The Australian Government has released draft legislation proposing to apply GST to downloads and streaming of digital content and other services supplied from offshore to Australian consumers.
This will affect media such as games, movies, e-books and music downloaded over the internet by Australian resident consumers. GST will also apply where an Australian consumer buys other services from offshore such as legal, accounting, architectural, medical or other similar services.
There will be measures to allow the GST to be collected from operators of electronic distribution services in addition to the offshore supplier and a simplified registration regime appears on offer. A lot of the detail will appear later in Regulations.
The States of Australia still need to approve the legislation but it is intended to apply from 1 July 2017.
So Australia gets an early jump on NZ. Bets are on something similar being announced in the NZ Government’s Budget this month.
The practical issues with these measures have been well debated now and no complete or ideal solution has been found. Australia is essentially following the EU lead.
The Australian approach tilts the playing field completely in the opposite direction. At the moment, products sold electronically from offshore (such as e-books) are not taxed as highly as goods purchased online and imported into the country.
When this measure comes into force the preference shifts in favour of goods purchased online. That is because, for goods bought over the internet and imported into Australia there is a threshold of $1,000 below which no tax is payable. There is no suggestion at this stage to apply a similar threshold to imported services. How this impacts consumer choices (such as buying hard copy books over the internet rather than an e-book) remains to be seen.
The thorny issue of the low value import threshold just won’t go away.