Does Your Business Have To Pay GST On Imported Digital Products?

The start of the 2017-2018 financial year saw the application of the GST on overseas-based digital products that are purchased by Australian consumers. Colloquially known as the ‘Netflix Tax’, the GST on digital products and services will be charged at 10%, in line with the general level of GST.

The ‘Netflix Tax’ is estimated to net the Federal Government an extra $350 million in revenue over the next four years, much of it through the taxing of digital services providers such as Netflix. The digital entertainment powerhouse has applied the tax to its subscription prices in Australia, in line with the introduction of GST.

GST-Registered Businesses Exempt

One major aspect of the GST on digital services and products is that transactions between overseas suppliers and Australian businesses which are registered for GST will be exempt from the tax. However, GST will still be charged on imported digital products if;

• Businesses are not registered for GST.
  ** A GST-registered business does not provide the importer with their Australian Business Number (ABN) and does not state they are registered for GST.

Purchases Made Before July 1, 2017, May Be Affected

Purchases that are made before July 1 but have payments that are made after that date, such as digital service subscriptions, will also be subjected to the new GST rules. This is referred to by the ATO as a “transitional rule” and applies to periodic and progressive purchases that began before and end after July 1, 2017.

If an individual subscribed to a one-year digital entertainment service in March 2017, for instance, they would not have to pay GST on their monthly payments between March and June. However, the monthly payments from July to March 2018 will be subjected to GST, and the individual will have to pay an extra 10% each month as a result.

Major Sites Will Be Subject to the ‘Netflix Tax’

The new GST rule will not only just apply to famous digital entertainments platforms such as Netflix. Internationally-based online stores, including eBay, are also covered by GST, although it will only apply to the fees customers must pay to those stores.

Sole traders and businesses that are currently unaware of their GST obligations can call Hart Partners. Our experienced and friendly team are able to advise whether or not you could be affected by the GST on imported digital products and services.