by Jeremy Malcolm, Internet lawyer
Death and taxes may both be inevitable, but as one American humorist noted, "there's one advantage about death; it doesn't get worse every time Congress meets". With this in mind, our Net Law Roundup this issue provides a brief overview of some of the issues that concern the Internet and taxation.
For business owners, there is limited scope to reduce tax by locating income generating activities outside Australia. It certainly isn't as simple as throwing a Web site up on an overseas Web server. If a taxpayer is resident in Australia, they are required to pay tax on the income they earn both here and overseas. Taxpayers who are not resident in Australia must still pay tax on the income they earn here.
Short of actually moving overseas lock stock and barrel, perhaps the only legitimate way for an Australian business to gain a tax advantage from the Internet is for the business to reincorporate overseas, relocate its central management and control overseas, and for the majority of the voting power of shareholders to be located overseas. Some companies have attempted to overcome these requirements by appointing "puppet directors" overseas, but the success of this approach is currently a grey area.
For consumers, GST is payable on transactions conducted online, just as on other sorts of transaction. In the case of imported goods valued over $250 (or $1000 if they are posted), the Customs Department can levy GST on the purchase. However, it is often very difficult for the ATO to track online purchasers, particularly when the product purchased is not only ordered, but also delivered electronically. Happily, the other side of the coin is that your overseas friends and relations who purchase products from Australia can do so GST-free.