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Australia – Potential Changes To GST System Will Impact Off-Shore Suppliers.

21 April, 2015

The Australian Federal Treasurer has announced that new GST legislation may be introduced to extend the tax to intangible services (such as internet streaming and E-books) sold into Australia.

 

To date, sales made by off-shore vendors, other than goods or real property, were not subject to GST when made to a private consumer. However, if the proposed expansion of the GST is legislated, GST could be charged on supplies by off-shore vendors of all intangibles such as media services (i.e. e-books, music and movie downloads), other internet-based services and advisory services. For consumers, this means that the purchase price of downloads and other services may increase by as much as 10%.

 

The Treasurer explained that the proposed broadening of the GST net is one example of an “integrity measure” for the country’s tax base which is in keeping with the OECD consensus position. That is, that GST should be charged at the source regardless of where the supplier is based. Other proposals have included increasing the rate of GST and lowering the current AUD 1,000 low-value threshold for imported goods.

 

For off-shore vendors, this means that all contracts for sales into Australia (whether it be for goods or intangibles) should contain appropriate wording allowing them to “gross-up” the purchase price on account of the GST. Such provisions are currently standard in onshore sales contracts.

 

Baker McKenzie

 

For further information, please contact:

 

Dixon Hearder, Partner, Baker & McKenzie

dixon.hearder@bakermckenzie.com

 

Amrit MacIntyre, Partner, Baker & McKenzie

amrit.macintyre@bakermckenzie.com

 

Angela Cowan, Baker & McKenzie

angela.cowan@bakermckenzie.com

 

Simone Bridges, Baker & McKenzie

simone.bridges@bakermckenzie.com

 

Janet Cho, Baker & McKenzie

janet.cho@bakermckenzie.com

 

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