Netflix Tax – GST transitional rules
The Australian Tax Office has released new guidance to regarding the new law that will apply GST to sales of digital products and services such as movies, music, games, apps and other digital goods.
The Australian Tax Office has released new guidance to regarding the new law that will apply GST to sales of digital products and services such as movies, music, games, apps and other digital goods. The new law is dubbed as Netflix tax.
The new rules come into effect on 1 July 2017, however, there are some transitional rules that are already impacting consumers. The transitional rules are relevant to periodic or progressive supplies that commence before 1 July 2017 and continue after 1 July 2017. Supplies made progressively over a period of time are treated as being supplied continuously over that period. The foreign businesses need to meet the registration turnover threshold of $75,000.
The rules require the foreign business to register for GST where these criteria are met, and once registered, they will need to report and pay GST on supplies made after 1 July 2017.
A foreign business which supplies software for download by an Australian consumer on a 12-month subscription will need to pay GST on the portion of the subscription that relates to the period from 1 July 2017 onwards. The foreign business is then required to report the GST collected and remit the amount to the ATO in the first tax period after 1 July 2017.
The ATO is preparing a simplified system to be available from 1 April 2017 to assist foreign businesses to register, report and pay GST online.
Under this system, the business will lodge and pay GST quarterly, will not be able to claim input tax credits, and will not be required to provide tax invoices or adjustment notes to Australian consumers.
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This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.