New Australian law applying GST to imported digital products and services
Australia has introduced a new law applying the Australian Goods and Services Tax (GST) to international sales of digital products and services provided to Australian consumers. Under the new law, overseas businesses will be required to pay GST on these sales from 1 July 2017.
What services and digital products are covered by the measure?
Examples of digital products include downloaded movies, games and electronic books. Examples of services include architectural, legal or educational services.
The new law applies very broadly to sales of anything except non-digital goods or real property.
If you sell through an electronic distribution platform, for example an app store, the platform operator is responsible for registering, reporting and paying the GST.
“Under the new law, overseas businesses selling digital products and services to Australian consumers are required to register for Australian GST and include the tax in their prices.”
Do you need to register for the Australian GST?
If you sell digital products or services to Australian consumers and you meet the registration turnover threshold, you need to register for GST with the ATO. You will meet the registration turnover threshold if your sales to Australian consumers in a 12 month period are A$75,000 or more. Once registered, you need to report and pay GST to the ATO on sales made from 1 July 2017.
How do you register?
A simplified system will be available for you to electronically register, lodge and pay the GST. You can access this service on the ATO’s website from 1 April 2017. Under the simplified registration system, you:
- will register electronically with minimal proof of identity
- will lodge and pay GST quarterly
- do not need to provide a tax invoice or adjustment note to your customers
- are not able to claim tax credits.
“From 1 July 2017, GST applies to the sale of imported digital products and services to Australian consumers — creating a level playing field with domestic suppliers.”
How do you comply with the new Australian GST laws?
The GST rate in Australia is currently 10%, therefore 1/11th of the amount you charge for sales of digital products or services to Australian consumers will be the GST amount that you must pay.
Australian consumers are Australian residents who are not registered for Australian GST.
- Taking 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.
- Obtaining an Australian Business Number (ABN) and a statement from your customer that they are GST registered will assist in working out that your Australian resident customer is not an Australian consumer.
If you have any questions and queries regarding doing business in Australia or want to know if these changes affect your business please don’t hesitate to contact
Marius Fourie
Senior Accountant
T: 02 9984 7774
E: mariusf@northadvisory.com.au
Martin van der Saag
Director
T: 02 9984 7774
E: martinv@northadvisory.com.au
About the author
Marius Fourie - Director & Business Advisor
As Director and Business Advisor, Marius uses his accounting expertise and empathetic skills to work directly with business owners and help them feel at ease with their finances.
Marius saw a common need in clients that just wasn’t being met by accounting providers.
That need was for clear, open communication and streamlined accounting services that didn’t come padded out with any unnecessary features.
Business owners just don’t have time to compare different accounting firms to see which one has the best packages with the best inclusions (many of which they would pay for but never use).
Key Takeaways
Australia extended GST to cover imported digital products and services from overseas suppliers.
This change ensures that digital goods and services sold by non-resident businesses to Australian consumers are subject to the same consumption tax as domestic supplies.
The law took effect from 1 July 2017.
From that date, supplies such as e-books, streamed content, apps and digital services connected with Australian buyers attract Australian GST.
Overseas businesses that sell these digital products may need to register for GST in Australia.
Registration is required if the supplier’s sales to Australian consumers reach the GST turnover threshold.
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Frequently Asked Questions
What is the new Australian law about GST on imported digital products and services?
It is a change that requires non-resident businesses selling digital products and services to Australian consumers to include and pay GST on those sales when they meet the GST registration threshold.
When did the GST on imported digital products and services start to apply?
The law took effect from 1 July 2017, meaning digital supplies made by overseas sellers into Australia are now treated as connected with Australia for GST purposes.
What types of digital products and services are covered?
Covered supplies include downloadable digital media such as movies, music, games and e-books, as well as digital services such as online courses, software, apps and other electronically supplied services.
Who must register for GST under the new rules?
Overseas suppliers must register for GST if their sales (to Australian consumers) meet or exceed the Australian GST turnover threshold — generally calculated on a 12-month basis.
How is the GST amount calculated on these imported digital supplies?
GST is calculated at 10% of the GST-inclusive price; the GST component is typically 1/11th of the sale amount charged to the Australian consumer.
What types of digital products and services are covered?
Examples include downloaded movies, games, and electronic books, plus services such as architectural, legal, and educational services.
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