A GST integrity measure announced in the recent federal 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 proposed 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 seek to compel non-Australian digital service providers (such as Netflix) to collect and remit GST to the Australian Federal Government. This is where the wing and the prayer come in. Exactly how we will compel non-residents to comply with Australian tax law is problematic.
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 if they are 'in Australia'. 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 – and we can exert any legal jurisdiction over them.
So don’t get too excited just yet about any potential increase in your Netflix subscription because of the GST.