Australia’s “Netflix” tax

Taxes signpost
Recently the Australian treasurer Joe Hockey announced that the Australian Government is considering extending the Goods and Services Tax to also cover intangible services such as internet streaming (eg Netflix), music downloads (eg iTunes) and e-books (eg Kobo and Amazon) that are sold into Australia. This could make buying online services 10% more expensive.

Generally, no GST is payable on sales other than goods or real property by overseas sellers to Australian to private buyers. But if the Government’s proposed “Netflix tax” becomes law, GST would apply to overseas sellers’ “supplies” of music or video streaming and downloads (or the legit/legal ones, at least!) and other internet-delivered services to Aussie consumers.

Why do this? The Treasurer says that this is an “integrity measure” for Australia’s tax base, and in line with the OECD position that that GST should be charged at the source regardless of where the supplier is based. Other proposals we’ve heard include raising the GST rate (currently 10%) or lowering the low-value threshold for imported goods (currently AU$1,000) but these might be more politically challenging or simply cost too much.

What would this mean?
For consumers – The price you pay for streaming services and downloads could go up by as much as 10%. And while I can’t recall hearing anyone specifically naming Apple’s AppStore or Google Play in this context, I see no reason app sales or even cloud-based services would be excluded.

For off-shore sellers – There would be many practical problems in trying to collect GST from an overseas seller, though arguably this might be easier if you sell through a centralised online middle-man like a Google Play or Apple’s AppStore, or somehow the tax gets collected from the customer directly. But generally as a seller you could be required to remit GST from your sales to Australian customers. So unless you agree to give up 10% of your selling price from Aussie customers you might think about adding a GST “gross-up” clause to your sales contracts, to allow you to collect an additional amount for GST from your customers. As always, consult a lawyer 🙂