Get ready to pay GST on digital purchases

Draft legislation extending to digital purchases from overseas is being released today

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Back in May this year, former treasurer Joe Hockey announced draft laws to extend GST to digital purchases such as movies, music, games and e-books purchased from overseas retailers.

Dubbed the 'Netflix tax', it is expected to bring in around $350 million and level the playing ground for Australian digital retailers, with Microsoft, Adobe, Amazon, Google and Apple all in the government's sights.

Car sharing service Uber, room rental service Airbnb, subscription video giant Netflix could also see GST of 10% levied on their products and services purchased by Australians. Some offshore retailers already collect GST such as Apple's iTunes and Google's Play stores.

New Treasurer Scott Morrison announced that draft legislation was being released today, with an expected implementation date of July 1, 2017, giving companies time to set up the necessary processes to collect the tax.

This is in addition to the government's plans to lower the GST threshold on goods and services bought offshore from $1,000 to close to zero. Company's like Amazon already collect taxes on behalf of countries like the UK for purchases made by UK citizens, so it shouldn't be as difficult as most people think to collect GST from offshore companies. For Australian retailers like JB Hi-Fi Limited (ASX: JBH) which are forced to add GST onto digital purchases, a level playing ground is good news.

It's all part of the current government's plan to rein in spending and increase revenues. Discussion over an increase in the 10% GST rate is also on the cards.

The GST was originally introduced on July 1, 2000, long before we had even heard of digital downloads. Essentially, the government's new legislation is just catching up with the times, but Australian consumers used to not paying GST on digital purchases need to be prepared to add another 10% to the purchase prices.

Motley Fool contributor Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »