10 February 2016

Turnbull Government to remove competitive tax advantage for overseas companies

The Turnbull Government today introduced legislation to the Parliament which will modernise our tax laws, protect the integrity of our tax system and ensure a level playing field for Australian businesses.

"Our tax system was not designed for the 21st century economy. The Turnbull Government is committed to modernising our tax laws to ensure they are fit-for-purpose in the digital era and do not create an unfair advantage for foreign companies," Treasurer, the Hon. Scott Morrison said today.

"The Tax and Superannuation Laws Amendment (2016 Measures No. 1) Bill will apply the GST to digital products and other services sold overseas, delivering on a 2015-16 Budget commitment.

"The Bill will require overseas vendors selling digital products or other services, such as 'apps' and downloads of digital content, to register, report and remit GST on their sales to Australian consumers.

"This improves the integrity of Australia's GST base in an area of rapid international growth and ensures a level playing field for business, regardless of the origin of the digital product or other services.

"For example, current laws discriminate between a software subscription service provided by a local supplier which attracts a GST but a similar software subscription service provided by an offshore supplier may not, creating a competitive advantage for overseas companies.

"The legislation will apply the GST to all digital supply provided from offshore, and thus, level the playing field for Australian businesses.

"These latest measures follow the Government's new Multinational Anti-Avoidance Laws, opposed by Labor, which came into effect from 1 January and will ensure major international companies operating in Australia but booking profits offshore have to pay tax here.

"The Bill is consistent with OECD guidelines, ensuring that Australia's approach is aligned with that of many other developed economies on the taxation of digital products.

"The legislation has been developed to minimise red tape. It includes two registration options, a simplified and a full registration option, which will allow international business a choice in registration giving these businesses more options and making it simpler to comply with.

"This legislation is expected to raise around $350 million over the forward estimates. All revenue raised by the GST is provided to the states and territories to deliver essential services.

"The Bill will also prevent non-resident businesses inappropriately being drawn into the Australian GST system unnecessarily through business to business transactions following a Board of Taxation review.

"In addition the legislation contains provisions that will enable farmers to better manage their financial risks through changes to Farm Management Deposits (FMDs), announced in the Agricultural Competitiveness White Paper in July 2015.

"The Bill has undergone extensive consultation and the Government thanks those who were engaged in that process.

"Australia's GST law needs to adapt to the growth of the international digital economy.

"These amendments respond to the changing economy and contemporary business needs, by ensuring that the GST should apply where appropriate.

"These changes help to make Australia's tax system more up to date, fairer for Australian business and fit-for-purpose in the rapidly changing digital economy," Treasurer Morrison said.