The Tax and Superannuation Laws Amendment (2016 Measures No.1) Bill 2016 received royal assent on 5 May 2016.

The changes relate to the application of GST on supplies of digital products and other imported services to Australian consumers and relieve the obligation of non-resident suppliers to account for GST on certain supplies.

Business to Business changes

Certain B2B supplies provided by non-residents will no longer be considered part of the Australian GST system, meaning that, under certain conditions, non-residents will no longer be affected by the Australian GST system. Previously, such suppliers were required to be registered for GST when making only GST-free supplies, this requirement no longer applies.  

For Australian-based business the new provisions also provide a more straightforward application of the GST-free rules. In some circumstances currently, Australian suppliers must charge GST to a non-resident where those supplies are provided to an Australian entity. Under the new provisions certain supplies are GST-free for the Australian supplier. The date of effect of the B2B changes is 1 October 2016 and is an opportunity for companies to revisit current agreements with offshore service providers.

Netflix tax

Badged the Netflix tax, this new measure predominantly targets supplies of services by non-resident suppliers to Australian consumers. The change will level the playing field between resident and non-residents suppliers, the former generally having to charge and remit GST on the provision of digital products and services they provide at a tax advantage compared to the non-resident businesses. Similar changes have already been implemented by other tax authorities across the globe.

In some circumstances there will be an option for suppliers affected by the rules to shift the GST liability from the supplier to the operators of electronic distribution platforms. Further, where entities are providing intangible supplies that are only connected with Australia, they have the option of becoming limited registration entities.

The effective date for the Netflix tax amendments is 1 July 2017.

These changes are an opportunity for businesses to revisit current arrangements with non-resident suppliers to ensure that contracts and any price negotiations reflect the upcoming changes.

For more information please contact your usual Grant Thornton advisor, or:

Tony Windle
National Leader of Indirect Tax
E tony.windle@au.gt.com
T +61 7 3222 0381

Andrew Barrah
Associate Director – GST & Indirect Tax
E andrew.barrah@au.gt.com
T +61 3 8663 6063

Chris Jenkins
Associate Director - Indirect Tax
E Chris.Jenkins@au.gt.com
T +61 8 9480 2157