For Australian and non-Australian businesses who sell digital goods it is important to know what your GST obligations are. As a country that spends on average $3,427 per person per year on digital goods, Australia is a lucrative market for any online business to enter. In entering the market, you will need to be aware of goods and services tax (GST) and how it works within the country.
What is a digital product?
A digital product is any product that is received through the internet. This could be an application, video game, movie, or more. If, after making the purchase online, the customer receives an email, downloads a file or program, or logs into a service portal in order to access the product, these are all digital products.
Unfortunately, the official definition for a digital product can be a little open, meaning it is difficult to find an exact definition on what a digital product is. The ATO’s official statement is: “This includes digital products such as streaming or downloading of movies, music, apps, games, e-books as well as services such as architectural or legal services.” Here the ATO has not provided an exhaustive list of what is classed as a digital good. Products such as online courses or templates for photoshop or WordPress also count as digital products even if they are not directly mentioned.
How does GST work?
GST is a 10% flat rate placed on most transactions. Businesses pay GST on every product or service that helps them create the end product. They can then claim GST credits on those products. When the product is sold to a customer the buyer pays GST, which the business then passes on to the ATO. At this moment the business will be refunded for all GST they paid during the production process.
The only one who actually pays GST is the end consumer.
What obligations are there with GST?
As a business you will be required to register for GST if your annual turnover is over $75,000 AUD. You will be required to then charge the 10% GST on all sales you make, whether it be to customers or businesses. From there you will collect that GST from each sale, before filing it and sending it to the ATO monthly or quarterly in a BAS. If you remain under this $75,000 threshold then you will not have to worry about GST.
If you sell on an online marketplace you may not have to worry about GST. It is possible, in some cases, that the online marketplace is responsible for GST. Which could mean that you do not have to register for GST.
How do I register for GST?
The easiest way to register for GST is through GSTregister.com.au. Both Australian and non-Australian businesses can take advantage of the easy to complete form which can be completed in a matter of minutes. You will then generally receive confirmation of your registration in 1 business day. We are also tax agents, which allows us to answer any of your GST related questions, assisting your business in meeting its obligations.
Head to GSTRegister.com.au today to register for GST or find the answer to any questions you may have.