The Tax and Superannuation Laws Amendment (2016 Measures No. 1) Bill 2016 (Bill) was introduced into Parliament on 10 February 2016. Among other things, the Bill proposes to amend the GST Act to extend the application of the GST to supplies of intangible products by foreign suppliers to Australian consumers (Schedule 1) and to limit when the GST will apply to certain “cross-border” supplies (Schedule 2). For a summary of these measures as they appeared in the original and revised Exposure Draft Bill, please see our previous alerts which can accessed here and here.
Supplies of intangibles from offshore – what has changed?
Following consultation on the original and revised Exposure Draft Bill, two key changes have been made to the new regime.
Operator of electronic distribution platforms treated as supplier - extension
The amendments shift responsibility for the GST liability from a supplier to the “operator” of an electronic distribution platform for supplies that are made through an electronic distribution platform to an “Australian consumer” (known as an “inbound intangible consumer supply”).
The main change to the Bill compared to the Exposure Draft is to provide for certain circumstances where a supplier and operator can agree between them to voluntarily elect to shift the GST liability from the supplier to the operator in cases where the operator would not otherwise be responsible for the relevant GST liability. This mechanism is intended to simplify the application of the new rules for parties who would otherwise be required to determine whether suppliers are making inbound intangible consumer supplies on a case-by-case basis by allowing the supplier and operator to elect to treat all supplies made through an electronic distribution platform as being subject to the new rules.
These measures start on 1 July 2017. Generally, most periodic or progressive supplies which become taxable supplies as a result of these changes and which span the period before and after this date will be apportioned, with only the portion of such supplies made on or after 1 July 2017 being caught under the new rules.
GST treatment of cross-border transactions – what has changed?
When the revised Exposure Draft Bill was released in October 2015, the Government announced that it was seeking consultation on whether the proposed changes to the GST treatment of cross-border transactions should take effect at the same time as the changes relating to supplies of intangibles from offshore, or at some earlier time.
It has now been decided that the changes to the treatment of cross-border supplies will take effect earlier than the changes relating to the supplies of intangibles from offshore. The cross-border GST measures, if passed, will start from the beginning of the second quarterly tax period after Royal Assent. If Royal Assent occurs before the end of March 2016, the changes would start on 1 July 2016. If Royal Assent occurs before the end of June 2016, the changes would take effect on 1 October 2016. Transitional rules for the new measures have also been included in the Bill.
The changes will not apply to supplies under a written agreement entered into before the changes commence, where the agreement specifies the consideration in money or a way of working it out. For the transitional rule to apply, the supplier needs to be registered or required to register for GST.
Transitional relief will cease to apply where there is a “review opportunity”. The concept of a review opportunity was also used in the transitional measures put in place when GST was first introduced.
In some cases the new rules will be more favourable to both parties than under the current law. Therefore, the Bill also allows the parties to a transaction to “opt in” to the new rules.
If the supplier is not registered or required to register for GST already, the new rules will apply automatically (i.e. there is no transitional relief for supplies made under a written agreement entered into before the commencement date).