taxes, web-development, australiaI’m planning on set up a freelance business in web design and development when I move to Australia next year and I’m creating an invoice system for my finances.
However, I’m struggling a little over VAT/GST and when to charge it.
I read this article about how it works, but I don’t quite understand when or how to charge clients in and outside of Australia. As far as I’m aware, I charge 10% to clients inside of Australia, but how does it work when the client is outside of Australia? I seem to be unable to find anything about that.
[EDIT 11th dec. 2014]
I found this article on GST which states that basically if you provide a service outside of Australia if said service’s “effective use or enjoyment must occur outside Australia”, it’s “not for work performed on any tangible personal property based in Australia”, that it’s “not connected with real property in Australia”, and that the client is not inside of Australia when the service is performed, that it falls under GST-Free.
To me, this indicates that clients outside of Australia are not charged GST.
However, it also says this:
To arrive at an accurate and more definitive conclusion, I would recommend seeking a specific transactional review by a qualified tax professional.
I also found this article on the site of RMIT which states the following:
Services exported by RMIT for consumption outside Australia will be GST-free in the following cases:
- The services relate to goods or real estate outside Australia, eg. If as part of an architecture course at RMIT, a student must design a building for a company or individual, and the student designs one for a non-resident, and the building is to be constructed in another country, his fee will be GST-free.
- Services are provided to a non-resident who is not in Australia at that time.
- Services provided to someone who is not in Australia, and the services are used outside Australia (cannot be directly related to goods or real property in Australia).
This also indicated to me that providing services to anyone who is outside of Australia at that time is not charged GST.
Based on your edit, it works much like VAT in the EU:
If your client is in Australia, collect GST.
If your client is anywhere else, don’t collect GST.
The EU has a few peculiarities with respect to the second point that you need to be aware of in the event you have European clients – namely, you’re also supposed to collect VAT (yes!) on behalf of the country your EU clients operate in.
Further reading on Wikipedia:
http://en.wikipedia.org/wiki/Goods_and_Services_Tax_(Australia)
http://en.wikipedia.org/wiki/Value-added_tax
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