The Australian Taxation Office (ATO), on February 15, issued draft guidance elaborating upon proposed goods and services tax (GST) legislation introduced by the government last week. The guidance concerns aspects of new rules which would narrow the current test for determining when the enterprise of a nonresident entity is carried on in Australia.
The proposal is part of the Tax and Superannuation Laws Amendment (2016 Measures No. 1) Bill 2016, introduced into Parliament February 10. The bill imposes GST on cross-border supplies of digital products and professional services to consumers and deems some cross-border supplies between businesses GST-free or no longer connected with Australia.
The current test for determining if an enterprise of an entity is carried on in Australia is based upon Australian permanent establishment rules for income tax purposes.
The proposed rules retain some elements of the current definition, but remove aspects the ATO said are less relevant to the consumption tax. Under the proposal, GST enterprise presence exists if the enterprise is carried on in Australia through a fixed place of business or if it has been carried on more than 183 days.
The ATO guidance goes through the various steps to satisfy the new test and also notes the consequences of carrying on an enterprise in Australia, such as the need to count the supplies of the enterprise in the threshold amount for GST registration.
The guidance also addresses changes made by the proposed law on agreements with resident agents and on voluntary reverse charge arrangements.
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