A week or so ago, Google sent an email out to Australian AdWords and Google App clients indicating that as of Nov 1st, 2016, GST will be charged on all Google products.
Here is a copy of the email:
Dear AdWords Advertiser,
This email is to inform you of important changes to the Advertising Terms affecting your AdWords account [YOUR ACCOUNT]
With effect from 1 November 2016, SG is assigning your advertising contract, including any amendments and related agreements (such as Service Agreements), to Google Australia Pty Ltd. This means that from that date, Google Australia Pty Ltd will be bound by the terms of the contract and will be providing the service to you and invoicing you for the service.
Google Australia Pty Ltd is required by law to charge 10% GST (Goods and Service Tax) on its services so you will see this appear as a new line item on your monthly statement from 1 November 2016.
Please contact your tax advisor if you have any questions regarding the tax consequences of this change.
3. Changes to the Advertising Terms
On 1 November 2016, certain sections of the Advertising Terms will be changed. A copy of the updated Advertising Terms is now available here. From 1 November 2016, those new Advertising Terms will be available in the terms and conditions finder, here.
Neither the assignment nor changes to the Advertising Terms should cause any interruption to your service. Your payment method will continue to be charged automatically, as in the past.
If you have any questions regarding these changes please click here to contact us.
The Google AdWords Team
Google Asia Pacific
How will GST be charged in AdWords?
While there was some confusion with the initial announcement as to whether GST will be inclusive or exclusive, we can now confirm that GST will be exclusive.
This means that, if you are paying Google directly for your click spend (e.g. via credit card), your AdWords spend will remain as is and Google will be charging an extra 10% on top of your current spend as an additional line item.
What does this mean for your business?
If your business is registered for GST, not much is going to change (except for cash flow of course). You can still claim credits for this GST at BAS time.
If your business is not registered for GST, then this will likely hit your hip pocket.
What to do next?
It’s our recommendation that you inform your tax consultants/finance department of these changes so they can be prepared for this come BAS time.