• Are you ready for cross border GST changes?

Legislation introducing what has been referred to in the media, as the “Netflix Tax” is now black letter law.

The first phase of significant GST change has been effective since 1 October 2016, and relates to Business-to-Business (B2B) and intangible supplies, including services, rights, leasing, etc.

These changes are promoted as being primarily positive as they may broadly allow some of those non-residents currently registered and charging GST on intangible supplies to de-register, and those who might do so in the future to remain outside the Australian GST regime. However, the changes are somewhat broader than first announced and previously anticipated. 

Have you entered into agreements with non-resident suppliers? If so, this is an opportunity to review the supplies under the agreement to ensure they are in line with the changes. In some instances the changes may create a benefit where GST is no longer chargeable.

The Netflix Tax

The second phase of the changes is commonly known as the Netflix Tax. These changes are concerned with the supply of digital products and other services from non-resident suppliers to consumers in Australia. The Netflix Tax changes are due to take effect from 1 July 2017.

This will level the playing field between resident and non-resident suppliers who provide digital products and other imported services.

Non-resident suppliers will have the option to opt for a simplified GST registration or appoint an Electronic Distribution Platform (EDP), such as Amazon or iTunes to collect and remit GST on the individual supplier’s behalf.

Removal of Low Value Threshold

The Low Value Threshold applied to the importation of goods into Australia removed the requirement for non-resident suppliers to register and account for GST on goods with a value of less than $1,000. The $1,000 threshold was generous and considered exceptionally high by international standards.

The low value threshold will be removed as of 1 July 2017. From this date, non-resident suppliers will be required to account for GST on the importation of “low value goods”.
A simplified GST registration will be available to these non-resident suppliers, and they will have the option to appoint an EDP to collect and remit GST on their behalf.

The changes will not only impact non-resident suppliers. The following entities may also be impacted:

  • those operating an electronic distribution platform (for example, a marketplace website that allows entities to make supplies of low value goods available to end users delivered by means of electronic communication)
  • those operating as ‘goods forwarders’ (including entities that provide an overseas address for Australian consumers to have low value goods sent to which are then re-sent to the consumer in Australia)

Further detail on the changes can be found in our client alert Exposure Draft legislation – Application of GST to low value imports.

Where you are involved in arrangements relating to cross border transactions, we recommend reviewing current and future arrangements to ensure they are in line with the recent GST changes.