Con Paoliello, Director - Tax Services, RSM Bird Cameron - Federal Budget and GST
GST and Digital Service Providers
A GST integrity measure announced in tonight’s Budget seeks to ensure that there is a level playing field for the suppliers of digital products and services in Australia in relation to the GST.
The new Australian digital services GST was outlined in the May 12 budget with introduction from 1 July 2017. Prior to its enactment, it will require the unanimous agreement of the States and Territories. The measures are expected to be similar to the European Union rules on the supply of digital services to EU consumers introduced on January 1, 2015.
It is expected that the changes will compel non-Australian digital service providers (such as Netflix) to collect and remit GST to the Australian Federal Government. Mr Hockey has indicated that the funds raised – estimated at $350m over four years – will then be redistributed to State coffers. There has been no indication as to how the funds collected would be redistributed.
As of 1 January 2015 in the European Union, “business to non-registered customer” (“B2C”) supplies of telecommunications, broadcasting and other electronically supplied services provided by suppliers in the EU and made to non-taxable customers within the EU will be treated as supplied in the EU Member State where the recipient of the service is established, has a permanent address or usually resides.
If similar rules are introduced in Australia, suppliers of such services will need to determine where their customers are established or usually reside, and will need to account for GST. This will be a requirement irrespective of where the supplier itself is established. No minimum thresholds apply in the EU version, so making supplies to just one customer in Australia may trigger a GST registration requirement in Australia if similar rules apply.
Low-value threshold for taxable importations
Currently, there is a GST threshold exemption of $1,000 that applies to purchases of imported goods (including online purchases). This has received considerable criticism from domestic retailers as they argue it causes a competitive disadvantage.
The Government has flagged an intention to "explore" lowering the threshold. This has been an ongoing issue, regardless of which party was in power. However, the problem has always been how to enforce the law in a cost effective manner if the threshold is lowered. Despite the changes mooted to digital supplies, there was nothing in the Budget about the imported goods threshold.
Changes to “Going Concern” rules not to proceed
The Government announced that it would not be proceeding with a “reverse charge” on the sales of going concerns and farm land.
Such supplies are currently treated as GST-free provided the provisions regarding going concerns and farmland are satisfied. The Government had previously announced in December 2013 that it would proceed to replace the GST-free treatment with a reverse charge. However, the Government decided not to proceed with the changes as it considered that it would have resulted in "adverse consequences for taxpayers".
Katie Timms, Principal, RSM Bird Cameron - Superannuation Solutions,
"Contrary to the announcements made by Labour in April, the Government confirmed in the Federal Budget that no tax changes will be made to superannuation this year.
"The Opposition proposed cutting the current tax free status available to retirees on superannuation earnings to introduce a tax of 15% on earnings over $75,001. The proposals also included reducing the ‘higher income earner’ threshold for those who incur 30% tax on contributions from $300,000 to $250,000.
"The lack of change will provide retirees and those planning for their future with some much needed certainty after months of speculation about exactly how much change was coming.
"Instead, it will be the outcome of the Tax White Paper Process and the Murray Financial System Inquiry that all should be anxiously waiting for. The paper raised a number of concerns over the fairness and complexity of the superannuation tax system.
"The Tax Paper, due for review in late 2015, is hoped to carefully consider the behaviours that can be encouraged by any proposed changes, along with the impact this may have on many average Australians."
Stephen Carroll, Director, RSM Bird Cameron - Federal Budget and Australian innovation
"There was minimal content in the Budget that will have an impact on Australian innovation.
"The announcements will have some benefits for startup innovators. For direct financial impact, the Crowd Sourced Equity could be a significant opportunity for startup innovators to raise the critical early stage capital they require and that is very hard to raise currently in Australia. This combined with the improvements to the employee share scheme provides a better environment for the early stage companies in Australia.
"The anticipated Tax White Paper is likely to contain more content covering the future direction of Australian innovation tax policy."