GST and digital currencies
The Government has confirmed its intention to remove the double taxation for GST purposes of digital currencies such as Bitcoin, in order to support the growth of Australia’s Fintech industry. From 1 July 2017 the GST treatment of digital currencies will be aligned with the GST treatment of money, which means their sale will no longer be subject to GST.
GST currently applies to the sale of a digital currency and the subsequent use of that currency in purchasing goods or services, which themselves are subject to GST. No legislation has been released yet and it remains to be seen how the measure will deal with internet-based currency-like products such as in-game currencies, loyalty scheme points, frequent flyer points and digital vouchers.
Entities that accept digital currency payments will welcome the change as it creates symmetry with other generally accepted payment methods and removes GST risks and complexities from their business. Entities that make sales of digital currencies, which presumably will become input taxed, will need to consider their input tax credit entitlements in respect of related acquisitions.
Residential property purchasers to pay GST directly to the ATO
From 1 July 2018, the Federal Government will strengthen compliance with the GST law by requiring purchasers of new residential premises and land in new subdivisions to remit the GST on the sale directly to the ATO as part of the property settlement process. This is expected to increase the GST revenue by $1.6 billion over the forward estimates period.
Under the current law, the seller of new residential premises or subdivided land is required to collect and remit the GST associated with the sale to the ATO through its Business Activity Statement. The Government has identified some property developers are failing to remit the GST on their sales, despite claiming credits for GST incurred on development costs. In order to combat this non-payment of GST, the responsibility for payment of the GST will be shifted to the purchaser. Given most purchasers use conveyancers to assist with the transfer and settlement of properties, the Government believes this change should not represent a significant additional burden for purchasers.
From a practical perspective, it is unclear how the ATO intends to collect the GST from the purchaser. We expect that property developers will face additional compliance costs as a result of the change, and will be forced to change the settlement statement provided to the purchaser to identify the GST payable on the sale so that the purchaser can remit this amount to the ATO. The change could also result in cash flow issues for developers as they will no longer have the benefit of the GST component of the sale proceeds in their bank account for the period between settlement and lodgement of their Business Activity Statement. Finally, purchasers’ conveyancing costs may increase subject to what processes are established by the ATO to facilitate payment of the GST.
Extension of taxable payments reporting regime to courier and cleaning industries
The Government will extend the Taxable Payments Reporting regime to contractors in the courier and cleaning industries. The measure will have effect from 1 July 2018 and is expected to generate additional revenue of $318 million over the forward estimates period.
The Taxable Payments Reporting regime already exists in the building and construction industry, where businesses are required to lodge an annual report with the ATO disclosing payments made to contractors in the preceding 12 months. The ATO uses this information to detect mismatches between payments made to contractors and the income declared by those contractors, and to identify contractors who are incorrectly dealing with their GST obligations.
Entities in the cleaning and courier industries will need to collect the required information from 1 July 2018, with the first report due in August 2019. Businesses will need to review and consider how the required information will be extracted from their systems in order to detect any potential problems before the due date of the first annual report.
Tobacco taxes – the stalwart of all Budgets
The Government has identified that ‘roll your own tobacco’ products currently receive a more favourable tax treatment than manufactured cigarettes. The excise regimes for both will be more closely aligned so that an equivalent amount of excise is paid on roll your own tobacco products.
An additional $360 million in taxes will be collected from tobacco sales over the forward estimates period. These changes will be phased in over four years with the first change occurring on 21 September 2017.
Anecdotally, many smokers have gravitated towards roll your own tobacco products as the price of manufactured cigarettes has increased. This measure will remove that price discrepancy and will result in roll your own tobacco users paying higher prices for their products.