There has recently been a change to how many countries, the United States and Australia included, apply taxes to eCommerce businesses that collect revenue from consumers within their borders and beyond. The rise of the digital economy had already been trending in pre-pandemic times. Still, since COVID-19 redefined how consumers shop and make purchases, eCommerce has become a pivot point for many companies who found their brick and mortar business models floundering. 

The term “digital economy” has grown to encompass several different things, and the same can be said for the taxing of digital businesses. Governments have taken deliberate measures to address when, where, and how digital companies pay taxes. That effort has evolved into a debate that could even affect brick and mortar establishments that cater to global markets. This battle is being fought on multiple fronts, with economic, political, and technological consequences that will reverberate for years to come.

 With the establishment of these new taxation guidelines, it is important for American ex-pats in Australia who conduct business and generate revenue through eCommerce channels to understand how these guidelines affect them. Failure to do so could be costly for both the business and the business owner. In terms of generating income from an eCommerce business that affects a U.S. ex-pat in Australia, we can begin by establishing taxation rates on non-resident eCommerce companies. 

What Is The Australian Goods and Services Tax

On July 1st, 2017, a 10% goods and services tax was imposed on the sale of all electronic and/or digital services by non-resident providers that exceed the $75,000AUS annual threshold. The Tax and Superannuation Laws Amendment was signed into legislation in 2016 and applied to the sale of e-books, online professional services, such as legal or accounting services, cloud and data storage services, services that featured the streaming of music and films, as well as apps and online games. 

Do U.S. Expats Have to Pay the GST?

This means that for U.S. ex-pats who live in Australia, the question of whether or not they must register their business and pay this GST on their e-commerce business depends on their resident status. There are three categories an ex-pat will fall into when living in Australia as it relates to residency and taxation. 

Australian Resident for Tax Purposes

• • If a person passes one or more of the following residency tests, they are considered Australian residents for tax purposes. The four tests are as follows:

• • • The Resides Test is defined as meeting the standard of the term “reside,” meaning to dwell permanently or for a considerable period of time or have a settled or usual abode and live in a particular place. 

• • • • Factors that are used to determine residency status include:

• • • • • • Physical presence
          • Intention & purpose
          • Family and/or business ties
          • Maintenance and location of assets

• Social/Living arrangements

• • • • The Domicile Test – This means the Australian government is satisfied that your abode’s permanent place is in Australia.

• • • • A domicile is considered a permanent home by law and is expected to have a permanence degree as contrasted with a temporary place of abode.

• • • The 183 Day Test – You are considered an Australian resident for tax purposes if you spend more than half the year, or 183 days, in Australia.
      • The exception to this rule is if it has been established that your usual place of abode is outside Australia. It is readily apparent that there is no intention of taking up residence in the country.
      • The Commonwealth Superannuation Fund Test – This test only applies to select Australian government employees who are considered eligible to contribute to the Sector Superannuation Scheme (PSS) or Commonwealth Superannuation Scheme (CSS). Persons who qualify for this test will be considered residents of Australia regardless of all other factors, along with their spouse and children under the age of 16.

• Foreign Residents – Those who fail to pass any of the mentioned residency tests are considered foreign residents. Foreign residents have no tax-free threshold and do not pay the Medicare levy. 

• • Foreign residents must declare all income received in Australia, including capital gains on Australian property.

• • • If a foreign resident is part of a Higher Education Loan Program (HELP) or Trade Support Loan debt (TSL), they are required to declare income received anywhere in the world.
      

Temporary Residents – A person who holds a temporary visa while neither the person nor their spouse is an Australian resident. As such, a person need only declare income derived in Australia plus income earned worldwide while a temporary resident of Australia.

What Should I Do If I Am Subject to the GST?

We will assume that the U.S. ex-pat does not meet the standard to be considered an Australian resident for tax purposes for our purposes. This means they must register their ecommerce business for the Goods and Services tax. If they are required to register and fail to do so promptly, they will have to pay the GST retroactively from when they were first required to register. There are three types of Australian GST registrations:

1. Simplified GST registration
2. Standard GST registration
3. Standard claim only GST registration

Most nonresident e-commerce providers should choose a simplified GST registration because it applies to people who provide services and digital products to Australian consumers from outside Australia. Regardless of how many businesses are operated, they will only need to register for the GST once.

How Should I Pay the Goods and Services Tax on my E-Commerce business?

The easiest method of registering for the GST is to first file for an 11-digit Australian Business Number or ABN. The information needed to do so includes:

• The legal name and physical address of the business
• Contact details of the business owner, including 
  • Name
  • Position held
  • Mobile phone, landline, and fax numbers
  • Email address
• The main activity of the business in question
• The date the business began or intended to begin.

Are There Any Advantages to Paying the Goods and Services Tax?

The advantage of applying for an ABN relates not only to pay the GST; it also makes it easier to interact with other businesses, the Australian Tax Office, and other government agencies. Once the ABN has been approved, the business can now collect the requisite GST by adding 10% onto the price of sales of the product or service the business provides. 

This primer should not be considered an exhaustive explanation of how taxes are levied against a U.S ex-pat e-commerce business owner living in Australia. If an e-commerce business owner is uncertain regarding eligibility for obtaining an Australian Business Number or whether they should collect and pay the Goods and Services Tax on their sales based on their residency status, they should retain the services of qualified tax advisors who understand the intricacies of digital taxation and can petition the ATO on their behalf.

eCommerce Tax Basics for a U.S. Expat Living in Australia

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