed its plan to extend the Goods and Services Tax law to inbound intangible supplies (also known as the 'Netflix tax'), with effect from 1 July 2017. Let's examine the impact of these changes.

Last year, in the 2015-2016 Federal Budget, the Australian Government proposed its plan to extend the Goods and Services Tax (GST) law to inbound intangible supplies, with effect from 1 July 2017.

Also referred to as the 'Netflix tax', the aim is to restore the GST revenue base with the fast-growing digital economy, to create a level playing field for domestic suppliers when compared with overseas counterparts. It will also align Australia’s capture of inbound transactions with other countries that have already acted on the indirect taxation of imported digital products such as Norway, Japan and the member states of the European Union.

Scope of the legislation change

The change will impact foreign suppliers and their operations in the GST regime. It will expand Australian GST to include e-commerce business or e-business transactions for digital services, as well as capture other cross-border inbound intangible supplies. 

The changes in the GST legislation will include:

  • supply of anything other than goods or real property, such as digital products including streaming or downloading of movies, music, apps, games, e-books, as well as overseas gambling supplies and other services
  • GST levied on the Australian end-consumer only – generally, business (B) to consumer (C) supply
  • extending the scope of GST by levying it on operators of an electronic distribution service
  • changes to existing GST administration rules.

Impact and other considerations

Foreign suppliers and operators of electronic distribution services that provide inbound intangible supplies will be impacted; followed by the Australian end-consumer, who will pay 10% more for the intangible supply.

Foreign suppliers and operators of an electronic distribution service will have to register on a simplified registration process, as well as collect and remit GST. It will require entities to modify and/or check their accounting and reporting systems to capture GST information, in order to comply with the new rules. 

So, what will the providers of intangible supplies and operators of the electronic distribution services do? 

The providers of the intangible supplies may now find themselves in the Australian GST net; they will need to register charge and remit GST.

For operators of the electronic distribution services, they would be captured and therefore need to consider whether to remain in their current scope of services for the underlying suppliers or alternatively, seek to renegotiate current contractual arrangements, where they are not caught. 

How we can help  

TMF Australia can engage with providers of inbound intangible supplies and operators of electronic distribution services, to monitor the progress of the draft legislation. We can also help your business stay compliant with local regulations, allowing you to focus on your core business.

Need more information? Get in touch with our experts.

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