The 'Online Goods' Tax Has Been Postponed Until 2018

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We have some good news and bad news for online shoppers. First, the good news: A proposed GST amendment - which will see GST extended to all goods bought overseas - has been delayed for another year.

Now for the bad news: It will almost certainly come into effect on July 1 2018, and the similar 'Netflix tax' kicks in at the end of this month. Better start stocking up on those streaming subscriptions and overseas goodies while the going's good.

From July 1 2017, the Federal Government will apply the Goods and Services Tax (GST) to all digital products and services supplied into Australia. A 10 per cent GST tax will also be applied to imported goods worth less than $1000 from July 1 2018. (Currently, overseas products that cost under $1000 are GST-free.)

The GST changes to online goods were originally to be implemented this year. However, an amendment pushed through by Labor has given Australian shoppers a 12-month reprieve. The amendment will require the Productivity Commission to investigate the most effective models available for collecting the GST on low-value online goods.

Once the Productivity Commission submits its findings, the bill will still need to be voted in by the House of Representatives. However, it is expected to pass without incident with all sides of politics supporting the principle of the bill.

For the most part, the tax will be collected via the international seller. However, the government has outlined scenarios where the tax will be the responsibility of the operator. Needless to say, there's still a lot of confusion about precisely how the tax will be collected.

Meanwhile, the so-called Netflix tax will be imposed on all "intangible supplies" from next month. This includes digital content, games and software as well as consultancy and professional services performed offshore for customers in Australia. Only supplies made to consumers will be caught, however - business-to-business transactions will be exempt.

GST will be imposed at a rate of 10 per cent on the value of the supply. This means that a 12-month subscription to Netflix's entry level tier will jump from $107.99 to $118.60 - a difference of around $10.70 per year.

Curiously, affected overseas companies - including Steam and Netflix - do not appear to have passed on the cost of the tax to customers yet. (Usually, this happens as soon as the bill is passed.) We'll report back when we have more answers. In the meantime, you can read about both taxes in further detail below.

The 'Netflix Tax' Explained

From July 1 2017, the Federal Government wants to apply the Goods and Services Tax (GST) to all digital products and services supplied into Australia. In practice, this means the amount of money you spend on software downloads and streaming services is set to increase across the board. Here's everything you need to know about the so called "Netflix Tax" and how it will affect your wallet.

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[Via Guardian]

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Comments

    US Netflix account, US PlayStation account, US Amazon account (that I use to send "gifts" to myself in Australia), etc.

    The Netflix tax will be super easy to avoid and is just a waste of time and resources!

    It's wrong to assume a 10% price hike.

    If there is little competition in a marketplace (eg. Spotify, Netflix, Microsoft) pricing is set based on the maximum amount you can charge, not based on costs.

    Interestingly, some offshore subscription providers (Microsoft, Crashplan, Spotify) already pay GST. It's others (Crazy Domains, Netflix, eBay, Kogan) who strategically dodge GST who are going to be affected by this.

    Importantly, Crazy Domains and Netflix can't just add 10% to their prices without loosing sales, and as Gerry Harvey said - the current structure is basically a 10% subsidy to companies like this who choose to avoid the taxes which local companies are subjected to.

    So you may very well find Netflix subscriptions DON'T go up 10%, because retail price is set by competition, not by costs.

    This is good news for anyone who benefits from Australian taxes (ie. us) and bad news for shareholders of multinationals that have previously dodged our taxes.

      In that example you provided, of little competition, they will definitely pass it on to the consumer. The only reason we aren't seeing it now, is most probably because they don't want to disrupt their current customer base, and instead will implement it over small increments over a longer duration, or B) their in-fact is competition (suppose Amazon Prime) who they want to compete against and are therefore prepared to absorb the cost (knowing Amazon will also). This example perhaps isn't very good, since in reality Amazon has massive capital. But suppose it was a smaller firm, then the bigger firm will use its capital advantage to try and put pressure on the smaller firm basically, to outcompete / squash the competition. For Netflix the most likely scenario is it will just transfer the 10% to consumers over time.

    So what does this mean for companies like Adobe that have already put their prices up on the basis of this new tax?

    Another bullshit

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