My last blog was all about the new “Netflix Tax” and was really just an informational blog outlining what, how and when etc. In this blog, I want to look at the tax from a bookkeeper’s perspective and provide a real “from the trenches” viewpoint. All is not what it seems with the Netflix Tax!
It’s been almost 3 months since the Netflix Tax law was enacted and in our practice, we are no closer to working out a reliable system in terms of the bookkeeping for this tax for our clients. To be honest, we are finding that there are just too many variables that can change from client to client. Generally with bookkeeping, one process fits all, give or take, but not with this tax! We are finding that what works for one client, certainly does not apply to the next client. This makes it very difficult when you are running a business that relies heavily on processes and systems! We would like one process that we can apply across our whole client base, but at the moment this is impossible. Below is a list of the issues we have seen so far with our clients:
- The ATO says that if you are GST registered, you should not be charged GST on international supplies. All you have to do is tell the supplier that you are registered and provide your ABN. Our clients are telling us that in most cases, they cannot find on the supplier’s website where to provide this information. It’s all very well to say that it’s a simple matter of giving your ABN to the supplier but if the supplier doesn’t make it easy for the user to do so, then how will this new tax law even work? One of our clients even went so far as to ring Adobe because she couldn’t find where to advise regarding her GST registration in her online account, and was told that Adobe doesn’t know anything about that aspect of the new law! It seems that there is a communication breakdown here! Why don’t they know about it and what will the ATO do about it?
- Some clients have been charged GST by Google, Adobe and Linkedin since late 2016 when they entered the Australian GST system. They are now asking if they should not be charged and based on what the new law says, our answer is no. However, going back to our first point, they are finding it impossible to advise these suppliers re their GST registration status so they continue to be charged. We don’t have a solution for them right now and honestly don’t know if there will ever be one!
- Some clients have been able to advise various suppliers but are continuing to be charged GST despite their efforts! They have given up trying to contact the suppliers.
- Some clients have personal subscriptions e.g. Skype or Dropbox that they use for business. They are being charged GST and will continue to be charged as the subscriptions are personally owned. Then they also have business subscriptions to which GST applies sometimes (depending on whether or not the client has advised the supplier re GST status) and sometimes not. It’s difficult for us to know when to add GST to the transactions and when they should be GST free.
- In a lot of cases, clients are finding it difficult to obtain actual invoices from these suppliers so aren’t even sure if they are being charged GST or not. Well, that makes two of us! If they don’t know, how are we as their bookkeeper supposed to know?
- Some clients can’t be bothered advising the suppliers and simply don’t care about this tax. So we have some clients who have advised and now aren’t being charged GST and some who haven’t and continue to be charged GST. Our issue here is trying to remember who has done what so that we enter transactions correctly on an individual basis. It’s confusing!
Those are just a few of the issues we are facing at the moment regarding the Netflix Tax and bookkeeping. As a BAS Agent, we want to get this right for our clients going forward. We want to ensure that we are claiming the correct amount of GST at all times. That being the case, I have some questions for the ATO:
- If a client cannot advise a supplier re his/her GST status, can the GST continue to be claimed on the supply or will it be deemed a GST free supply from 1 July 2017?
- Is it compulsory for GST registered business owners to advise suppliers re their GST status? What happens if they never do it?
- Will there be a cut-off date by which all GST registered business owners will need to advise international suppliers? If so, how will this be monitored?
- Should BAS Agents code all international supplies as GST free for our GST registered clients from 1 July 2017 regardless of whether or not GST is charged? OR, should we do as we have always done, and enter transactions as per provided invoices?
- Will the ATO decline GST claims on international purchases for those business owners who never advise suppliers?
- What do business owners do if they are unable to advise a supplier regarding their GST status? Will the ATO provide assistance to these business owners and act as a liaison between supplier and user?
As you can see, the Netflix Tax for bookkeepers and BAS Agents alike has added more questions to their job than it has answered! Confusion reigns supreme and until some of my questions above are answered, I don’t believe there is going to be a client file [at least in our practice] that will contain accurate international purchase data in terms of GST coding. It seems the ATO has delivered a law that works on paper but not in practice. The fact that there are so many variables regarding the bookkeeping for this tax, makes it almost impossible to process correctly. We are hoping that bookkeeping associations can work closely (and quickly) with the ATO to create a solution for bookkeepers/BAS Agents that will answer some of the questions above. Failing that, we think this is just going to end up being one big accounting mess!