International
Digital products and services
Digital products and services are intangible items delivered electronically, such as apps, streaming, downloads and online software, and overseas suppliers selling them to Australians may need to charge GST.
Digital products and services cover a wide range of things supplied over the internet rather than physically delivered. Examples include streaming video and music, mobile apps, e-books, downloadable software, online games, cloud storage, web hosting and subscriptions to online platforms. For GST, they are generally treated as supplies of intangible things or services, which affects how they are taxed when the seller is outside Australia.
Since 1 July 2017, overseas suppliers selling digital products and certain other services to Australian consumers have been required to register for GST and charge it, once their sales to Australian consumers reach the registration threshold. This put offshore suppliers on a level footing with Australian businesses selling the same things. The supplier collects the GST on the sale and reports it directly to the ATO, usually through a simplified registration system for non-residents.
For Australian consumers the practical effect is that the price of an overseas streaming service or app generally includes GST. For GST-registered Australian businesses the position is slightly different. A business buying a digital product for its business can often give the supplier a written declaration that it is registered, and the supplier may then treat the sale as not being to a consumer. The business then deals with any reverse charge itself, though this rarely produces a net cost where the purchase is wholly for creditable purposes.
If an Australian business sells digital products, it follows the ordinary GST rules. Once its GST turnover reaches the threshold it must register, charge GST on taxable sales to Australian customers, and generally treat exports to overseas customers as GST-free if they meet the connection requirements. Selling through a platform can change who is treated as the supplier, so check how any marketplace you use reports sales.
A frequent misunderstanding is that digital products are always GST-free because nothing physical is imported. That is not the case for sales to consumers in Australia. Another trap is assuming a foreign supplier's invoice automatically qualifies as a tax invoice. To claim a credit you need a document that meets tax invoice requirements and shows the supplier's registration details and the GST charged.
When reviewing your own subscriptions and sales, separate business and private use, retain invoices, and review your supplier's GST registration status. This page is general information only, and the rules around digital products have been refined over time, so check the current position with the ATO or a registered tax professional.
Worked example
An Australian design studio, registered for GST, pays an overseas cloud service $55 a month including GST for software used wholly for business. Over a year it pays 12 x $55 = $660 including GST. GST included is $660 / 11 = $60. If it holds valid tax invoices showing the GST, it can claim $60 in credits across the relevant BAS periods.
Practical tips
- Check that a foreign supplier's invoice shows GST charged and an Australian registration reference before claiming a credit. Without that detail, you may not have a valid tax invoice.
- If you sell apps or downloads to overseas customers, do not assume those sales are GST-free. Check that the supply meets the requirements before leaving GST off.
- Cancel or review unused overseas subscriptions, since paying GST on services you no longer need is an avoidable cost.