The Tax and Superannuation Laws Amendment (2016 Measures No 1) Bill 2016 was passed with 4 Government amendments and the House of Reps for approved those amendments, with Royal Assent as Act No. 52 of 2016.
The amendments seek to allow non-residents and their resident agents to agree that the resident agent will be the liable entity for GST despite the operation of the other amendments in Sch 2 to the Bill.
The Bill proposes amendments re GST treatment of digital products and other services; GST treatment of cross-border transactions between businesses; and Farm Management Deposits.
[APH website] [Bill as enacted] [Related TT article pre-amendments] [LTN 84, 4/5/16] [LTN 85, 5/5/16]
Purposes of original bill [EM]
1.7 … Schedule 1 of the bill extends the Goods and Services Tax (GST) to digital products and other services imported by consumers. GST will be collected by international businesses with Australian revenue greater than $75,000 and remitted to the Australian Tax Office. This measure will go some way to ensuring that Australian companies are competing without a tax disadvantage, and that Australia’s GST revenue base does not erode with the growth of the availability of digital content.
1.8 Schedule 2 amends the GST treatment of cross-border transactions between businesses to minimise the number of non-resident businesses required to register for GST purposes. This measure reduces regulatory burdens on non-resident businesses wishing to do business in Australia on a non-permanent basis.
Purposes of the amendments [Supp EM]
1.1 The amendment to the Tax and Superannuation Laws Amendment (2016 Measures No. 1) Bill 2016 (the Bill) allows non-residents and their resident agents to agree that the resident agent will be the liable entity for GST despite the operation of the other amendments in Schedule 2 to the Bill.
1.2 A key objective of the Bill is to reduce compliance costs for non-resident entities that interact with the Australian GST system. The Bill generally achieves this by transferring GST obligations from non-resident suppliers to Australian business recipients of supplies [under the ‘reverse charge’ provision in Div 84 of the GST Act, which has been amended to accomodate this].
1.3 Division 57 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) makes a resident agent of a non-resident supplier liable for GST on the taxable supplies made through the agent. The Bill disconnects supplies ‘done’ in the indirect tax zone (ITZ) by resident agents for supplies between their non-resident principals and Australian based recipients. This means that the agent will not be liable for GST in relation to the supply. However, it also makes the Australian recipients of cross-border supplies liable for GST as a reverse charge in certain circumstances [under Div 84 as mentioned above].
1.4 Some non-resident suppliers and resident agents would prefer to maintain their existing arrangements, so that resident agents continue to be liable for GST in relation to supplies made through the agent. This amendment allows non-residents and their resident agents to agree to ‘opt-out’ of the new arrangements [‘disconnecting’ a supply from the ‘indirect tax zone’ under new s9-26 of the GST Act], so that the resident agents continue to account for GST. [This has been done by inserting a new s57-7 into the GST Act.]