In the 2015-2016 Federal Budget, the Australian Government
proposed its plan to extend the Goods and Services Tax law to
inbound intangible supplies (also known as the 'Netflix
tax'), with effect from 1 July 2017. Let's examine the
impact of these changes.
Last year, in the 2015-2016 Federal Budget, the Australian
Government proposed its plan to extend the Goods and Services Tax
(GST) law to inbound intangible supplies, with effect from 1 July
Also referred to as the 'Netflix tax', the aim is to
restore the GST revenue base with the fast-growing digital economy,
to create a level playing field for domestic suppliers when
compared with overseas counterparts. It will also align
Australia's capture of inbound transactions with other
countries that have already acted on the indirect taxation of
imported digital products such as Norway, Japan and the member
states of the European Union.
Scope of the legislation change
The change will impact foreign suppliers and their operations in
the GST regime. It will expand Australian GST to include e-commerce
business or e-business transactions for digital services, as well
as capture other cross-border inbound intangible
The changes in the GST legislation will include:
supply of anything other than goods or real property, such as
digital products including streaming or downloading of movies,
music, apps, games, e-books, as well as overseas gambling supplies
and other services
GST levied on the Australian end-consumer only –
generally, business (B) to consumer (C) supply
extending the scope of GST by levying it on operators of an
electronic distribution service
changes to existing GST administration rules.
Impact and other considerations
Foreign suppliers and operators of electronic distribution
services that provide inbound intangible supplies will be impacted;
followed by the Australian end-consumer, who will pay 10% more for
the intangible supply.
Foreign suppliers and operators of an electronic distribution
service will have to register on a simplified registration process,
as well as collect and remit GST. It will require entities to
modify and/or check their accounting and reporting systems to
capture GST information, in order to comply with the new
So, what will the providers of intangible supplies and operators
of the electronic distribution services do?
The providers of the intangible supplies may now find themselves
in the Australian GST net; they will need to register charge and
For operators of the electronic distribution services, they
would be captured and therefore need to consider whether to remain
in their current scope of services for the underlying suppliers or
alternatively, seek to renegotiate current contractual
arrangements, where they are not caught.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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ATO has released 2 draft fact sheets relating to the 2010 amendments to corporate law and tax in relation to dividends.
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