Australian GST on imported services and digital products

Australian GST applies to international sales of services and digital products provided to Australian consumers.

This means overseas businesses are required to pay goods and services tax (GST) on these sales from 1 July 2017.

Services and digital products covered by the measure

The new law applies very broadly to sales of anything except goods or real property imported by Australian consumers.

If you are an Australian business registered for GST, then GST will not apply to the services or digital products you import for use in your business. If you are not registered for GST, GST will apply to these purchases.

The supplier will not charge GST if you:

provide them with your Australian business number (ABN), and
state that you are registered for GST.

If you are purchasing goods for your personal use only, don’t provide your ABN. Penalties can apply if you provide false information to a supplier.

Examples of digital products include downloaded movies, games and electronic books. Examples of services include architectural, legal or educational services.

If you sell through an electronic distribution platform (EDP), for example an app store, the platform operator is responsible for registering, reporting and paying the GST.

Registering for Australian GST

If you sell imported services or digital products to Australian consumers and you meet the registration turnover threshold, you need to register for GST with us. You will meet the registration turnover threshold if your sales to Australian consumers in a 12 month period are A$75,000 or more. Once registered, you need to report and pay GST to the ATO on sales made from 1 July 2017.

How to register

A simplified system for non-residents is available for you to electronically register, lodge and pay the GST. Under the simplified registration system, you:

will register electronically with minimal proof of identity
will lodge and pay GST quarterly
do not need to provide a tax invoice or adjustment note to your customers
are not able to claim tax credits.

What you need to do under the new Australian GST law

The GST rate in Australia is 10%. Therefore it is 1/11th of the amount you charge for sales of digital products or services to Australian consumers will be the GST amount that you must pay.

Australian consumers

An Australian consumer is an Australian resident who is not registered for Australian GST, or, if registered, does not purchase the imported service or digital product for business purposes.

To work out if you are dealing with an Australian consumer you need to:

use information captured in your business systems or obtain information to reasonably identify Australian residents
exclude Australian businesses by obtaining an Australian business number (ABN) and a statement that they are GST registered.

Supplies that start before 1 July 2017

A transitional rule applies to periodic or progressive supplies that start before 1 July 2017 and continue after 1 July 2017. Supplies made progressively over a period of time are treated as being supplied continuously over that period.

If you make a supply before 1 July 2017 and the period of the supply extends beyond this, the portion after 1 July 2017 may be subject to GST. The GST is payable in the first tax period after 1 July 2017.

This commonly occurs when selling subscription services to consumers. For example, if you sold a 12-month subscription in September 2016, the portion of the sale from 1 July 2017 is taxable, so you will need to pay GST on the portion of the subscription for July and August 2017.