Since 2017, Australian GST law has applied to imported digital services and, since 2018, to low-value imported goods (under $1,000). These rules were initially aimed at the B2C market — consumers buying from overseas tech companies — but they affect Australian businesses in specific circumstances that bookkeepers need to understand.
The short version: if your client buys digital services from overseas suppliers who are NOT registered for Australian GST, the client may owe GST under the reverse charge mechanism. And if your client is an "enterprise" buyer, the dynamics change further.
Imported Digital Services: The Background
Before July 2017, digital services purchased from overseas suppliers (Netflix, Spotify, software-as-a-service, digital downloads) were not subject to Australian GST — creating a competitive disadvantage for Australian providers, who charged GST on the same services.
The 2017 amendments extended GST to "imported taxable supplies" — digital services provided to Australian consumers by non-resident suppliers. Initially, overseas suppliers with Australian sales above $75,000 were required to register for Australian GST and charge it.
For most Australian consumers and small businesses, this change was invisible — Netflix started adding 10% GST, Spotify added 10% GST, and the price on their statement went up slightly. The obligation to collect and remit was on the overseas supplier, not the Australian buyer.
When the Obligation Shifts to the Australian Business
The standard rule is: if the overseas supplier is registered for Australian GST, they collect it and remit it. The Australian buyer pays GST to the supplier, claims the input tax credit in their BAS, and the system works normally.
The complication arises when:
The overseas supplier is NOT registered for Australian GST. If a supplier's Australian sales are below the $75,000 GST registration threshold, they don't need to register and won't charge GST. Small or niche overseas software providers, professional services firms, or content platforms may fall below the threshold.
The Australian buyer is an "enterprise." Under the reverse charge provisions, when a GST-registered Australian business purchases digital services from a non-GST-registered overseas supplier for business purposes, the Australian business may be required to self-assess and remit the GST.
In practice, the reverse charge applies when:
- The overseas supplier is not registered for Australian GST
- The Australian business is registered for GST
- The supply is for business purposes (not personal)
- The supply is a "digital" or "intangible" service
What Counts as Imported Digital Services
The GST rules apply to "digital services" broadly, including:
- Software as a service (SaaS) subscriptions
- Cloud storage and computing services
- Streaming media (video, music, podcasts)
- Online advertising (search advertising, display advertising from overseas platforms)
- Database access
- Digital downloads (ebooks, software, templates)
- Online consulting and professional services delivered electronically
Physical goods do not fall under this category — they're subject to the low-value goods rules discussed below.
Low-Value Imported Goods (Under $1,000)
Since July 2018, low-value goods (valued at $1,000 or less) imported from overseas are subject to Australian GST. This affects businesses purchasing physical goods from overseas suppliers.
If the overseas supplier is registered for Australian GST (which most major overseas retailers with substantial Australian sales now are), they charge GST at checkout. If they're not registered, the goods technically have a GST liability that sits with the buyer.
In practice, the compliance monitoring for individual low-value goods purchases is limited. However, for businesses making regular significant purchases of low-value imported goods, the GST treatment should be considered.
Practical Bookkeeping Implications
Check whether overseas subscriptions include Australian GST. When your client receives invoices from overseas software or service providers, check whether the invoice includes Australian GST (usually noted as "GST" or "VAT" at 10%). If it does, the client can claim the input tax credit. If it doesn't, and the supplier is not registered, determine whether the reverse charge applies.
The Australian Tax Invoice requirement. To claim an input tax credit, a valid Australian tax invoice is required. An overseas supplier's invoice that doesn't include Australian GST and doesn't show an Australian GST registration number is NOT a valid tax invoice for Australian GST purposes. The credit cannot be claimed on this basis.
Coding overseas software subscriptions without GST. If a client pays USD $100/month for a software subscription and the supplier doesn't charge Australian GST (either because they're not registered or because the invoice is issued outside the Australian GST system), the correct approach is:
- Code the expense to the appropriate expense account
- Do not claim a GST credit (there is no Australian GST included)
- If the reverse charge applies, calculate and report the GST separately in the BAS
BAS reporting for reverse charge: If a reverse charge liability exists, it is reported in G11 (other acquisitions) of the BAS, with the corresponding input tax credit claimable in 1B if the acquisition is for business purposes. The net GST effect may be nil (liability = credit) for fully taxable businesses, but the reporting obligation still exists.
How to Identify Reverse Charge Exposure
For each significant overseas digital service subscription your client uses:
- Does the supplier charge Australian GST on the invoice? (If yes, claim the credit normally.)
- Is the supplier registered for Australian GST? (Check the ATO's ABN Lookup — registered overseas suppliers are listed.)
- If not registered and not charging GST: is the client a GST-registered enterprise using the service for business? If yes, the reverse charge may apply.
For most small businesses, the dollar amounts involved are modest, and the practical compliance risk is low. For businesses with significant overseas software spend — particularly tech companies or professional services firms using multiple overseas SaaS tools — the aggregate GST obligation can be material.
When to Involve the Accountant
If your client has significant overseas digital service expenditure and none of the invoices include Australian GST, raise it with the accountant. The analysis of whether the reverse charge applies requires a view on the supplier's registration status, the nature of the supply, and the appropriate BAS reporting treatment — all of which sit comfortably at the accountant level rather than the bookkeeping level.
Your job as the bookkeeper is to identify the issue when processing overseas supplier invoices, flag it, and ensure the expense is not coded with a GST credit that isn't supportable.