GST and digital service providers
A GST integrity measure announced in tonight’s budget seeks to ensure that there is a level playing field for the suppliers of digital products and services in Australia in relation to the GST.
The new Australian digital services GST was outlined in the May 12 budget with introduction from 1 July 2017. Prior to its enactment, it will require the unanimous agreement of the states and territories. The measures are expected to be similar to the European Union rules on the supply of digital services to EU consumers introduced on January 1, 2015.
It is expected that the changes will compel non-Australian digital service providers (such as Netflix) to collect and remit GST to the Australian Federal Government. Mr Hockey has indicated that the funds raised – estimated at $350m over four years – will then be redistributed to state coffers. There has been no indication as to how the funds collected would be redistributed.
As of 1 January 2015 in the European Union, 'business to non-registered customer' ('B2C') supplies of telecommunications, broadcasting and other electronically supplied services provided by suppliers in the EU and made to non-taxable customers within the EU will be treated as supplied in the EU Member State where the recipient of the service is established, has a permanent address or usually resides.
If similar rules are introduced in Australia, suppliers of such services will need to determine where their customers are established or usually reside, and will need to account for GST. This will be a requirement irrespective of where the supplier itself is established. No minimum thresholds apply in the EU version, so making supplies to just one customer in Australia may trigger a GST registration requirement in Australia if similar rules apply.
Low-value threshold for taxable importations
Currently, there is a GST threshold exemption of $1,000 that applies to purchases of imported goods (including online purchases). This has received considerable criticism from domestic retailers as they argue it causes a competitive disadvantage.
The government has flagged an intention to 'explore' lowering the threshold. This has been an ongoing issue, regardless of which party was in power. However, the problem has always been how to enforce the law in a cost effective manner if the threshold is lowered. Despite the changes mooted to digital supplies, there was nothing in the Budget about the imported goods threshold.