Australian GST update—2015

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Notes

1 Tax and Superannuation Laws Amendment (2016 Measures No. 1) Bill 2016 (‘the Bill’), Chapters 1 and 2.

2 A third area—importation of low value goods—has been the subject of a policy announcement but no draft legislation has been released.

3 A New Tax System (Goods and Services Tax) Act 1999 (‘GST Act 1999’).

4 The terms ‘digital imports’ is generally used to describe ‘intangibles’ that are dealt with under the rules for ‘things other than goods or real property’ under the Australian GST Law (GST Act 1999, ss 9–25(5) and division 84) and which are supplied by an overseas supplier to an Australian recipient who ‘consumes’ the thing in Australia.

5 Netflix's supplies of digital content to Australian recipients would not be subject to GST under the Australian GST laws applicable at the time as it was not ‘done’ in Australia, nor supplied through an enterprise carried on in Australia: GST Act 1999, s 9–25(5).

6 B Grubb and T Pullar-Strecker, ‘Netflix won’t charge Australians GST [Internet]’ (2015) Sydney Morning Herald. Available from: http://www.smh.com.au/digital-life/digital-life-news/netflix-wont-charge-australians-gst-20150317-1m1sit.html; and J Lynch and N Khadem, ‘Netflix needs to pay GST, Assistant Treasurer Josh Frydenberg says [Internet]’ (2015) Sydney Morning Herald. Available from: http://www.smh.com.au/business/media-and-marketing/netflix-needs-to-pay-gst-assistant-treasurer-josh-frydenberg-says-20150322-1m581f.html

7 See, for example, R Millar, ‘The “Netflix tax”—coming to a country near you’, (2015) The Conversation, https://theconversation.com/the-netflix-tax-coming-to-a-country-near-you-40475.

8 Such as streamed/downloaded movies, music, apps, games, e-books and also professional services (ie things other than goods or real property).

9 The term ‘Australia’ has been replaced in the GST Act 1999 by the term ‘Indirect Tax Zone’ to take account of the fact that certain external territories of Australia are not included in the GST regime. For ease of reference, the term ‘Australia’ has been used, but should be taken to have the same meaning as ‘Indirect Tax Zone’, which is the technically correct term.

10 For example, if the non-resident supplier's servers are located outside of Australia and the recipient downloads the digital content from the overseas server, this supply will not be ‘done’ in Australia.

11 OECD/G20. (2015). Base Erosion and Profit Shifting Project—‘Addressing the Tax Challenges of the Digital Economy’, Action 1—2015 Final Report. OECD.

12 OECD. (2014–2015). Draft International VAT/GST Guidelines—Guidelines On Place Of Taxation For Business-To-Consumer Supplies Of Services And Intangibles. OECD. Available from: http://www.oecd.org/ctp/consumption/discussion-draft-oecd-international-vat-gst-guidelines.pdf

13 OECD. (2015). International VAT/GST Guidelines. OECD. Available from: http://www.oecd.org/tax/consumption/international-vat-gst-guidelines.pdf

14 It is not uncommon for such suppliers to be based in a low GST/VAT jurisdiction and to be liable to GST/VAT in these jurisdictions, not the jurisdictions of their customers.

15 GST Act 1999, s 38–190.

16 An ‘Australian consumer’ is defined in the proposed s 9–25(7) to effectively mean an Australian resident who is either not GST registered, or if GST registered does not acquire the thing solely or partly for its enterprise.

17 The May 2015 Exposure Draft imposed a more rigorous test, requiring non-resident suppliers to take ‘all reasonable steps’, but this was relaxed after consultation—refer to the Consultation Paper to the October 2015 Exposure Draft.

18 This term replaced the ‘electronic distribution service’, which was used in the May 2015 Exposure Draft. The explanatory material explains that the change was so that entities that merely facilitate the payment or transmission of services should not be liable for the tax, only entities that actually ‘provide services through which the supply is offered and made’ (see the Consultation Paper to the October 2015 Exposure Draft).

19 New s 9–25(5)(d).

20 For example: customer details obtained from registration forms or declaration forms.

21 For example: e-Bay, Amazon, Book Depository.

22 The concept of an ‘electronic distribution platform’ is defined to be a service that allows entities to make supplies to end users, is delivered by means of electronic communication, and is made by means of electronic communication. In short, an ‘electronic distribution platform’ is intended to cover a website, portal, gateway, online store or online marketplace, but excludes certain mobile phone carriage services and payment/processing/voucher systems.

23 An ‘inbound intangible consumer supply’ is a supply made to an ‘Australian consumer’ (as discussed above) of things other than goods or real property unless the supply is a ‘thing done’ wholly in Australia or made wholly through an enterprise the supplier carries on in Australia. That is, the term is aimed at capturing the supplies that have become subject to GST through these changes (although the use of the term ‘wholly’ means it may capture supplies previously subject to GST).

24 By not allowing limited registration entities the right to claim input tax credits, this overcomes the generally accepted compliance risk of allowing non-resident entities access to input tax credits.

25 See EM.

26 Income Tax Assessment Act 1936, s 6(1).

27 Either an individual (in the case of a sole trader) or an employee or officer of a company or an agent who can and does habitually conclude contracts on behalf of the entity and is not an agent of independent status.

28 Either intended to be, or actually more than the 183 days.

29 An ‘Australian-based business recipient’ is defined to be an entity that: (1) is registered; (2) carries on an enterprise in Australia; and (3) acquires the thing not solely of a private or domestic nature.

30 Where the supply of the intangible is done in Australia but the recipient acquires the thing solely for its enterprise outside Australia.

31 Where the recipient previously made a taxable importation of the goods and continues the lease on substantially similar terms and conditions.