AUSTRALIANS will pay an extra $150 million for home entertainment, apps, video games, e-books, and software over the next year and consumers will start to feel the pinch this weekend.
But adding the GST to digital downloads, in a move dubbed the “Netflix tax”, has already been exploited by some companies as a way to raise prices even more than 10 per cent, and experts warned it would not be long before the tax was costing consumers $1 billion a year.
The Australian tax on digital downloads from overseas kicked in yesterday (July 1) after being introduced in the 2015 Federal Budget as a way to close the “digital tax loophole”.
The scheme will see overseas firms collect GST from Australian buyers on any digital items, including streaming TV and music services, smartphone apps, digital books, and video games.
But Telsyte managing director Foad Fadaghi said the new tax would not raise the price of all digital offerings in Australia, with Apple, Adobe, and Spotify prices immune, leaving users with homework to do.
“It’s going to be confusing for some customers because they might already be paying the GST on some services and not paying it for others,” he said.
Netflix, after which the tax has been named, is one company raising its price to cover the 10 per cent tax, and adding more charges on top.
The leading streaming TV service, with 2.7 million Australian subscribers according to Roy Morgan, raised the price of its top streaming option by 20 per cent last week, and even its cheapest option rose by 11 per cent.
A spokesman said the company hiked up monthly subscription fees to cover the GST and the cost of new TV shows and “product features”.
“Since launching in Australia in 2015, we have not changed pricing,” the company said in a statement.
Other companies expected to raise their prices to cover the tax boost include video game provider Steam, US bookseller Amazon and, in some instances, Google.
While Apple already collects GST for apps and music purchases, Google Android users have purchased apps without paying the tax until now.
“The price of all items sold on the Play store will now include 10 per cent GST,” a spokesman said. “Sellers can decide whether to increase their prices or cover that additional cost.”
However, Google will cover the 10 per cent tax for its subscription services, such as YouTube Red and Google Play Music “at this stage”.
Microsoft could not confirm whether the price of its Office subscriptions or apps would rise, but a spokesman for Kobo said it would start collecting tax under the new laws.
“Kobo is prepared to collect and remit GST and all applicable taxes. We have no plans to change our discount strategy in Australia — publishers set the retail prices for their books,” the spokesman said.
Finder.com.au telco editor Alex Kidman said despite the rising cost of entertainment, many consumers might not find it a great imposition.
“This fits in that position of a ‘lazy tax’ — Netflix takes money out of your account every month and you probably don’t think about it,” he said. “We’re also talking about small sums of money. In the app example, it might cost $1.09 instead of 99c.”
But Mr Fadaghi said those small amounts would add up to a lot over time, as Australians were keen digital adopters and were taking out more digital subscriptions every year.
“We estimated the digital goods market to be worth $8.1 billion for everything from apps to games to music services by the end of 2016, and that’s up from $6.9 billion in 2015,” he said.
“It won’t be long before it’s worth $1 billion to the tax man.”
The ‘Netflix Tax’ is expected to cost consumers $150 million in its first year, and $200 million next year, according to Budget forecasts.
CHANGES UNDER THE ‘NETFLIX TAX’
Google Android apps
Amazon US e-books
Apple apps, music, movies
Google Play Music