Tony Ince, Mostyn Consulting

As a baby boomer struggling with technology (I’m still trying to work out my VHS), I was fascinated about recent stories about the rapid development of 3D Printing. Coincidentally, I saw this story on the same day the Treasury released updated draft GST legislation on the so-called Netflix Tax, known to us as the “Tax Laws Amendment (GST Treatment of Cross-Border Transactions) Bill 2015”. Spooky or what?
I figured I couldn’t be the only one interested in 3D Printing and GST, so here it is.
What is 3D Printing?
3D printing, or more correctly, “additive manufacturing”, is the way of the future. I thought it would be interesting to have a little look at it and how it might affect the way we buy stuff in the future, and how GST might be applied to those sales. Let’s start with the technology.
According to the website 3dprinting.com, additive manufacturing works like this.
3D printing or additive manufacturing is a process of making three dimensional solid objects from a digital file. The creation of a 3D printed object is achieved using additive processes. In an additive process an object is created by laying down successive layers of material until the entire object is created. Each of these layers can be seen as a thinly sliced horizontal cross-section of the eventual object.
It all starts with making a virtual design of the object you want to create. This virtual design is made in a CAD (Computer Aided Design) file using a 3D modeling program (for the creation of a totally new object) or with the use of a 3D scanner (to copy an existing object). A 3D scanner makes a 3D digital copy of an object.
3D scanners use different technologies to generate a 3D model such as time-of-flight, structured / modulated light, volumetric scanning and many more.
Not all 3D printers use the same technology. There are several ways to print and all those available are additive, differing mainly in the way layers are built to create the final object.
Some methods use melting or softening material to produce the layers. Selective laser sintering (SLS) and fused deposition modeling (FDM) are the most common technologies using this way of printing. Another method of printing is when we talk about curing a photo-reactive resin with a UV laser or another similar power source one layer at a time. The most common technology using this method is called stereolithography (SLA).
To be more precise: since 2010, the American Society for Testing and Materials (ASTM) group “ASTM F42 – Additive Manufacturing”, developed a set of standards that classify the Additive Manufacturing processes into 7 categories according to Standard Terminology for Additive Manufacturing Technologies.
For you tech-heads, have a look at all the detail at http://3dprinting.com/what-is-3d-printing/
GST and additive manufacturing
So will the increase in households being able to “print their own goods” change the way GST is applied in Australia, and indeed the way VAT is applied around the world?
Well the answer in the short term is “yes”. In the longer term it will probably be caught in the so-called “Netflix tax”. Digital products and services supplied into Australia will be taxed from 1 July 2017, assuming the relevant legislation is passed. Updated draft legislation was released recently.
What the draft legislation does is amend the “connected with Australia” rule (more correctly but more confusingly called the “connected with the indirect tax zone” rule). Basically, the amendments extend the scope of the GST to supplies of services and intangibles made by non-residents to an Australian consumer. These will be “connected with Australia” and therefore subject to GST under the proposed new law.
Schedule 1 to the Bill amends the GST law to make all supplies of things other than goods or real property connected with the indirect tax zone where they are made to an Australian consumer. An Australian consumer is broadly an Australian resident other than a business.
This change will result in supplies of digital products, such as streaming or downloading of movies, music, apps, games, e-books as well as other services such as consultancy and professional services, receiving similar GST treatment whether they are supplied by a local or foreign supplier.
So if the law passes as it is, it would seem to apply to the purchase of “virtual objects” although this does not seem to have been contemplated, judging on the wording in the Explanatory Memorandum. There will come a time in the not-too-distant future where you will order a “virtual object” over the net that is emailed to for you to. You then print it off on your 3D printer (or go to a retail outlet that charges you to use theirs). You have the goods. They have not passed through Australian Customs and had GST applied because they were not goods at the time.
Under the proposed new law, the non-resident supplier (in the first instance) will have a GST liability. They will have supplied something other than goods or real property to you, an Australian consumer. I guess the questions will be further highlighted in this example: how will the know ATO who these suppliers are and what legal jurisdiction to chase and prosecute them will they have under current arrangements? I suspect that there will be a lot more supplies of digital goods that may not be worried too much about laws, especially tax laws in another country.