LCG 2017/D4 – when an ‘electronic distribution platforms’ operator is liable for Australian GST under the ‘Netflix’ intangible supplies laws and the low value import laws

This draft Law Companion Guide LCG, 2017/D4 was released on Thur 8.6.2017. It  describes how the Commissioner intends to apply:

• the “Netflix tax” rules in the Tax and Superannuation Laws Amendment (2016 Measures No 1) Act 2016 (applicable from 1 July 2017) and
• the imported low-value goods measures in the Treasury Laws Amendment (GST Low Value Goods) Bill 2017 (still before the House of Reps) to electronic distribution platform (EDP) operators.

LCG 2017/D4 sets out a 4-step approach for determining whether an EDP operator is responsible for GST for supplies made through the EDP.

1. The first step is to work out whether the supply is made though a service which is an EDP, such as a website, internet portal, gateway store or online marketplace. The Draft provides that a service will qualify as an EDP if it is delivered via electronic communication and enables entities to make supplies available to end-users. The mere provision of a carriage service, access to a payment system or the processing of payments, or face value vouchers that are taxed on redemption or expiry, will not be an EDP, the ATO says.
2. The second step is to determine if the supply is subject to the EDP rules. The Draft provides that a supply of a digital service or digital product to an inbound intangible consumer will automatically be subject to the EDP rules (and can be subject to the rules by agreement in other situations). An offshore supply of low-value goods will also be subject to the rules, unless the supply is connected with Australia because the goods are sourced within Australia, or the merchant is the importer.
3. The third step is to ascertain whether any exclusions apply, in which case the merchant will be responsible for GST, not the EDP operator.
4. The final step is to work out who will be responsible for GST if multiple EDPs are involved. A written agreement between EDP operators may determine responsibility. The Draft notes that the Commissioner can prescribe additional rules to determine GST responsibility, and invites submissions on the matter. In the absence of a written agreement or legislative instrument, the operator responsible for the GST will be the first of the EDP operators to receive or authorise the charging of any consideration for the supply. If no entity meets this criterion, the responsible operator will be the first to authorise the delivery of the supply.

DATE OF EFFECT: When the final guidance is issued, it will generally apply from 1 July 2017.

COMMENTS are due by 10 July 2017.

[LTN 107, 8/6/17; FJM]