Concepts
Subscription
A subscription is a recurring payment for ongoing access to goods, services or digital content, and GST generally applies if the supply is taxable and the seller is registered.
A subscription is an arrangement where a customer pays regularly, such as monthly or annually, to receive goods or services on an ongoing basis. Common examples are software and streaming services, magazine and box deliveries, gym passes, cloud storage and professional memberships. GST does not treat subscriptions as a special category. Instead, the treatment is based on what is being supplied under the subscription and who is supplying it.
If the subscription is for something that is a taxable supply, such as software access or a delivered product, the price includes GST of 10% when the supplier is registered or required to be. The GST fraction of one-eleventh of the total price is reported by the supplier on the BAS. Some subscriptions relate to GST-free items, such as certain educational courses or basic food boxes, and those would carry no GST on the GST-free part. Where one subscription bundles different items, the GST treatment needs to be looked at item by item.
The timing of GST depends on the accounting method of the seller. A business that accounts for GST on a cash basis generally reports GST when it receives each payment. A business using accrual accounting generally attributes GST at the earlier of invoicing and receiving payment. This matters for annual subscriptions paid up front. A cash-basis seller usually reports all GST in the period the money arrives, even though the service is provided over twelve months, and the invoice should be marked clearly with the GST amount.
Digital subscriptions are a special case. Where an overseas provider sells digital services to Australian consumers, it may have to register for GST and charge it, and Australian businesses purchasing from non-residents may need to consider reverse charge rules for imported services in some situations. Consumers generally see the GST-inclusive price, and businesses should check invoices to see whether GST is shown so they can claim credits correctly.
For subscribers who run a business, subscriptions that relate to the enterprise are generally claimable as a tax deduction, and the GST in the price can be claimed as an input tax credit when the subscriber is registered and holds a valid tax invoice for purchases over $82.50. If the subscription is partly private, only the business part can be claimed. Many software providers issue invoices by email, which should be saved for five years.
Common issues include forgetting to cancel unused subscriptions and continuing to claim them, claiming credits for personal streaming or fitness services, and treating annual prepayments as if they were all costs for the current period when they may span more than one income year. Sellers sometimes overlook that price rises need correct GST rounding and revised invoices.
The right treatment depends on what is supplied and who supplies it. This is general information only, so confirm your situation with the ATO or a registered tax professional.
Worked example
A registered accounting practice pays $55 per month including GST for a business software subscription, and the whole cost is for business use. Over the year that is $660. The GST included is $660 divided by 11, which is $60. If the practice holds tax invoices where required, it claims credits of $15 in each quarterly BAS, which is $60 for the year, and deducts the $600 ex-GST cost for income tax.
Practical tips
- For annual subscriptions, check whether the cost covers more than one period or income year, as this can affect when GST and deductions are reported.
- Review recurring charges regularly. Claim GST credits only for subscriptions that are actually used in your business.
- Keep emailed invoices for each billing cycle, as bank statements alone usually do not show the GST.