The cost of online services based outside Australia, such as Netflix, will rise as the federal government prepares legislation to charge GST.
Currently, more than $1 billion in revenue is being lost because the government can’t collect GST on services sold in Australia by companies based overseas.
However, Fairfax Media reports today that next week’s budget will include a plan to charge GST on virtual imports such as movies and tv shows from Netflix, ebooks, downloadable music and software.
Last month Treasurer Joe Hockey said strengthening the GST so it catches music and movie downloads from overseas providers is an integrity measure.
“It is not fair to taxpayers, or to retailers or their many employees, to exempt overseas online retailers from the GST even if some consumers are enjoying the ride,” he said.
Currently Netflix charges $8.99 a month, making it cheaper than local players Stan, Pronto and Quickflix which must include 10% GST.
“The government’s expenditure review committee has been told that the change is fairly easy to make, requiring little redrafting of the Tax Act,” Fairfax says.
Netflix launched on March 24 in Australia in an already crowded market with new local players Stan, a Fairfax Media and Nine Network joint Venture, Foxtel and Seven’s Presto and ASX-listed Quickflix.
Netflix hasn’t revealed subscriber numbers yet but this week Fairfax said Stan was heading to 200,000.
(Disclosure: Fairfax Media owns 100% of Allure Media, the publisher of Business Insider Australia)
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