On October 25th 2016, the ATO announced that all cross-border supplies of digital products and other services to be consumed by Australians will attract GST. The products to be taxed include streaming or downloading of movies, music, apps, games, e-books as well as services such as architectural or legal services. The Australian government is targeting large multi-national digital providers such as Google, Facebook, Linked, iTunes, etc. The requirement is that those businesses with a turnover of A$75,000 who make these supplies must register with the ATO for GST and report their GST turnover to the ATO using either the existing system or a simplified reporting system. ATO release
Overseas businesses must report from 01 July 2017 and they have until this date to become compliant.
Adobe Cloud – Adobe have announced to their customers that from 01/12/2016, all their invoices will add GST.
Google – Google have announced to their customers that from 01/11/2016, all their Google Adwords and Google Apps invoices will add GST.
LinkedIn – GST will be included on all purchases from 01/11/2016
Facebook Advertising – Facebook are yet to register for GST for Australian customers. As of May 2017, there is no GST on their charges
Paypal Fees – Paypal are not currently charging GST on their fees
Other suppliers recently began charging GST
Skype, Salesforce, Uber, Vista Print, Wotif, iTunes, Crazy Domains
No official word has been received from Facebook at this date.
What does that mean for small business consumers?
Businesses that are registered for GST should not be charged GST on overseas purchases
If your business is registered for GST, overseas suppliers should not add GST to their invoices. The reason for this is the intention of the Australian Taxation Office is for consumers to pay the GST on overseas purchases – not businesses. GST registered businesses that pay GST are able to claim back the GST. Therefore, businesses should not be paying this extra tax.
If you are registered for GST, are an Australian business and have been charged GST on an overseas supply, you are able to contact the supplier, provide your ABN and advise them you are GST registered. They should issue a credit for the GST component. This includes digital purchases.
In the past, you could on-charge digital marketing like Facebook and Google Adwords without charging and reporting GST.
Now, you will need to prep your customers that GST may soon be charged on their invoices. Pay careful attention to the invoices from these suppliers and where GST is charged, don’t wear the cost – ensure you oncharge the ex GST price, then add GST to this amount.
For example, a Google Adwords invoice for $1000.00 is now payable by you to Google for $1,100 including GST. You need to bill your client for $1,000 Google Adwords plus any other services or costs and then add GST to the total.
Businesses not registered for GST will now be charged GST on many overseas purchases