Under the GST “Netflix tax” rules, the supply of services, digital products or rights by an overseas-based supplier to an Australian consumer is connected with Australia and, therefore, potentially liable to GST (see s9-25(5)(d)&(7) of the GST Act).
GSTR 2017/1 was issued on 7 June 2017 and explains how overseas suppliers can determine whether the recipient of a supply is an Australian consumer. In particular, the Ruling explains what evidence suppliers should have, and what steps they should take, in establishing whether or not the supply is made to an Australian consumer.
Section 9-25(d) makes the supply of a thing (other than goods or real estate) connected with Australia (strictly: an ‘indirect tax zone’) if “the recipient of the supply is an *Australian Consumer”.
Section 9-25(7), in turn, defines ‘Australian Consumer’ as:
(a) the entity is an *Australian resident (other than an entity that is an Australian resident solely because the definition of Australia in the *ITAA 1997 includes the external Territories); and
(b) the entity:
(i) is not *registered; or
(ii) if the entity is registered – the entity does not acquire the thing supplied solely or partly for the purpose of an *enterprise that the entity *carries on.
Note: Suppliers must take reasonable steps to ascertain whether recipients are Australian consumers: see section 84-100 [of the GST Act].
DATE OF EFFECT: The Netflix tax changes come into effect on 1 July 2017, with transitional rules commencing on 1 July 2016. For this reason, the Ruling applies to arrangements begun to be carried out from 1 July 2016.
[GSTR 2017/1; GST Act] [FJM] [LTN 2017, 8/6/17]
Extract from Ruling
Determining if the recipient is an Australian consumer
13. Under section 84-100, you can treat the supply as having not been made to an Australian consumer if you:
- have satisfied particular evidentiary requirements, and
- reasonably believe[7] that the recipient is not an Australian consumer.
14. Your reasonable belief can be founded on a belief that:
- the recipient does not satisfy the residency element (paragraphs 18 to 92 of this Ruling), or
- the recipient does not satisfy the consumer element (paragraphs 93 to 103 of this Ruling).
15. For you to satisfy the evidentiary requirements in section 84-100, you must have either:
- a reasonable basis for forming a reasonable belief about whether your recipient is an Australian consumer, based on your usual business systems and processes,[8] (the business systems approach ), or
- have taken reasonable steps to obtain information about whether your recipient is an Australian consumer (the reasonable steps approach ).[9]
16. In determining if a recipient is not an Australian consumer because of the residency element, we accept that the requirements of section 84-100 are met when you:
- satisfy evidentiary requirements from jurisdictions that we have listed as having a comparable residency element (see paragraphs 85 to 89 of this Ruling), or
- collect sufficient evidence to show the recipient does not satisfy the residency element using automated systems (see paragraphs 90 to 92 of this Ruling).
17. There is specific evidence that you must collect to establish a reasonable belief that the recipient does not satisfy the consumer element. You must have information or a declaration from the recipient to show that the recipient is registered for GST, and the recipient’s Australian Business Number (ABN), or other prescribed information, has been disclosed to you.