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Trans-Tasman tax rules for the platform economy

Tax Alert - October 2022

By Robyn Walker & Di Williamson

Both New Zealand and Australia are in the process of introducing new tax reporting rules for digital platforms (Platforms). The proposals in each country have the potential to require material systems changes for Platforms, and unfortunately at this stage there isn’t harmonisation of the rules, meaning New Zealand based Platforms could get caught having to comply with two sets of rules. In this article we explain the proposed reporting requirements in each country and also summarise how and when GST obligations also arise.

The emergence and growth of the “gig economy” through Platforms has led to concerns for tax authorities about the security of the tax base. If more people move from earning income through employment (where tax authorities get full data about income being earned) to earning income through the gig and sharing economy there is a great risk of individuals concealing or under-reporting income. The European Union (EU) has lead the charge in requiring reporting by Platforms, as they have designed and are in the process of implementing a set of reporting rules known as “DAC 7” (Directive on Administrative Cooperation in the field of taxation) which notes: “The digitalisation of the economy has been growing rapidly over the last years. This has given rise to an increasing number of complex situations linked to tax fraud, tax evasion and tax avoidance. The cross-border dimension of the services offered through the use of digital platform operators has created a complex environment where it can be challenging to enforce tax rules and ensure tax compliance. Tax compliance is suboptimal and the value of unreported income is significant. Member States' tax administrations have insufficient information to correctly assess and control gross income earned in their country from commercial activities performed with the intermediation of digital platforms.”

Historical analysis by Inland Revenue on self-employed individuals suggested that incomes may be underestimated by 20 percent on average. The chosen solution to this problem is to require Platforms which are acting as an intermediary between Sellers and the end Customer to have to collect and report information about those sellers.

Given many Platforms operate in multiple jurisdictions, there is a current risk that Platforms could be subject to numerous different regimes and requirements around the globe. To mitigate this risk, the OECD has developed a model set of rules, based on the EU approach, for countries to adopt.

New Zealand and Australia are taking different approaches to information reporting. New Zealand is adopting the OECD model rules, whereas Australia is taking a “bespoke” approach in its reporting requirements. Australia was perhaps ahead of its time, as its proposals come as an output of a Black Economy Taskforce established in 2016.

Below is a comparative summary of what is being proposed in eachcountry:

Aside from proposals to require reporting of information, Platforms also have a role to play in collecting and paying GST. For a number of years now Platforms have been charging GST in both New Zealand and Australia for low value goods and services exported into the respective countries. We provide an overview of these existing rules below.

In addition, to address the issue of many ‘gig’ suppliers falling under the GST registration threshold of NZ$60,000, in New Zealand there are new proposals for Platforms facilitating “Listed Services” to charge GST on services facilitated through the Platform.

Listed Services are:

  • The supply of accommodation services in New Zealand (other than residential accommodation); and
  • The supply of transport services in New Zealand, in the form of ride-sharing and beverage and food delivery services.

Under these proposals, with effect from 1 April 2024, the Platform will charge GST on all services facilitated through the Platform. In order to approximate the GST that a vendor would be able to claim back if they were GST registered, the Platform will pass a ‘flat rate credit’ of 8.5% to the seller. Any GST registered suppliers will claim back GST input tax credits as normal and be deemed to make a zero-rated supply to the Platform of the Listed Services.

Deloitte commonly helps non-residents with GST compliance obligations and we are happy to provide further information about GST registration requirements in both New Zealand and Australia.

For more information please contact your usual Deloitte advisor. 

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