Advertising on Google AdWords is about to get more expensive.
Google recently announced that advertisers in Australia will be charged GST on their invoices starting from November 1, 2016. Initially, there was some confusion as to how advertisers would be charged. But it has been confirmed that the additional 10% charge will be added on top of any ad spending for that month. Just like with local purchases and expenses, AdWords costs will be factored into your BAS returns.
Here is the official email that Google recently sent out:
Dear AdWords Advertiser,
This email is to inform you of important changes to the Advertising Terms affecting your AdWords 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 provide the service to you and invoice 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 change. 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
So why is Google suddenly making this change?
Advertisers were previously exempt from paying GST because invoices were payable to Google Asia Pacific, not Google Australia. The move allowed Google and other multinational tech companies (including Facebook) to reduce the amount of taxes they pay. In an effort to bring more tax revenue to state governments, the then Communications Minister Malcom Turnbull unveiled a new proposal that advertising services booked by Australian companies be charged GST.
It is also important to note that other Google services including G-Suite (renamed from Google Apps) will have GST applied. These changes will most likely have the biggest impact on smaller businesses. So advertisers and business owners will need to factor in GST to their overall AdWords spend.
Advertising on AdWords has always been one of the best digital marketing channels to drive targeted traffic to land pages. Everything else will still remain the same, but the only major change is the added cost which goes into effect starting from November 1, 2016.
Campaign optimisation will be even more important to improve performance and maximize returns.