New Zealand residents trading over the internet
This explores the Australian tax obligations you face if you are a New Zealand resident entity that trades over the internet.
Under these circumstances:
- you generally will not have to pay goods and services tax (GST) or register for GST
- you will generally not be liable to Australian income tax – income tax only applies if you have an Australian permanent establishment
- you will generally not be liable to Australian capital gains tax (CGT) – CGT only applies to assets that are taxable Australian property (for the meaning of taxable Australian property, refer to sections 855-15, 855-20 and 855-25 of the Income Tax Assessment Act 1997)
- unless you are employing workers in Australia, you won't have any Australian superannuation obligations or fringe benefits tax (FBT) obligations.
Generally, the business profits of New Zealand residents cannot be taxed in Australia unless they carry on business through a permanent establishment in Australia.
A permanent establishment is a fixed place of business through which the enterprise wholly or partly operates. It includes a branch, place of management, factory, workshop, an office, or a dependent agent who has authority to enter into contracts on behalf of the enterprise and habitually exercises that authority.
Generally, having a website that is hosted by an independent internet service provider is not regarded as having a permanent establishment in Australia. Therefore, you will not have any income tax obligations. Refer to Taxation Determination TD 2005/2.
If an Australian resident pays licence fees to a New Zealand resident for the provision of software, those licence fees may, in some cases, be subject to royalty withholding tax. Refer to taxation rulings TR 93/12 and IT 2660. For example, a New Zealand resident who does not have a permanent establishment in Australia might grant to an Australian resident the right to make copies of the software for resale. In that case, the licence fee will generally be regarded as a royalty and would be liable to Australian royalty withholding tax.