Why AdWords just got a bit more expensive

13th October, 2016

If you’re an SME using Google’s AdWords, it’s about to get 10 percent more expensive.

Yesterday, Google started emailing customers to inform them that they would start charging them GST on transactions on Google products.

It said that from 1 November, GST will start to appear as a line item on customers’ monthly invoices.

The GST change also affects its G-Suite product.

The change is a relatively big deal given the huge number of small businesses that use AdWords to market their business.

There have been recent changes to GST law taking effect from 1 October relating to transactions between Australia and overseas-based businesses.

Some overseas businesses will now be totally exempt from registering for GST.

Companies such as Google Australia which does a lot of business in Australia will now be forced to enter the system.

READ: What did Google just tell us about the future of work?

Google used to charge for AdWords out of its Singapore office, but from 1 November it will start charging for AdWords from Google Australia.

As part of the 1 October tax changes, those businesses in Australia which have to enter the GST system are:

  • Businesses that are based in Australia for more than 183 days in a 12-month period
  • Have a GST turnover of $75,000 or more

Google Australia meets these criteria rather handsomely.

So, from 1 November you’ll start to see GST charged on AdWords monthly invoices.

If you’re using AdWords you should get an email or have already gotten an email from Google about the change.

So why is all this happening?

About 18 months ago then communications minister Malcolm Turnbull unveiled a plan to charge the likes of Facebook and Google GST on advertising.

It was part of the broader debate at the time around getting multinational companies to pay their fair share of tax for activities carried out in the Australian market.

According to The Australian, Australian businesses spent up to $2.4 billion on online advertising on platforms such as Google and Facebook, making the introduction of GST on these services potentially a $240 million money-spinner for the government.