Australia Clarifies GST Rules for Cross-Border Services

July 31, 2025

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The Australian Taxation Office has published a GST ruling, which provides clarification of the applicable GST exemption rules for certain cross-border supplies of services or digital products that are typically not subject to Australian GST. However, as stated in the ruling, these supplies may become subject to GST if certain conditions are met.

Impact on Cross-Border Supplies

As noted in the ruling, if an Australian business supplies something other than goods or land to a non-resident customer, it can be GST-free. However, there are certain exemptions to this rule, which are highlighted by the ruling.

According to the ruling, even if the supply is made to a non-resident, if all the criteria are met. For the GST to apply, the supplier must have an agreement with a non-resident. Still, the service or digital product is used or delivered to someone in Australia. Finally, none of the specific exemptions apply, such as those provided for a registered business in Australia that would be able to claim GST credits. If all three conditions are met, the GST applies to the transaction.

The ruling shifts the focus from where the supply is made to who receives the supply. Therefore, if the supply is provided to someone in Australia under that agreement, and none of the specific exceptions apply, the supply becomes taxable even if the formal customer is abroad or overseas. The primary reason behind this decision is that the actual consumption of the service occurs in Australia, not in another foreign country.

Additionally, the ruling underlines that agreements with non-residents can be formal or informal and may involve intermediaries such as agents or representatives. In any case, it is crucial that the agreement is concluded with the non-resident. Furthermore, the ruling provides examples and mechanisms on how taxable persons can determine if the supply is provided to a non-resident or someone else, for instance, whether it is supplied to an employee, agent, or partner in Australia.

Conclusion

The ruling applies both retrospectively and prospectively, meaning that supplies made before and after the issue date are subject to the interpretation of GST rules if all the conditions are met. All taxable persons engaged in the cross-border supply of in-scope taxable activities should examine the effect of the rulings on their businesses and ensure that they follow the underlying rules to avoid non-compliance issues.

Source: Australian Taxation Office

What is the purpose of the ATO’s recent GST ruling on cross-border supplies?

The ATO's ruling aims to clarify when cross-border supplies of services or digital products may be subject to GST, even if they are made to non-residents, by focusing on the actual use or consumption of the supply in Australia.

When can a supply to a non-resident still be subject to GST?

A supply to a non-resident can still be subject to GST if the agreement is with a non-resident, the service or digital product is actually delivered or used in Australia, and no specific exemptions apply.

How does the ruling affect the interpretation of GST applicability?

The ruling shifts the emphasis from where the supplier is located to where the recipient of the service is based, especially focusing on whether the service is consumed in Australia, regardless of the customer's official location.

Do formal agreements have to exist for GST to apply under this ruling?

No, the ruling states that agreements can be either formal or informal and may involve intermediaries like agents or representatives. What matters is the connection to the non-resident and the use of the service in Australia.

Does the ruling apply retroactively?

Yes, the ATO ruling applies both retrospectively and prospectively, meaning it affects supplies made both before and after the date the ruling was issued.

What should businesses do in light of the new ATO GST ruling?

Businesses involved in cross-border supply of services or digital products should reassess their agreements and supply chains to determine if GST applies under the clarified rules, and take steps to ensure compliance.

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