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  • When to charge GST

    You must charge Australian GST on a sale of imported services and digital products if:

    • the sale is connected with Australia
    • you are registered or required to be registered for GST
    • the sale is made for payment and as part of conducting your business (or it is treated as being part of your business because you are an electronic distribution platform operator)
    • the supply is not GST-free or input taxed.

    A sale is connected with Australia if the imported services or digital products are sold to an Australian consumer.

    GST does not apply to sales of imported services or digital products made to Australian GST-registered businesses who are making the purchase for business use.

    The business that charges GST on these sales can be the merchant who sells the imported services and digital products or an electronic distribution platform (EDP) operator.

    If you are an overseas merchant who sells through an EDP, for example an app store, the platform operator is generally responsible for registering, reporting and paying the GST.

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    Australian GST

    The GST in Australia is a value added tax of 10%. This means that 1/11th of the amount you charge for sales of imported services and digital products to Australian consumers is the amount you must pay to the ATO. Some sales don’t include GST (for example, GST-free sales, which are known as 'zero-rated' sales in some other countries).

    If you sell imported services and digital products to Australian consumers (or you are an EDP operator that is treated as the supplier for GST purposes), you may need to:

    • register for GST and meet reporting, payment and record-keeping requirements, and
    • include GST in the price of imported services and digital products.

    Sales before 1 July 2017

    If a sale occurred prior to 1 July 2017 and the invoice issued and payment is received after 1 July 2017 then GST will apply to the supply.

    Example – payments received after 1 July 2017

    Auction 2 U is an overseas-based auction house that provides online auction services on which it charges commissions.

    Auction 2 U holds an on-line auction on 14 June 2017. Adrian is a resident merchant who is not registered for GST (an Australian consumer). He sells a watch through the online auction.

    Auction 2 U is registered for GST and accounts on a cash basis. Adrian receives an invoice from Auction 2 U for the auction services and payment is made after 1 July 2017.

    Therefore, Auction 2 U includes GST on the commission it charges Adrian for the sale of his watch through the auction as the payment was received on or after 1 July 2017.

    End of example

    If a subscription started prior to 1 July 2017 and expires after 1 July 2017 and payment is received and invoiced after 1 July 2017 then GST will apply to the whole subscription.

    Example – payments received prior to 1 July 2017

    B4 Magazines is an overseas-based company that sells digital magazine subscriptions.

    On 15 June 2017 it sells a 12-month subscription to Anthony, an Australian consumer. The subscription runs from 1 June 2017 to 31 May 2018. An invoice with 30 day terms is issued to Anthony for the subscription on 2 July 2017.

    The full 12-month subscription Anthony purchased from B4 Magazines is subject to GST as the invoice and subsequent payment occurred after 1 July 2017.

    End of example

    There are transition rules if a payment was received prior to 1 July 2017, for supplies made for a period or on a progressive basis that started before 1 July 2017 and continue after 1 July 2017.

    These supplies 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 payment relating to the portion after 1 July 2017 may be subject to GST. The GST is payable in the first tax period after 1 July 2017 despite the payment being received prior to 1 July 2017.

    This commonly occurs when selling subscription services to consumers. For example, if you received payment for a 12-month subscription in September 2016, GST will apply to the portion of the sale from 1 July 2017.

    Example – ongoing subscription supplied before 1 July 2017

    A1 Magazines is an overseas-based company that sells digital magazine subscriptions.

    It sells a 12-month subscription to Scott, who is an Australian consumer. The subscription runs from 1 April 2017 to 31 March 2018 and was fully paid for prior to 1 July 2017.

    As at 1 July 2017, nine months of the 12-month subscription supplied by A1 magazines is still active, as such nine months of the 12-month subscription is a taxable sale.

    GST does not apply to the portion of the subscription from 1 April 2017 to 30 June 2017.

    End of example
    Last modified: 20 Feb 2018QC 53387