GST for non-residents made easy

It has been out for a while, but there is some draft law that proposes big changes to GST.

The first part of the draft Tax Laws Amendment (GST treatment of Cross-Border Transactions) Bill is exactly as we expected… The government will impose GST on offshore intangible supplies to Australian consumers from 1 July 2017.

But the second half of the Bill proposes a series of changes to the “connected to Australia” rules in the GST Act. And if these changes are implemented there will be a massive drop in the number of non-resident suppliers in cross-border business-to-business arrangements that must apply the GST system. But the draft Bill has not start date yet so don’t get to excited…

This draft Bill does three interesting things for non-residents:

First, the draft Bill creates a new type of supply, which is specifically made not connected with Australia. This is a supply made by a supplier who is a non-resident, that is not be made through an enterprise that the supplier carries on in Australia, and the recipient of the supply must be registered, must be carrying on an enterprise in Australia and must not acquire the thing solely for a private or domestic purpose.

Put simply, non-residents who don’t have an enterprise in Australia that only transact business to business will find that they no longer have GST obligations.

Second, the current GST Act uses the income tax definition of “permanent establishment” to establish if there is an enterprise carried on in Australia. The new rule proposed by this draft Bill will be that an enterprise of an entity will be carried on in Australia if the enterprise is carried on by particular individuals who are in Australia and either, the enterprise is carried on through a fixed place in Australia, or the enterprise of the entity is carried on, or is intended to be carried on, through one or more places in Australia for more than 183 days in a 12-month period.

Third, the draft Bill states that GST-free supplies made by a non-resident supplier will not be counted towards the turnover test so they will only need to assess if their taxable supplies are greater than $75,000 to see if they need to register for GST.







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