Australia will get a new “Netflix Tax” on digital services

Australians will pay an extra 10% for digital goods bought on any streaming platform, such as music, movies, games, software and ebooks.

Announced yesterday afternoon, Treasurer Joe Hockey confirmed that the Australian Federal Government would charge the 10% Goods and Services Tax on top of these digital services in a bid to raise $350 million over the next four years.

“It is plainly unfair that a supplier of digital products into Australia is not charging the GST whilst someone locally has to charge the GST,” Hockey said at a press conference in Canberra.

The so-called ‘Netflix Tax’ will target 30 companies however Hockey didn’t say which services will have the GST applied to them. The tax won’t increase the price for iTunes purchases because Apple customers in Australia already pay GST on downloads.

The tax also won’t apply to online purchases that cost under $1000, as it currently stands. However it will increase the cost of Netflix in Australia to around the same price as locally-owned services Stan and Presto, which already charge a tax.

Hockey said the extended tax should stop multinational companies from avoiding taxes and while it’s one of the first of its kind, it may be expanded outside of Australia.

"A number of other countries have or will introduce similar rules such as Japan, Norway, South Korea, Switzerland and member countries of the European Union,” he said.

The Government will now go to tech companies and ask them to raise their prices by 10%. The $350 million in revenue raised (in the form of a tax) will go to the states and territories, rather than the federal government.

Draft legislation will be tabled before the House tonight at the unveiling of the Federal Budget. The legislation will go into effect January 1.