Application of GST to Cross-Border Transactions

Background

On 11 June 2008 the Assistant Treasurer announced that he had asked the Board of Taxation to undertake a review of the legal framework for the administration of the GST. On 12 May 2009, the then Assistant Treasurer announced the release of the Board’s report on the review of the legal framework for the administration of the GST and also announced a new review to be undertaken by the Board on the application of the GST to cross‑border transactions. This request was in response to the Boards recommendation in the legal framework report that the Government should investigate the issues surrounding non-residents and cross-border transactions due to a large number of issues raised in public consultations and submissions.

Terms of Reference

The Board was asked to consult widely with relevant stakeholders and report to the Government on improvements to the design of the GST system necessary to ensure that cross‑border transactions are treated in an efficient and effective manner. A particular focus was those design features underpinning the involvement of non‑residents in the Australian GST system with a view to simplifying the design. The review was to include, but not be limited to, the consideration of:

• the impact of the current cross‑border provisions on the international competitiveness of Australian enterprises;
• the extent to which non‑residents should be drawn into the operation of the GST;
• the role of resident agents acting for non‑residents and whether there is scope to broaden it; and
• ways to simplify and reduce compliance and administrative costs associated with cross‑border transactions.

The Board was to have regard to the design features of the GST as a multi‑stage value added tax and should also ensure that any possible changes do not undermine the integrity of the GST in aiming to tax final consumption in Australia. In considering any changes, the Board was to ensure that its recommendations have regard to the likely impact on revenue. After considering the views of all stakeholders the Board was to provide a final report to the Government by the end of February 2010.

Discussion Paper

On 29 July 2009, the Chairman of the Board of Taxation announced the release of its discussion paper on the review of the application of GST to cross-border transactions. In developing the discussion paper the Board consulted with members of its expert panel. The discussion paper:

• provided some background to how and the framework under which GST is applied to cross‑border transactions;
• examined issues relating to the application of GST to cross-border transactions; and
• explored various options to improve the application of GST to cross-border transactions.

The Board requested written submissions on the review of the application of GST to cross‑border transactions by 4 September 2009. All submissions received were acknowledged. The Board also held targeted consultation meetings with selected stakeholders who have made submissions. The purpose of these meetings was to clarify aspects of these submissions and to explore possible responses to issues raised in these submissions.

Board’s Report

The Board completed its review of the application of GST to cross-border transactions and provided its report to the Assistant Treasurer in February 2010. In preparing its report the Board took into account the various submissions to the review and discussions with stakeholders.

Government Response

On 11 May 2010, the then Assistant Treasurer announced the release of the Board of Taxation’s report  on its review of the application of GST to cross‑border transactions. The Board made 14 recommendations which seek to simplify the design of the GST cross-border rules and improve the balance between ensuring Australia’s GST system does not draw in non‑residents unnecessarily and ensuring the existing GST tax base is maintained. In releasing the report the then Assistant Treasurer advised that the Government had accepted the Board’s recommendations but in relation to recommendation five the Government will be looking at approaches that do not impose an excessive compliance burden or revenue risk on Australian suppliers.

Further information on this review can be obtained from the Board of Taxation Secretariat on (02) 6263 4366 or at taxboard@treasury.gov.au.

Submissions received