Anthony Restaino explains transition rules of digital products. Any sales of digital products and services by overseas businesses in Australia will now incur a GST, effective from 1 July 2017. This renders that such ventures have to pay tax for music, e-books and movies, or any legal service provided. However, there are transitional rules for the period before 1 July 2017 and afterwards. This included subscription, and that the tax will be applied to the taxable income after 30 June 2017.
Anthony Restaino was consulted by Andrew regarding this matter as he was not very much clear about how to apply the transitional rules. Andrew had subscribed to an online library which allows him to access different e-books and other electronic sources for over a time span of two years. Upon subscription, he had to pay for the full amount on the invoice.
The subscription gives him access to intellectual property and digital products over a time that crosses 1 July 2017. This renders that the supply to the online library is subject to transitional rule, and that any supply made after 30 June 2017 has to be taxed. As such, the tax starts from 1 July 2017 and applies to the remaining 21 out of 24 months.
In order to gain clarity on the matter, Anthony Restaino explained to Andrew that had he accessed the online library before 30 June 2017 to find some valuable e-book, and paid on getting invoiced, but the book is not available instantly.
Let’s say that the library takes around 2 months to make it available and he has access to it on 15August 2017. In this instance, this sale would not be subject to tax. This is because neither the supply is periodic, nor progressive. Moreover, the payment was made before the effective date of Tax, i.e 1 July 2017. This is the case where transition rules are not applicable.
For more information about digital products, contact Anthony Restaino from Trak Accountants.
