As consumer activities and spending habits continue to evolve and change, the Australian Government has moved forward on its promise to review taxation by proposing to extend the GST (Goods and Services Tax) to online purchases and transactions. Two proposed measures in particular will impact on all overseas companies who provide goods and services to Australia, they are proposals to:
Extend the application of GST to intangible and online goods and services purchased by Australians from overseas; and
Removing the exemption from the requirement to pay GST for imports of goods which have a value of less than AUD $1,000 (The GST Threshold).
On 21 August 2015, former Australian Treasurer, Joe Hockey announced the proposed tax, which in effect will extend the application of the GST to things such as digital products (i.e. computer games, mobile/tablet apps, music, movies and software) and digital services (i.e. video on demand or video streaming services). The proposal has so far been subject to two rounds of public consultation, with the revised draft bill stating that only companies which sell more than $75,000 worth of goods and services into Australia will need to register their products for GST collection with the Australian Tax Office (ATO).
The draft bill also proposes the use of a ‘vendor registration model’ as a method for collecting GST. If passed, this amendment would place the obligation for registering and collecting GST on the operators of ‘electronic distribution services’ such as Amazon, Apple, Google and eBay – rather than the direct supplier or product vendor of the good or service.
Under current Australian taxation laws, overseas suppliers of goods under a GST threshold of AUD $1,000 are exempt from the application of GST. It was originally thought the proposal would lower the threshold to $20, however in a press conference in August 2015, Mr. Hockey announced that the GST threshold would be removed all together – meaning GST will apply to all goods and services purchased online.
The intangible and international nature of these laws raises questions of just how compliant overseas businesses will be, especially since many have no physical presence in Australia. In his August 2015 press conference, Mr. Hockey indicated that ‘agreements with overseas regulators’ and ‘global pressure’ would be factors assisting in compliance, although no further specifics on these methods has been announced.
If the proposed changes are passed, it may require substantial changes to the Australian operations of online gambling providers, such as compliance with additional financial recording. Australian consumers are also likely to be charged an increase in price as international entities pass on the costs. This will likely result in an increase in the cost of games, apps, software and other digital media products by a rate of 10%.
At this stage, only draft legislation has been published and no formal bills have been tabled in Parliament. However, the Australian government has made it clear that if any legislative changes are passed, they will come into force on or before 1 July, 2017, with the new Turnbull Government indicating that tax reform is still ‘at the centre of our efforts’.