One of the key inclusions in the Budget is the confirmation that GST rules are to be extended to apply to the importations of digital products and services. This so called “Netflix” tax is designed to ensure that non-resident suppliers (e.g. video streaming servers) of such content pay GST, thereby levelling the playing field for Australian suppliers already subject to GST. This measure is consistent with the OECD’s guidelines on this subject, but under Australia’s laws will require the approval of all States and Territories to be enacted.
Generally speaking, GST only currently applies to supplies that are “connected with Australia”.
If enacted, the amending legislation will extend the “connected with Australia” test to include supplies made to a recipient who is an “Australian consumer”. For these purposes, an “Australian consumer” will be an entity that is a resident of Australia (excluding external territories) and which is either:
(a) not GST registered, or required to be GST registered; or
(b) a registered entity which does not acquire the intangible supply wholly or partly for carrying on the entity’s enterprise.
The intention is to broaden the GST net to capture inbound intangible supplies made to individuals and small businesses which are not GST registered.
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