No matter where you live or where your online business is based — if you have customers in Australia, you gotta follow Australian GST rules. That’s what this guide is for! This guide includes everything you need to know about digital tax laws in Australia, whether your customers live in Sydney or Perth.
Digital products
First let’s confirm what you’re trying to sell in Australia. Are you selling digital products?
A digital product is any product that’s stored, delivered, and used in an electronic format. These are goods or services that the customer receives via email, by downloading them from the Internet, or through logging into a website.
You’re probably consuming and using digital products all day long, whether or not you realize it. Here are some common ones on the market today:
- E-books, images, movies, and videos, whether buying a copy from Shopify or using a service like Netflix. In tax language, these products are in a category usually called, “Audio, visual, or audio-visual products.”
- Downloadable and streaming music, whether buying an MP3 or using a service like SoundCloud or Spotify. Of course, these products also fall in the audio category.
- Cloud-based software and as-a-Service products, such as Software-as-a-Service (SaaS), Platform-as-a-Service (PaaS), and Infrastructure-as-a-Service (IaaS).
- Websites, site hosting services, and internet service providers.
- Online ads and affiliate marketing. Income from these services can be considered taxable under digital tax policies.
Heads up: you might also hear digital goods referred to as “digital services,” “e-goods”, or “e-services.” All of these terms refer to the same thing.
Not sure if what you sell is considered a “digital product?” Check out our explanation of what a digital product is exactly.
Australia's GST for digital products
GST is the consumption tax throughout Australia, levied on almost everything sold in the country. There are specific rules around digital products, which you must follow closely to stay tax compliant.
So if you sell digital products to a customer in Australia, you must charge the GST rate. Simple, right?
It’s simple in theory. But in practice, Australia GST has a bit more complexity. You don’t necessarily need to add tax to every sale. It can depend on the amount of sales you make in the country, whether the sale is B2B or B2C, and other things. We’ll go into more detail about each of these throughout the rest of the guide!
Registering for Australia's GST
Is there a sales registration threshold?
Yes, Australia has an annual sales registration threshold of AUD 75,000, based on local sales.
What does this mean exactly?
Well, the threshold amount refers to your total sales in the country, during any 12-month period. This can be a calculation of sales in the last twelve months, or a prediction of sales in the next twelve months — any rolling year-long period, past or future.
If your total sales in Australia remains below AUD 75,000, then you don’t need to worry about GST at all. Phew!
But once your local sales do surpass AUD 75,000, then you may have to register for VAT and comply with all of the Australian rules around tax rate and collection, invoices, and filing returns. Please contact Australia's tax agency for more information.
The registration process
So, turns out you do need to register for tax in Australia. Don’t worry! Just follow our instructions on how to register for Australian GST.
Ultimately, you will receive a GST registration number, which establishes you in the Australia tax system as a legal business. This number tracks your business through the system: the taxes you pay, the tax credits you receive, plus the tax you charge from customers.
Do you need a local tax representative?
No, you don’t need a representative to handle your taxes in Australia. That is, you aren’t required to have one. Some tentative foreign business owners may hire a tax representative for peace of mind. Taxes can be an intimidating and confusing topic, especially in a foreign language! Makes absolute sense.
But because the Australian tax portal is available online, it’s possible for you to handle these foreign taxes on your own. It’s just up to you!
Collecting GST in Australia
Once you’re registered for taxes, you’re expected to charge 10% GST on every sale to a Australian resident.
If your customer is a fellow business, and they’ve provided a valid GST number, then adding and collecting tax isn’t necessary! The buyer will handle tax, via Australia's reverse-charge mechanism.
GST invoices in Australia
In order to comply with tax laws, you should include the following information on your invoices to customers in Australia:
- Your business name and address
- Your business VAT number
- Invoice date
- Invoice sequencing number
- Description of the goods or services
- Rate of VAT applied to each item
- Total amount including VAT
The easiest solution for the GST invoice would be to use a tax software that automatically generates and sends all invoices (as soon as the sale is complete), and also stores them in the cloud for you. Quaderno does just that, but we won’t go on about it here. :)
Filing GST returns
Charging and collecting tax is only the first half of staying compliant. The second, and equally important, half is filing returns and paying whatever you might owe to the government.
In Australia, foreign businesses are expected to file tax returns every quarter. You have 28 days to file and pay after the end of each period.
Note: At Quaderno we love providing helpful information and best practices about taxes, but we are not certified tax advisors. For further help, or if you are ever in doubt, please consult a professional tax advisor or the tax authorities.