Draft Law Companion Guideline LCG 2017/D4 (the Draft) deals with how the ATO intends to apply the Netflix and low-value imported goods measures to supplies made through electronic distribution platforms (EDPs).
The draft guidance sets out a four-step approach for determining whether an EDP operator is responsible for GST.
Step 1: Work out whether the supply is made though a service which is an EDP, such as a website, internet portal, gateway store or online marketplace. The Draft provides that a service will qualify as an EDP if it is delivered via electronic communication and enables entities to make supplies available to end users. The mere provision of a carriage service, access to a payment system or the processing of payments, or face value vouchers that are taxed on redemption or expiry, will not be an EDP.
Step 2: Determine whether the supply is subject to the EDP rules. A supply of a digital service or a digital product to an inbound intangible consumer will automatically be subject to the EDP rules (and can be subject to the rules by agreement in other situations). An offshore supply of low-value goods will also be subject to the rules, unless the supply is connected with Australia because the goods are sourced within Australia or the merchant is the importer.
Step 3: Ascertain whether any exclusions apply, in which case the merchant will be responsible for GST, not the EDP operator.
Step 4: Work out who will be responsible for GST if multiple EDPs are involved. A written agreement between EDP operators may determine responsibility. The Draft notes that the Commissioner can, by legislative instrument, prescribe additional rules to determine responsibility for GST and invites submissions on the matter. In the absence of a written agreement and any legislative instrument, the operator responsible for the GST will be the first of the EDP operators to receive or authorise the charging of any consideration for the supply. If no entity meets this criterion, the responsible operator will be the first to authorise the delivery of the supply.
Draft Law Companion Guideline LCG 2017/D5 explains the measures in the Treasury Laws Amendment (GST Low Value Goods) Bill 2017 (awaiting assent) that will make redeliverers responsible for GST on offshore supplies of low-value goods from 1 July 2018.
The Bill imposes GST on supplies of imported low-value goods, ie those worth less than A$1,000. Under the reforms, a redeliverer will be treated as the supplier if low-value goods are delivered outside Australia as part of the supply and the redeliverer assists with their delivery into Australia as part of, broadly, a shopping or mailbox service that it provides under an arrangement with the consumer.
The draft guidance seeks to clarify three matters: (i) the meaning of "redeliverer"; (ii) when a redeliverer will be responsible for GST under the amendments; and (iii) who will be responsible for GST where multiple deliverers are involved in an arrangement to bring low-value goods to Australia.
A redeliverer is an entity that assists in bringing goods to Australia through the provision of either:
- an offshore mailbox service, where it provides or assists in providing the use of an overseas address to which goods are delivered; or
- a personal shopping service, where it purchases or assists in buying goods outside Australia as the agent of a recipient.
Transporters, freight forwarders and merchants are not redeliverers. Importantly, the ATO accepts that overseas relatives or friends who assist in purchasing low-value goods, or arranging for the goods to be sent to Australia, are not typically redeliverers as they are not carrying on an enterprise.
LCG 2017/D5 states that if a merchant or EDP operator assists in bringing the goods to Australia, the redeliverer will not be responsible for GST on the offshore supply. This is because the redeliverer is last in the hierarchy of entities that can be responsible for GST under the amendments. Where there are multiple redeliverers (eg a redeliverer hires another entity to purchase the goods as an agent of the customer), hierarchy rules will apply to ensure that only one entity is responsible for the GST.