The so-called Netflix tax will hit Australians on 1 July 2017. The Netflix tax is the nickname for taxes that will be applied to downloadable products like movies, games and eBooks.
This is part of the Government’s plans for the expansion of GST to compensate for the original GST legislation’s lack of taxation of digital goods that have grown prolifically in popularity since the introduction of GST on 1 July 2000.
Former Treasurer Joe Hockey believes that the tax is an equaliser between local and foreign businesses in the service sector. ‘A local business that employs Australians, pays rent in Australia, pays tax in Australia, and helps build our economy is disadvantaged by the current system,’ the former treasurer said.
Foxtel, the main Australian rival to Netflix supports the new measures. ‘The introduction of this legislation will not only help to maintain consistency across the competitive landscape…which benefits all Australians’ said Foxtel’s head of corporate affairs, Bruce Meagher.
This means that goods like a Netflix subscription could rise by 10 per cent. Apple customers are assured that their downloads will not be affected by the GST reforms with Apple Australia’s Tony King claiming that they ‘pay GST on every single sale.’
GST low-value imports exemption also removed
Downloadables are not the only goods adopting GST reforms. In Australia, the $1,000 GST threshold for imported goods will be removed too. Consequently, all imported goods will be taxed.
Retail Council Chief Anna McPhee believes the reform will keep the tax system ‘fair and efficient.’ ‘This is sensible reform that delivers greater consistency in our consumption tax system and will mean similar goods and services consumed domestically are taxed equally,’ she said. On the other hand, this means that Australian retailers are facing higher costs when buying products’ inputs from overseas while their international rivals will not be faced with GST for supplies used for inputs.
Kathrin Bain, UNSW Lecturer at the ‘School of Taxation and Business Law’, claims that this reform will be difficult to implement. ‘The Commonwealth proposal to require overseas suppliers to collect and remit GST on low-value imports raises numerous questions as to enforcement, with comments made by the Treasurer indicating a significant level of voluntary compliance by overseas suppliers will be required’ she said.
For any queries of questions about taxation; please don’t hesitate to get in touch with the team at Fortis Accounting Partners. You can reach us on 02 9267 0108, or via info@exemplary-financial.flywheelsites.com.
