The ATO, on Mon 15.2.2016, issued Draft Law Companion Guideline LCG 2016/D1 (GST and carrying on an enterprise in the indirect tax zone (Australia)).
It describes how the Commissioner plans to apply the proposed new GST test for carrying on an enterprise in the indirect tax zone (ie Australia). This test is contained in the Tax and Superannuation Laws Amendment (2016 Measures No 1) Bill 2016 and forms part of the amendments to the GST Act concerning cross-border transactions between businesses (due to commence from the second quarterly tax period after Royal Assent) [Schedule 2 of the Bill].
The Bill also extends the GST to cross-border digital supplies and other imported services supplied to Australian consumers (from 1 July 2017) [Schedule 1 of the Bill].
Part 2 of the Bill will update the test for when an enterprise is carried on in Australia so that it is more closely aligned with Australia’s modern treaty practice in relation to permanent establishments. The new test (in s 9-27 GST Act) provides that an enterprise will be carried on in Australia if particular individuals carry on the enterprise of the entity through a fixed place in Australia, or if they carry on the enterprise (or intend to do so) through one or more places in Australia for over 183 days in a 12-month period.
There will be 2 broad consequences of either passing or not passing this new ‘enterprise’ test:
- if a non-resident supplier does not have a GST enterprise presence, it will generally only be subject to GST on supplies to unregistered entities in Australia; and
- if a non-resident entity has a GST enterprise presence, it will be treated in the same way as a domestic entity. This means that supplies made through the enterprise will count towards the GST registration threshold, so the entity may be required to register for GST. Entities that believe they may need to register for GST are encouraged to email the ATO at AustraliaGST@ato.gov.au.
COMMENTS on the draft Guide are due by 11 March 2016.
[Note: at 29.2.16, the Bill had only been read a second time in the Lower House: on 23.2.16. However, on 25 February 2016, the Senate referred the terms of the Bill to its Economics Legislation Committee for report by 10 March 2016 (submissions to close 3 March 2016).]
[Note: ‘Law Companion Guides’ provide guidance on new law as it is introduced.]
[LTN 30, 16/2/16] [TT article on Schedule 1 and Schedule 2 of the 2016 Measures No. 1 Bill] [2016 Measures No. 1 Bill – APH website]
Draft Law Companion Guide
“22. The following sections deal with the requirements for an entity to establish that they have a GST enterprise presence. These are that the enterprise must be carried on:
- in a fixed place (see paragraphs 37 to 45 of this draft Guideline), or
- by one or more relevant individuals (see paragraphs 28 to 36 of this draft Guideline)
- in Australia (that is, in the indirect tax zone, see paragraphs 25 to 27 of this draft Guideline)
- in one or more places for 183 days or more, or the entity must intend to carry it on for 183 days or more (see paragraphs 46 to 73 of this draft Guideline).”