GST changes for cross border transaction commencing 1 October 2016
Relief for Australian entities making outbound supplies
Where a supply is contractually made to an overseas entity but is actually provided to a recipient in Australia, it will be GST-free provided the Australian recipient of the supply is:
– a GST registered entity
– supply is not of a private or domestic nature
It also applies if the supply is provided to an employee or officer of the Australian based business recipient. The GST-free status does not apply if it is a non-deductible expense.
– Greater obligation on the Australian supplier to ensure that the Australian recipient of the supply is GST registered.
Repairs to satisfy non-resident entity warranty obligations
Non-resident suppliers of goods to Australian customers may engage local Australian repairers to undertake their warranty obligations in respect of goods situated in Australia. The supply will now be GST-free provided the repairs are supplied to meet warranty obligations relating to the goods.
– Provides relief to the non-resident entity from having to register for GST in order to obtain a refund.
Simplification measure to calculate the taxable value for GST purposes
An importer who is an Australian business taxpayer can apply a 10% mark-up on the customs value and duty to arrive at the taxable value for importation purposes. An importer doesn’t need to determine the exact amount of international freight and insurance charges that may apply to a particular shipment.
Reverse charge considerations for Australian recipients
Compulsory reverse charge GST liability if the acquisition is not made for a fully creditable purpose.
Relief for non-resident entities making inbound supplies
A non-resident entity making specified types of supplies in Australia will no longer have Australian GST obligations where the recipient of a supply is a GST registered business recipient.
The non-resident entity will still have a GST liability if the supply is made through “an enterprise the supplier carries on in the indirect tax zone”, essentially a ‘permanent establishment’ (PE) in Australia.
If the supply is not made through a permanent establishment, the following supplies will not have a GST liability even though the supply may be “done” in Australia:
- A supply made by a non-resident to an Australian based business recipient of the supply;
- A supply made by a non-resident to another non-resident for the purpose of an enterprise carried on outside Australia;
- The transfer of ownership of goods from a non-resident entity to another non-resident entity where the goods are leased to an Australian lessee who imported them and are situated in Australia at the time of the transfer; or
- The renewal of a lease of goods by a non-resident lessor to an Australian recipient lessee (who imported them) on similar terms and conditions.
If the recipient of the supply is a private consumer, a GST liability will continue to apply to the non-resident supplier.
New Permanent Establishment (PE) rules for GST
Under the new rules, supplies made by an individual, an employee or officer of a company or an agent (but not a broker, commission or other independent agent) will be made through a PE if:
1. They are made through a fixed place;
2. They have been made through one or more places for more than 183 days in a 12 month period; or
3. It is intended that supplies will be made though one or more places for more than 183 days in a 12 month period.
Installation and assembly of goods in Australia by non-resident
Under the new rules, the GST liability for a non-resident that supply goods and provide assembly/installation services to its Australian customer may be different.
The supply of the services may fall outside the GST net if the tests above are satisfied but the supply of the goods may continue to be a taxable supply if imported by the non-resident supplier. However, if the goods are imported by the Australian recipient, GST will only be payable by the Australian recipient at the time of importation.
Where goods are supplied and installed by a non-resident supplier for a single all-inclusive price and the non-resident supplier is the importer into Australia, the price between the value of the installation services and the value of the goods may be apportioned.
Assistance
If we may be of assistance in the application of these new rules to your business please contact Ross Koffel +61 2 92835599 or [email protected]