From 1 July 2017, the so-called Netflix tax was introduced to require overseas businesses to remit GST to the ATO on the supply of digital downloads to Australian end-consumers.
However, upon reading the 1 July 2017 amendments more closely, it will be noticed that they apply to a significantly wider variety of supplies than just digital downloads.
Take for example an internationally renowned architecture practice that does not operate a business in Australia but is engaged by an Australian resident individual to draw plans for their home renovation. Assume all of the work performed by the architecture practice are performed outside of Australia.
Prior to 1 July 2017 – as the services were provided outside of Australia and as the overseas business did not have a permanent establishment in Australia – the architectural services would not be considered to have been “connected with Australia” pursuant to section 9-25 of the GST Act meaning that the services could not represent a taxable supply.
From 1 July 2017 however, section 9-25(5)(d) of the GST Act was introduced to include within the definition of “connected with Australia”, any supply provided to an Australian resident end-consumer (i.e. irrespective of where the services were performed and irrespective of whether the overseas business has a permanent establishment in Australia). As a result of the services being connected with Australia, the supply will represent a taxable supply and the overseas business will need to register for GST if their total GST turnover (i.e. taxable supplies) exceeds $75,000.
In the circumstances above, the ATO will allow the overseas business to obtain an ABN and register for GST, or register for GST using the Simplified GST registration system.