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GST can seem simple in most cases. Its just a flat 10% broad based, indirect tax on most goods and services. Right?
The truth is GST gets tricky when it comes to imports, as there are now entities involved who are not Australian residents for tax purposes and are not operating in Australia.
Imported goods or services are also being consumed by a mixture of Australian businesses who may or may not be registered for GST and regular individual consumers who are not registered for GST.
Below are the four main situations which Australian taxpayers will find themselves in regarding GST on imports.
Before reading on it is important to get some definitions established:
Indirect tax Zone - Australia and offshore rigs, excluding external territories such as Norfolk and Christmas islands.
Non resident entity - Foreign entity based outside of Australia
Imports over $1,000 are taxed according to section 7-1 of the GST Act. The GST is actually paid by the buyer rather than the supplier, also known as a 'reverse charge'
The buyer must pay 10% GST on the value of the taxable import which includes the goods themselves, inwards freight, insurance, handling and customs duties.
This applies to both individuals and businesses and it does not matter whether they are registered for GST or not.
The GST liability for imported goods under $1,000 AUD is borne by the non-resident entity rather then the Australian consumer.
If the non resident entity supplies over $75,000 of taxable goods into Australia they will have to register for GST and pay it on themselves.
GST only needs to be paid on these imports by the non resident entity if the Australian consumer is not registered for GST. If the Australian consumer is registered for GST the supply will be considered non taxable.
Inbound services and software to Australia are not subject to GST so long as they are used wholly for taxable purposes by an Australian business registered for GST.
If the Australian business is not registered for GST then the service will be subject to the 'Netflix Tax' described in the next paragraph.
If the service is not used wholly for business purposes then the service will be subject to GST by the Australian resident in the form of a 'Reverse Charge'
Effective from 1 July 2017 inbound services, software and digital products which are provided to Australian consumers (either individuals or businesses who are not registered for GST) will be subject to GST in the hands of the foreign entity providing the service. This is also known as the 'Netflix Tax'.
The foreign entity will not have to provide official 'Tax invoices' as the recipient will not be registered and therefore not be able to claim any input tax credits back.
Disclaimer: CTK Accounting does not provide specific financial or tax advice in this article. All information on this website is of a general nature only. It might no longer be up to date or correct. You should contact us directly or seek other accredited tax advice when considering whether the information is suitable to your circumstances.
