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Australia: Foreign Online Vendors Will Likely Be Required to Collect Goods and Services Tax

Aug 31, 2015
From KPMG TaxWatch

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On August 21, 2015, the Treasurer of Australia announced that beginning July 1, 2017, Australia will likely require most foreign vendors to collect the goods and services tax (GST) on all goods and services sold online to Australian customers. On July 22, 2015, the Council on Federal Financial Relations Tax Reform Workshop, made up of Australia’s state and territorial treasurers, voted unanimously in favor of this proposed reform. As such, the federal government will draft legislation incorporating the agreed-to proposal, which the Treasurer of Australia expects will go into effect on July 1, 2017, along with certain other proposed reforms to the GST.

Currently, the GST is levied only on those goods and services purchased online that cost over $1,000 Australian dollars ($730 U.S. dollars). Removing the threshold would put online purchases of goods and services on the same footing as purchases of goods and services made at retail establishments.

The proposal would require foreign online vendors with a “turnover” exceeding $75,000 Australian dollars ($55,000 U.S. dollars) to register, charge, collect, and remit GST on purchases of all goods or services. A vendor’s “turnover” is its gross income minus GST remitted. The proposal builds on earlier draft legislation, released on May 12, to extend the GST to digital goods and services sold by foreign vendors to Australian customers. While the May 12 draft legislation did not extend the GST to physical goods, the new proposal would do so. As such, all goods and services sold online would be subject to GST. This proposal is the most recent in what many see as a global trend toward applying goods and services taxes to foreign, online vendors. On August 18, 2015, New Zealand proposed new rules that would require foreign vendors to collect the GST on digital goods and services sold to New Zealand consumers. The proposal will be included in the next omnibus tax bill. New rules from the European Union went into effect January 1, 2015 that require vendors of telecommunications, broadcasting, and electronic services to collect and remit VAT in the countries where their customers are located. Norway, South Korea, Switzerland, and South Africa have introduced similar rules, and Japan plans to require foreign vendors of services to collect the Japanese consumption tax beginning October 1, 2015. Please stay tuned to TWIST for future updates.

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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.