Australian GST

Introduction

In Australia the Goods and Service Tax is a value added tax implemented on the most goods and service sales with some concessions and exemptions.All the businesses in Australia, whose gross income is more than the minimum threshold, which is $75,000 per annum currently, are required to sign up for GST. The Businesses whose gross income is below the threshold can also register if they want to.

It is mandatory to collect the remit GST, in case you are a registered organization located outside Australia and are selling various low value physical products including digital products and services to the customers of Australia.

GST Rules

GST Registration

If you are operating a business in Australia or provide services/ sales in Australia and have a gross income (without tax) of AUD 75,000 or more (for non-profit organizations AUD 150,000 or more) then you should register for GST. If you want to get your business off the ground then calculate what you expect to make will give you an idea of what you need to register for GST. Find out how to estimate your turn over here.

To get registered for GST you need an ABN or Australian Business Number. You can also register online for GST, by phone or via a registered tax agent; if you have an ABN.

GST Rates

GST is configured at a flat rate of 10% and is needed to be included in the invoice of your service or product.

Note

Tax prices were revised on 8th Sept, 2017.

GST on Digital Goods

Initiating July 1, 2017, traders selling digital services/goods from outside of Australia to Australian consumers will have to collect 10% GST from their consumers. Learn more about tax policy alterations.

GST on Low Value Physical Goods

Currently, merchants located outside of Australia have not to collect the tax for physical products sold to consumers in Australia, equal to or less than A$1,000. For products traded in a consignment over A$1,000, customs duty, clearance charges and any GST will be charged under the existing processes.

Starting on 1st July 2018, Australian GST will be applied to the products imported into Australia, with a consignment equal to or less than A$1,000 as well. Learn more.

The price excludes shipping charges, taxes, and other additional charges, if any. In case there are various physical good items, then the rate of all the items will be considered for the calculation.

Also, ChargeMonk considers one invoice as a single consignment for applying the taxes.

Price is Tax Inclusive: In case the prices include Tax, ChargeMonk will verify if the product price excluding tax is equal to or less than A$1,000. If it is, then GST will be applied. Here's a sample:

Product name Unit Price Currency Price Type Sample Tax Rate
Basic 100 USD Exclusive 5%
Professional 150 USD Exclusive 5

In case consistent pricing is enabled, then Australian GST (destination based) will be excluded and calculated to check if the price exceeds A$1,000 or not.In case consistent pricing is not enabled, then the tax of the organization address (source based) will be calculated and excluded.

B2B Sales: In case the merchant has given the ABN Number and has also checked the ‘Registered for Tax' option in Tax settings, then the tax will not be applied as per the Reverse Charge mechanism. Otherwise, tax will be applied for the amount in the invoice, equal to or less than A$1,000.

Multi Currency Configuration: In case you are using AUD and other currencies, ChargeMonk will contemplate the exchange rate which will be configured in your ChargeMonk site. If AUD is not configured in your ChargeMonk site, ChargeMonk will get the price internally to verify if the amount exceeds in AUD currency or not.

Steps to Configure

  1. Physical goods create a tax profile.
  2. Now you can assign this tax profile to the physical goods plan/add-on.
  3. Once an invoice is generated, if the taxable total is equal to or less than A$1,000, then GST will be applied.

In case your consumer has added physical and digital goods in a subscription, all the digital goods will be taxed according to the current GST policy. For the physical goods, if the amount in invoice of the physical goods is equal to or less than A$1,000, then GST will be applied.

Below given is the list of scenarios defining what tax rates will be applied based on what are you selling, digital or the other products/services and where you are registered:

Scenario Products Tax Rate
Aus Merchant Digital GST
Outside Aus Digital 10% GST
Outside Aus to Aus digital Tax
Outside Aus to Aus Customer Non GST

GST Invoices

A GST invoice which is sent to a consumer must contain the following information:

  1. Tax invoice titled document should be sent.
  2. Identity of the seller
  3. The Australian business number (ABN) of seller
  4. The date when invoice was issued
  5. A concise description of the products sold, including the price, the quantity (if applicable), the payable GST amount (if any) – this can be displayed separately or as a statement like 'Total price includes GST'

Configure GST

This section will help you to walk through configuring the GST in ChargeMonk:

Step 1: Update your organization address

Ensure that you have added the address of your organization at Settings > Configure ChargeMonk >Business Profile. You cannot set up taxes in ChargeMonk without completing this step initially.

Step 2: Enable Tax

Go to Settings > Configure ChargeMonk > Taxes and click the Enable Tax tab. In case your ChargeMonk site has a current Tax Profile, you will find the tab Add Region instead. You will also find a list of countries to choose from, select Australia from the list.

Step 3: Choose a Price Type

Once taxes are active, you will be forwarded to a page having all the currencies that you have enabled for your site. Step 3 is setting up a price type (that price you quote for your product /add-on/ service and can be either inclusive of taxes, where the tax is included in the price, or excluded in price, or tax is added to the price) for each currencies.

In case you are selling to consumers in Australia, then AUD will be displayed automatically on your list of currency.

Step 4: Add 'Australia' to Tax Jurisdiction list

Click on the Add Region and choose Australia from its country list.You will now be forwarded to the configuration page of GST.

Step 5: Select product type

Select the product type, physical or digital based on products/services you are providing.

Step 6: Enter tax details

  • Tax Registration Number: The tax label should be set as ABN and you have to enter your ABN here. This will be shown in the invoices sent to your customers.
  • Location Validation: Enable the location validation based on whether you have to gather and store you’re the address proof of your customers' or not.
  • Collect Tax Registration Number: You can opt to collect ABN number of your customer or not.
  • ABN Validation: Choose whether to act upon ABN Validation against ABN Lookup service or not once the ABN number is added by your customers

Step 7: Add the tax rate

Lastly, you will require providing a tax rate and Tax label that you would like to apply to your invoices by ChargeMonk. According to the GST regulation, you should put your tax rate to 10%.

Reverse Charge Mechanism

In case a merchant, who is registered outside of Australia, is selling services/ products to a business customer in Australia, then no Tax will be applied. Additionally, the below given conditions should be met:

  • You have set up Australia in the list of your Taxable countries.
  • A valid ABN number has been provided by the customer.
  • The customer has verified the Registered for GST option Otherwise tax will be applied.

Note

Registered for GST option is available only in Hosted Pages v2.

Where will a consumer uncheck/check the ‘Register for GST' option?

The ‘Register for GST' option can be updated in the below given ways:

  • Hosted Checkout Pages: Your customers can choose the option by Hosted Checkout page of ChargeMonk while creating a subscription.
  • Web Interface: You can also select/deselect the option by web interface of ChargeMonk (Customer billing Info)
  • API: You can configure the ‘Register for GST' option through Subscriptions API

Location Validation

According to the IR regulations, you have to ensure that the businesses or customers to whom you are selling are locating in Australia. Your consumers are required to offer two non-conflicting pieces of evidence that signify the same. ChargeMonk will collect the following location information:

  • Customer's IP Address

    HOSTED PAGES: In case you have integrated with the ChargeMonk by using the hosted pages then the IP Address of the consumer will get collected automatically.

    API: In case you utilize the ChargeMonk API then you will have to pass the IP Address of the consumer to the ChargeMonk using the User Details Header API.

  • Card BIN of the Customer

    The first six digits of a card form the Bank Identification Number (BIN). BIN provides us the information regarding the card issuing bank and hence can be used to determine the location of the customer.

    HOSTED PAGES: In case you have allied with ChargeMonk by using the hosted pages, the BIN of the consumer will get collected automatically.

    API: In case you are using the API of ChargeMonk, you need to pass the BIN of the customer by using the card [number] parameter in the Create a Customer API.

Note

In case the location validation doesn’t work, the consumer will not be able to complete the order.

Location Validation Failure

If the location of your customers’ validation fails, their order will not get completed. They will get the following error message:

In case a customer registers for a trial plan where no immediate payment is involved, the subscription is formed irrespective of whether the location validation was successful or not.

The details of the consumers are marked with a warning signifying the failed location validation.

ABN Validation

ChargeMonk verifies the ABN and displays whether the number is valid or not. Based on the validity, ChargeMonk will apply the taxes. Sometimes in such cases, the ABN lookup service may be down, here's how ChargeMonk manages the error -

Whenever ABN Validation Service the ABN Lookup is down

When the ABN Look up service is not operational because of ABN Look up service internal error, ChargeMonk will not be able to understand if the ABN was VALID or INVALID. In the absence of status, you can set up one of the options:

  • Allow to save the ABN (that is not validated) and continue with creating subscription
  • Restrict the subscriptions from being formed in case ABN status is not known

Based on your choice, ChargeMonk will form subscriptions (or not).Contact support@chargemonk.com to setup the options of your choice - to restrict or allow subscriptions from being formed (when the ABN Look up service is down)

By default, ChargeMonk will permit you to create subscriptions.

If you have decided to allow saving and collecting the ABN without validation, whenever the ABN Look up service is down, ChargeMonk will be checking the ABN status later, in every 24hrs.Based on the response from the ABN Look up, below given actions will be taken

  • VALID: In case the ABN is VALID, no changes will be needed to do, the subscriptions will be continued to renew.
  • INVALID: In case the ABN is INVALID, ChargeMonk will alert you with the customer(s) detail who’s ABN(s) are invalid. The GST will be applied to upcoming invoices.

Note

An email will be sent to the Owner and Site Admin of ChargeMonk with the details.

Validate ABN Every 3 Months

During the subscription renewals, ChargeMonk will validate the ABN of customer, in case it was not validated in the last 3 months. ChargeMonk will try to validate the VALID ABN's only.

  • VALID – In case the ABN is VALID, no changes will be needed to done, the subscriptions will be continued to renew.
  • INVALID - In case the ABN is INVALID, then the GST will be applied to the upcoming invoices.

FAQ

1. What is Netflix Tax?

Netflix tax is a general analogy for the tax being applied on digital services or product sold by the companies which are registered outside the country to a customer of that country, Australia, in this case.

2. From when is the digital tax rule applicable?

July 1, 2017 onwards, traders registered outside of Australia, who are selling digital services and products to consumers in Australia should remit and collect GST.

3. From when is the low value physical goods rule applicable?

July 1, 2018 onwards, traders registered outside of Australia, selling physical goods equal to or less than A$1,000 in a consignment, to customer in Australia, should remit and collect GST.

4. What is the importance of ‘Register for GST' option?

There are some cases where Australian companies have an ABN Number but did not register for the GST additionally. With the GST tax policy updates (starting July 1, 2017), companies are needed to register for the GST additionally. Hence companies registered with GST and with an ABN number will be entitled to the reverse charge exemption. Refer to this link for additional details.