The Tax and Superannuation Laws Amendment (2016 Measures No 1) Bill 2016 was introduced into Parliament on 10 February 2016 to give effect (amongst other things) to the previously announced measure that GST should apply to overseas digital supplies, to Australian consumers. If the supply is made through an ‘electronic distribution platform’ the operator of that platform will be treated as the supplier (including Australian internet service providers). These changes will take effect for supplies made on or after 1 July 2017.
[Section references are to the A New Tax System (Goods and Services Tax) Act 1999 (‘GST Act‘) unless otherwise stated.]
Schedule 1—Tax integrity: extending GST to digital products and other services imported by Australia consumers
Item 1: will make a supply, to an ‘Australian consumer‘ subject to GST, by including such a supply in the definition of ‘connected to the indirect tax zone’ (new s9-25(5)(d)).
Item 3: will introduce the definition of ‘Australian consumer’ as an Australian resident who is not registered for GST (or if registered does not acquire the thing in the course of carrying on his/her/its enterprise) (new s9-25(7)).
Items 4 & 5 will allow the Minister to make a legislative instrument to deem an ‘inbound intangible consumer supplies’ to be deemed either GST-free or input taxed by legislative instrument made by the Minister (new s38-610 & s40-180).
Item 6: will introduce 3 new sub-divisions into Division 84, which is about ‘offshore supplies other than goods or real property’.
Sub-division 84-B – Inbound intangible consumer supplies – will be introduced.
s84-45 What this Sub-division is about – this section gives an overview of how the new regime will work. Broadly, the internet service provider (not the overseas supplier) will have to pay GST on the relevant type of content it ‘on-supplies’ to Australian consumers.
s84-50 No tax invoices or adjustment notes for inbound intangible consumer supplies – this sectionwill relieve the off-shore supplier from having to issue tax invoices or adjustment notes for ‘inbound intangible consumer supplies’.
s84-55 Operator of electronic distribution platform treated as supplier – if the ‘inbound intangible consumer supply’ is made through an ‘electric distribution platform’, the operator of that platform will be treated as having made the supply – not the original supplier.
s84-60 Extension of s84-55 to certain other supplies through an electronic distribution platform – this section will allow a supplier to agree, with the operator of an electronic distribution platform, that a supply will be treated, as if it were an ‘inbound intangible consumer supply’, for the purposes of new s84-55.
s84-65 Meaning of inbound intangible consumer supply – this section will define ‘inbound intangible consumer supply‘ as any supply to an ‘Australian Consumer’ other than supplies of goods or real property and other than when the thing is done wholly in Australia (viz: the ‘indirect tax zone’).
s87-70 Meaning of electronic distribution platform – this section will define ‘electronic distribution platform‘ as a service that allows entities to make supplies to end-users electronically (subject again to some exceptions). The definition would catch internet service providers but is wider than that.
Sub-division 84-C – Australian consumers
s84-100 When entities are treated as not being Australian Consumers – this section will define ‘Australian consumer‘ as anyone the operator of the electronic distribution platform may distribute to, unless they have taken adequate steps to determine otherwise. There is a ‘reasonable steps’ provision and also provision for the recipient to give a declaration that the customer is registered for GST.
Sub-division 84-D – Limited registration entities
s84-95 What this Subdivision is about – this section says that ‘limited registration entities’ are not entitled to input tax credits.
s84-140 Limited registration entities – this section says that a non-resident may elect to to become a ‘limited registration entity‘.
s84-145 Limited registration entities cannot make creditable acquisitions – this section precludes a limited registration entity claiming input tax credits, whilst its election is in force.
Limited registration of this type is designed to make registration easier, for the operators of electronic distribution platforms that become liable to pay GST, when they have no need to claim input credits against their Australian GST (because their enterprise is offshore). They will not be entitled to an ABN and will not be able to issue tax invoices (as a result).