Mar 23, 2017
Australia Digital GST liabilities are to become a reality for international digital service suppliers on the 1st of July.
On July 1, 2017, Australia’s Goods and Services Tax (GST) will – as outlined here new law — be extended to the cross-border supplies of digital services bought by Australian consumers. These supplies include digital services (e.g. the streaming, or downloading, of movies, music, apps, games, e-books) in addition to services such as architectural or legal services.
Australians — given their geographical location, and with 28% of the population born overseas — are world leaders, on a per capita basis, when it comes to cross-border e-commerce.
- Over 80% of the country’s 24 million population have made a cross-border purchase. Well above the global average of 51.2%.
- According to this KPMG report 35% of Australian and New Zealand consumers make cross-border e-commerce purchases outside of this region, and mostly (25%) from North American and European-based websites.
- A recent PWC report predicted that Australian consumers would lead the Asia-Pacific region in e-commerce spending in 2016 spending AUD$4,500 apiece. This is a huge rise from the 2013 figures, when Australian shoppers each spent, on average, AUD$2,802 — a whopping 60.5% rise in the value of individual purchases.
- According to Statista e-commerce purchases by Australian consumers hit USD$9.5 billion in 2016 and are expected to reach USD$15.4 billion by 2021.
Fast, easy, and simple e-commerce comes with strings attached
As the digital economy has matured it has become faster, easier, and more convenient for Australian-based consumers to purchase digital services from overseas. These purchases, however, have been outside the existing GST net. This has led to a market imbalance with domestic suppliers having to account for GST as overseas competitors sell to Australian consumers without adding, collecting, and remitting GST.
Australia’s new digital GST law is being framed as re-introducing integrity and neutrality to the taxation system. It also ensured that Australia is an early adopter of Organisation for Economic Co-Operation and Development (OECD) guidelines in relation to the taxation of the digital economy. These guidelines have influenced international tax jurisdictions to amend their laws so as to harness the fruits of cross-border e-commerce in these increasingly borderless markets.
Australia will follow a well-worn path with the extension of their GST laws to cover the cross-border supply of digital services by overseas companies. In January 2017 Russia introduced similar legislation while in April Serbia is to do likewise.
There is a revenue boost attached to the extension of GST to digital supplies with the Australian Tax Office (ATO) estimating that the Treasury will benefit to tune of AUD$150m in the new GST measure’s first year (July 2017 – June 2018) and a further AUD$200m in its second full year (July 2018 – June 2019).
Partner with Taxamo
By partnering with Taxamo we take on your GST liability in Australia. By doing so you do not have to worry about:
- Registering with the ATO
- Filing Australian GST returns
- Settling your Australian GST liabilities in Australian Dollar to the ATO
- Complying with local GST rules
Taxamo aims to support every country which brings in destination-based GST for digital sales. We know every business is different, and we use this knowledge to create bespoke solutions for each partner. By partnering with Taxamo you get full access to 21 million Australian cross-border consumers.
In short, we look after your global tax liabilities so you can easily continue to sell your services.
Contact us now to learn how we can help your business.
Taxamo content is created for guidance only, please consult your local tax advisor.