The Netflix Tax: Everything You Need To Know

Days after Federal Treasurer Joe Hockey confirmed that the so-called “Netflix Tax” would be coming for your wallets, we now have the details on the plan from the Budget.

What Is It?

[related title=”GIZMODO ROUNDUP” tag=”bd2015″ items=”1″]”Netflix Tax” is a pretty sexy name when said in a press conference, but the actual plan is a a bit more complicated.

According to the Government’s 2015 Budget papers, the 10 per cent Goods and Services Tax will be “extended to cross border supplies of digital products and services imported by consumers”.

What’s Being Taxed?

It’s pretty broad. Think of it this way: anything you can download to a tablet, smartphone or e-book reader, including music; movies; e-books; digital magazines and streaming services will be taxed.

Why Is This Happening?

The Federal Government is looking to level the playing field for businesses in Australia. From the Budget papers:

Under the current law, digital products and services imported by consumers are not subject to the GST. This results in forgone GST revenue to the States and Territories and places domestic businesses, which generally have to charge and remit GST on the digital products and services they provide, at a tax disadvantage compared to overseas businesses.

The GST was designed to apply to all products and services, except those specifically exempted, for example fresh food, health and education. This measure ensures that the GST applies to non-exempted products and services, including digital supplies purchased from overseas and from Australia.

In his budget speech, Hockey said that local businesses had previously had an unfair advantage over their overseas competitors:

It is unfair that overseas based businesses selling services into Australia may not charge GST when local businesses have to charge GST.

A local business that employs Australians, pays rent in Australia, pays tax in Australia, and helps build our economy is disadvantaged by the current system.

We will level the playing field for Australian businesses by mandating that foreign businesses supplying digital products and services are subject to the GST.

When Will It Start?

Don’t worry: the Government won’t up the cost of your digital services starting from tomorrow.

Digital products and services will be taxed from 1 July 2017 (assuming the relevant legislation is passed). Over the two-and-a-half years from July 2017 to 2019, the tax is predicted to net $350 million, which will be distributed to the states (the normal destination for all GST revenue).

What do you think of the new tax on digital entertainment and services?

Image via Shutterstock

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