Indirect Tax Alert | 29 June 2017

Australia to impose GST on digital products from 1 July 2017 and on low value imported goods from 1 July 2018

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Executive summary

Australia has enacted two important changes which extend the reach of Australia’s Goods and Services Tax (GST) to overseas suppliers of digital supplies and supplies of low value goods. While digital supplies will be subject to GST from 1 July 2017, this measure was delayed a year for suppliers of low value goods and low value imported goods will be subject to GST from 1 July 2018.1 Some more details on each of these measures is set out below.

Detailed discussion

Low Value Goods

The legislation enacted on 26 June 2017 imposes GST on the importation of low value goods (LVG) with a customs value of less than AU$1,000 as follows:

  • LVG sales under AU$1,000 will be subject to GST from 1 July 2018 unless they are from a seller with turnover connected with Australia of less than AUD$75,000 not selling through an electronic distribution platform or goods forwarder. If the goods exceed AU$1,000 the consumer will need to pay GST to clear the goods through Customs.
  • This vendor collection model is now contained in the legislation, although it will undergo a further review by the Productivity Commission.

Digital Supplies and other Services

The last minute amendment to delay the start date of the LVG changes does not impact how GST applies to digital products and other services supplied to Australian consumers where the start date is only days away.

Australia is “levelling the playing field for GST” in relation to supplies of digital products and services in Australia by offshore suppliers from 1 July 2017. As well as applying to digital products like movie streaming, downloads of music and apps, among others, they also apply to any intangible supply including that of services, some financial products, rights, gaming products and insurance. GST will apply from 1 July 2017 to B2C (business to consumer) supplies of digital products/services:

  • Unless nonresidents take reasonable steps and it is reasonable to conclude the supply is not to an Australian end consumer
  • Ability remains to move the GST liability to operators of “electronic distribution platforms”
  • Nonresident suppliers can register for GST in a “limited” capacity to reduce their compliance burden

Endnote

1. See EY Global Tax Alert, Australia introduces legislation on GST on ”low value” imports from 1 July 2017, dated 27 February 2017.

For additional information with respect to this Alert, please contact the following:

Ernst & Young (Australia), Oceania Indirect Tax Leader, Melbourne
  • Brad Miller
    +61 3 9655 2718
    brad.miller@au.ey.com
Ernst & Young (Australia), Adelaide
  • Matthew Nicholls
    +61 8 8417 2068
    matthew.nicholls@au.ey.com
Ernst & Young (Australia), Brisbane
  • Patrick Lavery
    +61 7 3243 3694
    patrick.lavery@au.ey.com
  • David Wilson
    +61 7 3011 3346
    david.wilson@au.ey.com
Ernst & Young (Australia), Melbourne
  • Rhys Penning
    +61 3 9288 8432
    rhys.penning@au.ey.com
Ernst & Young (Australia), Perth
  • Gavin Shanhun
    +61 8 9429 2209
    gavin.shanhun@au.ey.com
  • Karen Dill-Macky
    +61 8 9429 2128
    karen.dill-macky@au.ey.com
Ernst & Young (Australia), Sydney
  • Mark Tafft
    +61 2 8295 6987
    mark.tafft@au.ey.com
  • Greg Hill
    +61 2 8295 6432
    greg.hill@au.ey.com
  • Jason Bailey
    +61 2 9248 4698
    jason.bailey@au.ey.com

EYG no. 04036-171Gbl