On Thursday 26.5.2016, the ATO issued Law Companion Guideline LCG 2016/1 (GST and carrying on an enterprise in the indirect tax zone (Australia)).
It discusses:
- a test in the Tax and Superannuation Laws Amendment (2016 Measures No 1) Act 2016 (“the Amending Act”) for when an enterprise of an entity is carried on in the indirect tax zone (Australia);
- specific issues in applying this test to non-resident entities; and
- some of the consequences of satisfying this test eg registration.
The Amending Act changed how GST applies to cross-border supplies involving non-resident entities. The changes in the Amending Act are divided into 2 parts: business-to-consumer supplies in Sch 1; and business-to-business supplies in Sch 2.
Schedule 1 predominantly impacts supplies of digital products and services.
Schedule 2 makes other cross-border supplies between businesses GST-free or no longer connected with Australia. This means that the non-resident supplier will not need to account for GST on those supplies, and the obligation to account for GST on these supplies may instead fall to the recipient.
Schedule 2 also replaces the previous test in the GST Act for when an enterprise of an entity is carried on in Australia by repealing s 9-25(6) and inserting new s 9-27. The Guideline mainly focuses on the test in s 9-27.
It also briefly considers other changes to the GST Act.
DATE OF EFFECT: The Guideline is a public ruling with effect from 5 May 2016, having regard to the application dates set out in the Amending Act.
- Schedule 1 of the Amending Act applies in working out net amounts for tax periods starting on or after 1 July 2017.
- Schedule 2 of the Amending Act (which includes the amendment to the test for carrying on an enterprise in Australia) applies in working out net amounts for tax periods starting on or after 1 October 2016.
Note the Schedules also contain transitional provisions.