The new GST tax is coming. There’s been plenty of news about retailers being unable to compete with imports under $1,000 not having GST, but now the government is extending GST to digital products and other services imported by consumers. Introduced as the amazing Australia “Netflix tax” back in April 2015, and a move which would “level the playing field” it received formal noting in the online news as the “Netflix tax” shortly thereafter.
So what is affected. The legislation is clear that this is “digital products and other services imported by customers”, and includes “services such as architectural or legal services.”
This effectively means all offshore services providers of fixed-seat manpower services (think Philippines) are going to be caught under this new legislation. Anyone purchasing services from any of the freelance sites using offshore labour is also going to be caught. Any services such as Accounting, bookkeeping, tax preparation, administration, digital marketing, SEO optimization, computer coding… The list goes on… ALL THESE SERVICES WILL NEED TO BE REVIEWED IN LIGHT OF AUSTRALIA’S NEW GST LAWS…
Firstly, at the moment, (underlined and bolded deliberately) GST treatment of cross-border transactions between businesses so (at the moment) anyone registered for GST will be excluded from this issue. However, for Australian Accountants, any one of your clients that are consuming offshore or overseas provided services or digital products will be affected. Whilst a major impact is likely to be in personal tax returns, there are also flow-ons into sole traders and other businesses not registered for GST.
So if the consumer (say a small business) isn’t registered for GST, then the onus is at the moment on the supplier to capture GST and report/pay to the ATO.
And what about business to business. It seems for the moment that (GST Registered) Australian Accounting firms fall into the category of an exempt business, though you can expect your offshore provider to be contacting you to ensure you are GST registered, otherwise they’ll be required to add 10% GST to your bill from 1 July 2016.
A lengthy but good article is available here on the Parliament site.
New Zealand has initiated similar legislation in 1 October 2016, so New Zealand is a good place to start if you want to see the impact of the new GST laws.
Some key dates to remember:
1 October 2016 – the Act removed certain business-to-business (B2B) supplies made by nonresident businesses from the Australian GST system, many of which were caught under the previous law.
1 July 2016 – new GST laws come into place. By this time offshore companies should have taken reasonable steps to obtain information or using information captured in your business systems can be relevant in working out if your customer is an Australian resident. GST taxes commence.
Certainly this GST law will add further complexity to our tax system. The ability of the ATO to ensure foreign services providers are deducting and paying Australian GST will be an interesting matter to watch. In addition, when the foreign services providers do not deduct the GST, will the onus then fall onto the Australian tax agent to ensure GST has been paid by the consumer?