MA613 Taxation Law

Answer to question 1: 

(i): Impact of GST imposed on supply of digital products and services to Australian Consumer:

An important consequences of this issue for majority of the non-residents and digital products as well services has been how it can ascertained whether a customer is regarded as an Australian consumer. Furthermore, whether they are required to charge GST on the supplies. Ascertaining the application of GST comprises of getting necessary permission and this becomes difficult for business to make sure that the current process are aligning to this requirement and allow them to report rightly to ATO (Mondaq 2021). The impact of this amendment is that the reach of Australian GST has extended to companies that has no physical presence in Australia.

As evident that majority of the suppliers are operating on global stage with the desire of maintaining reputation as a good corporate citizen, it is probable that there would be compliance from large suppliers and electronic platforms operators (Aph.gov.au, 2021). Unquestionably there would several others that might be ignorant or may not be enthusiastic regarding compliance with tax laws of Australia. It is tactically identified that the level of revenue package should be accepted because it is either not likely or not cost-effective to collect it.   

(ii): GST applicable to offshore supplies of low value goods to Australia: 

The new regime of imposing tax on inbound intangible consumer supplies, the regime of imposing tax imported low value goods would impose additional GST liability on companies that does not have any physical connection with Australia. They are anticipated to comply with the laws that have very little or no exposure (Business.unsw.edu.au, 2021). The scheme of imposing tax on electronic distribution platform operators and offshore re-deliveries might simply restrict the number of potential non-residential registrants but it also comes with the considerable amount of complexity and often there is a lack of clarity in its application. For example, in most of the instances it is hard for the non-residents suppliers, electronic platform operators and re-deliverers to ascertain whether the receiver of particular supply is regarded as an Australian consumer (Deloitte, 2021). The legislation efficiently identifies this and also addresses the matter contained in the sub-division 84-D.

(iii): The introduction of GST withholding on new residential property sales: 

An important consequence regarding this regime is the impact for developers on cash flow. Majority of the businesses along with the developers are dependent on the terms of payment with commissioner as the main source of cash flow (Financial, 2021). The new measures would eventually deny all those that are involved in the property developers of cash flow benefit which is available to the taxpayers in other industries.

Administration of cash flow is very hard for the property developers with the number of projects at numerous stages of completion. Furthermore, the time gap involved between occurring a development expenses and realising the consideration for finished product is very large and needs careful financial management. It becomes almost inevitable that the small business suppliers to property developers would be required to wait much longer than before to get the payment because of these measures.

The difference between the premises which are residential premises and those that are not is not clear. There are number of cases that have considered whether or not a particular property is regarded as the residential premises or not. For example the case of “Sunchen v Commissioner of Taxation [2010] and Vidler v Commissioner of Taxation [2009]” shows the difference between premises that are residential premises or not (Estabe, 2021). If the property is regarded as the new residential premises and not used for creating a substantial renovation or commercial residential premises it would be considered for withholding purpose. If the property is new but it is not residential premises it would not be considered subject to GST.

Answer to question 2: 

The amendments made are very difficult and far reaching. As a fact, the provisions are so remote that the commissioner would never be able to know who must be taxed within the scope of provisions once the large online retailers and platform operators are identified and registered (Lexology, 2021). A large number of non-resident online suppliers of suppliers and intangibles may have a possible GST liability in Australia without being ever aware of it. Ascertaining if a recipient is an Australian consumer can be hard.

While for the offshore supplies of low value goods in Australia determining the subjective assessment of status of receiver cannot be considered incompatible with the operation of electronic platform. Ascertaining the method of addressing the matter further becomes difficult when non-resident suppliers, online platform operators and re-deliverers are contemplating GST registration (Ris.pmc.gov.au, 2021).

The changes introduced on new residential property sales are designed to counteract individuals entering in phoenix arrangements. This type of arrangements are fraudulent however the provisions that is enacted is not aimed at punishing fraud and prepetrators.

Answer to question 3: 

The alternative approaches that can be implemented are as follows;

1. Applying GST on the digital “products and services”that is imported by Australian customers using the model of consumer compliance (Deloitte, 2021). With the help of this alternative, customers would be needed to recognize the “digital products and services” which they import and remit any valid GST amount. This is regarded as a substitute model for imposing the GST to the “digital products and services”. 
2. Changes must be made to the creditable use to reflect the changes in the amount of creditable purpose. It is now the time of redesigning the division 129 and should take a practical tactic (Pwc, 2021). At first, the threshold limit must be increased substantially. Secondly, a de-minimum threshold must be taken into account to make sure that if the changes of use is lower than 10% of actual estimate, then there is no need to make any adjustment.
3. It is also recommended to amend the GST law and provide an option of imposing tax on vouchers. There should also be a decreasing adjustment for GST registered business that acquire voucher covered by the Division 100 for use in business.
   
   

References:

An update on the new GST withholding regime for the sale of residential premises - Tax - Australia. (2021). Retrieved 5 May 2021, from https://www.mondaq.com/australia/sales-taxes-vat-gst/730056/an-update-on-the-new-gst-withholding-regime-for-the-sale-of-residential-premises

Applying GST to digital products and services imported by consumers – Parliament of Australia. (2021). Retrieved 5 May 2021, from https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/BudgetReview201516/digital

Business.unsw.edu.au. (2021). Retrieved 5 May 2021, from https://www.business.unsw.edu.au/News-Events-Site/Events-Site/Documents/Denis-McCarthy_%20GST-design-digitisation-and-disruption_paper.pdf

Deloitte | tax@hand. (2021). Retrieved 5 May 2021, from https://www.taxathand.com/article/13608/Australia/2020/GST-withholding-Transitional-treatment-ending-for-residential-sale-contracts

Financial, C. (2021). Property Development and GST Withholding | Catalyst Financial. Retrieved 5 May 2021, from https://catalystfinancial.com.au/property-development-and-gst-withholding/

GST on low value imports to Australia. (2021). Retrieved 5 May 2021, from http://www.estabe.com.ar/insights/global-insight/gst-on-low-value-imports-to-australia/index.html

GST withholding tax on sales of new residential premises and subdivisions only two months away! | Lexology. (2021). Retrieved 5 May 2021, from https://www.lexology.com/library/detail.aspx?g=fe38ae7c-e4c4-4c90-84cd-7a03583eadf5

Ris.pmc.gov.au. (2021). Retrieved 5 May 2021, from https://ris.pmc.gov.au/sites/default/files/posts/2016/04/RIS.pdf

Www2.deloitte.com. (2021). Retrieved 5 May 2021, from https://www2.deloitte.com/content/dam/Deloitte/au/Documents/tax/deloitte-au-tax-tax-insights-gst-low-value-goods-220218.pdf

www.pwc.com. (2021). Retrieved 5 May 2021, from https://www.pwc.com/gx/en/tax/international-tax-services/assets/a-vibrant-state-of-change.pdf

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