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Australia Consults On 'Netflix Tax'

by Mary Swire, Tax-News.com, Hong Kong

14 May 2015


The Australian Treasury has launched a consultation on draft legislation that would ensure that consumers buying digital goods and services from overseas pay goods and services tax (GST) on their purchases.

In an explanatory memorandum, the Treasury states: "With the growth in the use of the internet and e-commerce more generally, it is often no more difficult for Australia residents to obtain many types of services and intangible property from a foreign resident than from a local supplier. As a result, because GST does not apply to these supplies it creates both a significant integrity risk and places Australian suppliers at a tax disadvantage relative to foreign suppliers. This measure will ensure the GST revenue base does not steadily erode over time through increasing use of foreign digital suppliers."

GST is payable on taxable supplies and taxable importations. For a supply to be a taxable supply, it must be connected with the indirect tax zone (broadly supplies made or done in Australia or made to Australia, excluding those geographic areas where the GST does not apply).

The proposed amendments to the GST law "will make all supplies of things other than goods or real property connected with the indirect tax zone where they are made to an Australian consumer." An Australian consumer is broadly an Australian resident other than a business.

This will result in supplies of digital products, such as the streaming or downloading of films, music, apps, games, and e-books, along with services such as consultancy and professional services, being subject to similar GST treatment whether they are rendered locally or offshore.

In some cases, responsibility for GST liability will be shifted from the supplier to the operator of an electronic distribution service. This will occur where the operator controls any of the key elements of supply, such as delivery, charging, or terms and conditions. This measure is intended to minimize compliance costs and ensure that digital goods and services sourced in a similar manner are taxed in a similar way.

New regulations will provide for a modified GST registration and remittance scheme for entities making supplies that are only connected with the indirect tax zone as a result of the changes.

The consultation closes on July 7.

TAGS: compliance | tax | tax compliance | commerce | law | goods and services tax (GST) | Australia | ministry of finance | offshore | internet | e-commerce | legislation | tax reform | regulation | services

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