Australia levies 10% GST on foreign digital services – July 2017

Tue 12th May 2015

Australia has announced in this week’s annual budget plans to make supplies of digital services by non-resident providers to consumers subject to 10% Australian GST.  The measure will raise an estimated AUS$ 350million. The implementation date of the new measure will be 1st July 2017.

This will require companies such as Apple, Google, Netflix, Amazon and Skype to register as foreign GST businesses for the first time, charge Australian GST and submit regular filings and payments to the Australian tax office. The Australian Federal Treasury will include the following services in the new tax: e-books; streaming music, films or games; membership to online clubs or dating services; digital newspapers; and SaaS software or hosting-type services.

Credit rating threat

One of the reasons for implementing the GST extension to online services is the threat of a credit rating threat. One of the three main credit rating agencies, Standard & Poor’s is rumored to be considering a downgrade for Australia from the highly prized AAA. Such a cut would raise the cost of debt finance for Australia.

Global VAT on digital services

The Australian changes reflect reforms taking place across the world as tax authorities attempt to adapt to the global digital economy. The EU 2015 digital services VAT changes shifted the place-of-supply rules to where the consumers were based for EU-providers. Korea is requires VAT on foreign digital services in July 2015. Japan is to levy 8% Consumption Tax on foreign e-services from 1 October 2015. South Africa extended VAT to digital services last year.