House of Representatives

Taxation Laws Amendment Bill (No. 4) 1986

Taxation Laws Amendment Act (No. 4) 1986

Australian Capital Territory Stamp Duty Amendment Bill 1986

Australian Capital Territory Stamp Duty Amendment Act 1986

Australian Capital Territory Tax (Transfers of Marketable Securities) Bill 1986

Australian Capital Territory Tax (Transfers of Marketable Securities) Act 1986

Sales Tax (Exemptions and Classifications) Amendment Bill (No.2) 1986

Sales Tax (Exemptions and Classifications) Amendment Act 1986

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon. P.J. Keating, M.P.)

MAIN FEATURES

The main features of the Bills are as follows:

Taxation Laws Amendment Bill (No. 4) 1986

Arrangements to avoid provisional tax (Clauses 42 to 44 and 49)

This Bill will amend the provisions of the Income Tax Assessment Act 1936 that allow taxpayers to apply to the Commissioner of Taxation to have their provisional tax payable in respect of income of a year of income recalculated on the basis of their estimates of taxable income and certain rebates and credits for that year (called an application to "self-assess"). In accordance with a 1986-87 Budget proposal, anti-avoidance measures will be introduced into Division 3 of Part VI, the Division that sets down the basis for self-assessing provisional tax liability, to apply when a taxpayer seeks to self-assess because of a reduction in income from a "closely-held" partnership or trust estate (defined as a "family partnership" or a "family trust") and the Commissioner forms the opinion that the reduction is due to the existence of an arrangement to obtain a reduction of the provisional tax liability.

The amendments will apply in relation to the calculation of provisional tax in respect of the 1986-87 income year and of all subsequent income years.

The arrangements to reduce provisional tax sought to be overcome by the new measures are those that result in the income entitlement of a partner in a partnership or a beneficiary in a trust estate being varied from year to year. By way of example, a partner may receive in a year of income ("year 1") a larger proportionate distribution of income than, on average, he or she is entitled to receive; in the next year ("year 2") the proportion of partnership income distributed to the partner is substantially reduced, so that by averaging the distributions the taxpayer receives his or her due entitlement.

In the situation described provisional tax liability for "year 2" is calculated having regard to the distribution of income in "year 1". The taxpayer, however, uses his or her right to self-assess the provisional tax liability for "year 2" and makes an estimate of the taxable income for that year in the knowledge that the distribution for the year will be substantially lowered.

As a result, the provisional tax liability is decreased for "year 2". The provisional tax liability raised for "year 3" will also be low, even though the proportionate share of income may increase, because it is determined having regard to the low distribution of income in "year 2". The result of the arrangement is that taxpayers are able to avoid paying all or some of what, if the arrangement had not been entered into, would have been their annual provisional tax liability.

The arrangements centre on family partnerships or family trusts where the partners or beneficiaries are prepared to forgo income in a year because of their close relationship, in the knowledge that their share will be increased in another year. Under the new measures, a reduction in family partnership or family trust income from that received in the preceding year will not be taken into account in recalculating provisional tax in an application to self-assess, where the Commissioner is of the opinion that the reduction is attributable to an arrangement, under which the share in the income of the partnership or the trust estate is varied from year to year, that has been entered into for the purpose of obtaining the reduction in provisional tax liability.

The measures will have no effect where the proportionate distribution of income between partners or beneficiaries changes for genuine business or personal reasons. For example, a greater distribution to a partner in accordance with the partnership agreement, in recognition of a greater than normal involvement in the day-to-day running of the partnership business during the year, or to a beneficiary because the trustee exercises a discretion to make a larger contribution to fund the beneficiary's education, would not bring the new measures into operation.

A partner in a family partnership or a beneficiary in a family trust wishing to self-assess a provisional tax liability, will now be required to provide additional income information on the statement furnished to the Commissioner disclosing estimated income from the family partnership or family trust. That information, together with any other information available to the Commissioner, will be used in forming an opinion whether the taxpayer has obtained a "provisional tax benefit" in connection with an arrangement that exists in relation to the relevant partnership or trust estate and whether the arrangement was entered into for the purpose of obtaining a "provisional tax benefit".

A partnership will be treated as a family partnership in relation to a person (other than a trustee of a trust estate) in a year of income, if the person, and at least one "associate", are each partners in the partnership and they share in more than 50 per cent of the partnership net income, or partnership loss, of the year of income.

A trust estate will be a family trust in relation to a person in a year of income, if the person and at least one "associate" benefits, or is capable of benefiting, under the trust and the person or an associate is presently entitled to more than 50 per cent of the net income of the trust estate of the year of income. Also, a trust estate will be a family trust in relation to a person in a year of income, if the person shares in more than 50 per cent of the net income of the trust estate to which the person or any other beneficiary is presently entitled in the year of income and the trustee of the trust estate acts in accordance with the directions of the person or of an "associate", or may be removed by the person or an "associate".

The application of the anti-avoidance measures will be dependent on the Commissioner forming the opinion that the taxpayer has obtained, or but for the operation of the new measures would otherwise obtain, a "provisional tax benefit" in connection with an arrangement entered into or carried out for the purpose of obtaining that benefit. The Commissioner must serve a notice in writing on the taxpayer of his opinion that a provisional tax benefit has been obtained, and specify the amount of the benefit in the notice.

Generally speaking, a reference to the obtaining of a provisional tax benefit in connection with an arrangement in respect of a family partnership or family trust of a person is a reference to -

(a)
the person's assessable income of the year of income being less than it would otherwise have been, because of a reduction in the share of income in the family partnership or the family trust, as a consequence of the arrangement;
(b)
the person's assessable income in a year of income, other than the year referred to in paragraph (a), being greater than it would otherwise have been because of an increased share in the income of any family partnership or family trust of the person, as a consequence of the arrangement;
(c)
provisional tax not being payable by the person in respect of the year referred to in paragraph (a), or being less than it would otherwise have been, if the arrangement had not been entered into.

Where there is a "provisional tax benefit" in respect of a year of income, the estimate of the taxable income in the application to self-assess will be increased by the amount determined to be the benefit. In the general run of cases, that will be the taxpayer's share of the income of the relevant partnership or trust estate of the preceding year, uplifted by 11 per cent, and reduced by the estimated income from that source shown in the application to self-assess.

The provisional tax liability of a taxpayer after the tax has been recalculated on the basis of the estimated taxable income shown in the "self-assessment" application, as adjusted because of a deemed provisional tax benefit, will not be greater than the provisional tax payable in respect of which the variation was lodged.

The new measures will also apply to a trustee liable to be assessed under section 98 of the Principal Act in respect of a share of a beneficiary in the net income of a trust estate that is a family trust in relation to the beneficiary.

Taxpayers will have the right of objection against a notice served by the Commissioner stating that he is of the opinion that the taxpayer has obtained a provisional tax benefit, and a further right of review or appeal on the Commissioner's decision on the objection.

Taxing of certain educational assistance (Clauses 26, 28 and 40)

From January 1987 the Commonwealth's Tertiary Education Assistance Scheme (TEAS), Adult Secondary Education Assistance Scheme (ASEAS) and Secondary Allowances Scheme (SAS) are to be incorporated into a single age-related educational assistance scheme (AUSTUDY). Payments under TEAS and ASEAS have been subject to tax since 1 January 1986 while payments under SAS are at present exempt. All payments under the new scheme, which is to be set up under the Student Assistance Act 1973, as proposed to be amended by the Student Assistance Amendment Act 1986, are to be subject to tax except to the extent that they contain a component in respect of a child dependent on the recipient. The Bill will effectively terminate the exemption at present available to recipients of allowances under SAS.

Source of natural resource income (Clauses 24 and 25)

This Bill will give effect to the proposal announced on 7 April 1986 to amend the income tax law to ensure that income derived by non-residents of Australia and based on the value of natural resources produced, recovered or produced and recovered in Australia is treated as having a source in Australia.

Under the present income tax law, it is a general principle that income derived by a non-resident is subject to Australian tax only where the income is derived from a source in Australia. The source of income for tax purposes is a question of fact to be decided in the light of all the circumstances of each particular case.

The amendments proposed by this Bill will mean that, subject to the exception outlined below, income that is directly related to the exploitation of Australia's natural resources and that is derived by a non-resident (referred to as "natural resource income") will be subject to full Australian tax. The amendment will apply to payments of natural resource income made after 7 April 1986 and which are based on the level of production and recovery of natural resources after that date.

Exempted from the proposed new measures are payments of natural resource income that are made to a non-resident who, as at 7 April 1986, had an entitlement to receive that income and was at that time, a resident of a country with which Australia had a double taxation treaty in force. Where, before 8 April 1986, the Commissioner had given a statement in writing to the effect that income tax would be levied only on 50 per cent of that income, those payments will continue to be taxed in Australia on the basis that 50 per cent of the payments have a source in Australia.

Collection of tax in respect of certain natural resource payments and royalty payments (Clause 46)

The Bill provides for new measures in respect of the collection at source of tax on certain natural resource income and royalties paid to non-residents. The new measures are to have effect in relation to payments made after the date of Royal Assent.

The measures for collection at source of tax on certain natural resource income and royalties paid to non-residents are to be incorporated in a new Division - Division 3B - in Part VI of the Income Tax Assessment Act 1936. Division 3B adopts many of the collection features of Division 3A - the system that provides for the deduction of tax at source in respect of certain payments for work or services (the Prescribed Payments System) - and imposes on payers of natural resource income and royalties to non-residents obligations similar to those imposed by the Prescribed Payments System on payers of amounts subject to deduction at source under that system.

The new Division requires payers of royalties and natural resource income as defined to advise the Commissioner of the amount of any intended payment to a non-resident and to ascertain from the Commissioner the amount to be deducted from the payment. The amount to be deducted is to meet any tax liability which is or may become due by the non-resident. The payer must deduct this amount and remit it to the Commissioner within 14 days after the end of the month in which the payment is made. Court penalties may be imposed where a payer makes a payment without first giving a written statement to the Commissioner of the amount of the intended payment or ascertaining from the Commissioner the amount of money to be deducted from the payment, or where a payer fails to deduct that amount or fails to remit it to the Commissioner within the specified time. Statutory penalties are imposed for a failure to deduct an amount or failure to remit an amount. Such penalties will be subject to a power of remission by the Commissioner and, except for any late payment element calculated on a per annum basis, will also be subject to objection by the taxpayer and reference to the Administrative Appeals Tribunal or a specified Supreme Court.

Credit for tax deducted by the payer will be allowed in the assessment of the non-resident.

Capital gains and capital losses (Clauses 30 to 38)

This Bill will implement the proposal, announced on 22 July 1986, to amend the capital gains and capital losses provisions of the Income Tax Assessment Act 1936 to vary the treatment of options granted by a company to acquire shares or debt instruments (debentures) of the company.

Under existing law a grant of an option is deemed to be a disposal of the option at the time when the grant took effect. However, where the option is exercised by the grantee, the grant of the option and the transaction entered into as a result of the option's exercise are treated as a single transaction. Thus, options granted by a company to acquire shares in the company are treated as follows -

·
where a company grants options to acquire shares and the options are exercised in the same year of income, tax does not apply to the consideration received for the grant of the option nor to the subsequent issue of the shares (a company does not have a capital gains liability on the issue or allotment of its shares);
·
where the options are exercised in a later income year, the tax on capital gains applies in the year of the grant, but when the options are exercised the assessment for the year of the grant is amended to exclude the capital gain; and
·
where the options expire unexercised, the consideration received for the grant of the options is subject to the tax on capital gains in the year of the grant.

Under the amendments being made by the Bill, where a company grants options to acquire shares or debentures of the company, the tax on capital gains will not apply to the proceeds received for the grant of the options until the year in which the options expire and then only in respect of options which expire unexercised. The proposed changes will also apply in a similar way to options granted by the trustee of a unit trust. The amendments will apply to options granted after 19 September 1985, the date of first effect of the tax on capital gains.

The Bill also proposes several amendments of a technical nature to the capital gains and capital losses provisions to clarify the operation of the law.

Company tax instalments - modified provisions for early balancing companies (Clause 39)

This Bill will give effect to the 1986-87 Budget proposal to advance the due dates for payment of instalments of company tax by companies that balance in May or earlier in lieu of the following 30 June. Companies affected by the new measures are described as "early balancing companies". The new measures will first take effect in relation to the year of income that commenced on 1 July 1986, referred to as the "transitional year", and will apply in relation to all subsequent years.

Instalments of company tax payable by early balancing companies will, subject to special arrangements for the transitional year, become due for payment on dates not earlier than 1 1/2, 4 1/2 and 7 1/2 months after the end of the accounting period, corresponding with the earliest due dates of 15 August, 15 November and 15 February for instalments payable by companies balancing on 30 June.

Under special arrangements for the transitional year, instalments which would otherwise become due for payment prior to 1 July 1987 are not to be payable before 15 June 1987 and then only as to one-third of the amount otherwise payable. An amount approximating the balance, calculated at the time of assessment, will be paid in two instalments in June 1988 and June 1989.

Rebate of tax on amounts paid under certain life assurance policies (Clause 29)

Under the existing income tax law, bonuses - and other amounts in the nature of bonuses - received by a taxpayer during the first 10 years of a policy of life assurance issued after 7 December 1983 (or during the first 4 years of policies issued after 27 August 1982 and before 8 December 1983) are generally included in the taxpayer's assessable income and a rebate of tax equal to (currently) 30% of that amount is allowed. The rebate of tax allowed is designed to broadly compensate for the tax paid by the life assurance company (in respect of its investment income) or by the friendly society (in respect of its life assurance business) that issued the policy.

State government insurance offices are, because of their status as public authorities for income tax purposes, exempt from income tax and the underlying reason for the allowance of the rebate does not apply in the case of such offices. However, in return for the New South Wales, Queensland and South Australian Governments agreeing to reimburse the Commonwealth for the estimated Commonwealth revenue forgone, the Taxation Laws Amendment Act (No.4) 1985 amended the Income Tax Assessment Act 1936 to extend the operation of the rebate provisions to assessable amounts received under life assurance policies issued by the Government Insurance Office of New South Wales, the State Government Insurance Office (Queensland) (as it then was) and the South Australian State Government Insurance Commission. This Bill proposes the further extension of those provisions to assessable amounts received under life assurance policies issued by the State Insurance Office of Victoria. The Victorian Government has agreed to reimburse the Commonwealth for the estimated Commonwealth revenue forgone by allowing the rebate.

The Bill will also amend the rebate provisions in consequence of the change of name of the State Government Insurance Office (Queensland) to Suncorp Insurance and Finance.

ACT stamp duty (Clauses 8 to 11)

The Bill will amend the Australian Capital Territory Taxation (Administration) Act 1969 to insert provisions relevant to the proposed imposition of ACT stamp duty on grants of Crown leases and the proposed inclusion, in the value for ACT stamp duty purposes of conveyances of residential property, of the value of chattels conveyed with the property. Each of these proposals is being effected by the accompanying Australian Capital Territory Stamp Duty Amendment Bill 1986.

The provisions to be inserted will define the term "non-commercial Commonwealth authority" used to describe an authority that will be exempt from the duty on grants of Crown leases, require relevant information to be provided in respect of chattels transferred with residential property and authorise the refund or remission of stamp duty in certain circumstances.

Transfers of marketable securities (Clauses 8, 12, 13 and 14)

Amendments of the Australian Capital Territory Taxation (Administration) Act 1969 proposed by the Bill will set out the rules governing liability for the new ACT tax to be imposed in certain circumstances on the registration of a transfer of a marketable security. The tax will be imposed by the accompanying Australian Capital Territory Tax (Transfers of Marketable Securities) Bill 1986. The proposed imposition of this tax was announced on 10 June 1986 and the tax is to apply in relation to instruments of transfer executed by the transferor after 5 pm in the ACT on that day.

The liability to pay the tax will fall on the company that registers the transfer. The company will, however, be able to recover the tax from the person to whom the marketable security was transferred. The tax will be due and payable 21 days after the close of the month in which the transfer is registered and the company will be required to lodge with the Commissioner of Taxation, on or before the day the tax falls due, a return form showing particulars of each transfer.

Credit against ACT tax will be allowed for stamp duty or similar tax paid under a law of the place in which the marketable security was registered, where the transfer registration is not exempt because of the payment of such duty or tax.

Second Commissioners of Taxation (Clauses 22 and 54)

This Bill will provide for the creation of a third statutory office of Second Commissioner of Taxation with the same powers and functions as the two existing Second Commissioners of Taxation. Second Commissioners have all the powers and functions of the Commissioner of Taxation apart from the general administration of the taxation laws and the authority to report to the Parliament on the working of those laws. Unlike the Commissioner of Taxation, a Second Commissioner of Taxation cannot delegate his or her powers and functions to subordinate officers.

An increase in responsibilities at the very senior levels in the Australian Taxation Office necessitates the creation of this extra statutory position.

In 1959 when the second Second Commissioner position was created, the staff of the Australian Taxation Office numbered 7,500. The Office is currently staffed by some 16,500 people. From the perspective of revenue collections, the Australian Taxation Office in 1986-87 has the task of collecting some $51 billion. In addition to the very substantial existing pressures on the organisation, there is the need to implement and administer numerous Tax Reform measures. The appointment of a third Second Commissioner will enable the strengthening of the senior levels of the Taxation Office and allow the organisation to be fully responsive to all the challenges that lie ahead.

Fees for references to the Administrative Appeals Tribunal or a court (Clause 55)

In the 1986-87 Budget it was announced that a filing fee of $200 is to be imposed for applications to the Administrative Appeals Tribunal (except those relating to income maintenance matters). This Bill provides the mechanism for the payment of that fee in the case of certain taxation decisions. The Bill specifies that, where a taxpayer requests the Commissioner of Taxation to refer a decision on an objection against an assessment or other decision to the Administrative Appeals Tribunal, the request must be accompanied by the fee. Requests not accompanied by the required fee will be treated as not having been lodged.

Under the various taxation laws a taxpayer may request referral of an objection decision as an appeal to a specified Supreme Court as an alternative to a review by the Administrative Appeals Tribunal. (In the case of promoters recoupment tax, the right of appeal lies only to the Federal Court.) A similar fee will be payable in respect of appeals to a Supreme Court or the Federal Court.

The fee will be refunded where the objection decision is subsequently varied to any extent in favour of the taxpayer by the Commissioner, or as a result of consideration of the matter by the Administrative Appeals Tribunal or a court. The fee will also be refunded if the taxpayer decides not to proceed with the request provided that this occurs before the decision is actually referred to the Administrative Appeals Tribunal or court.

These measures will take effect from a date or dates to be proclaimed.

Australian Capital Territory Stamp Duty Amendment Bill 1986

Transfers or assignments of interests in land (Clause 4)

This Bill will give effect to the 1986-87 Budget proposal to increase the rate of Australian Capital Territory stamp duty on transfers or assignments of interests in land where the value of the interest in the land, or the consideration for the transfer or assignment, exceeds $100,000. A higher marginal rate of duty is to be applied to that part of the value or consideration that exceeds $100,000.

The existing rates of duty on a transfer of a freehold interest in land situated in the ACT, or of a Crown lease for more than 5 years of land in the ACT, are as follows:

For every $100, and any fractional part of $100, of the value of the interest transferred or agreed to be transferred -
$1.25 up to $14,000;
$1.50 between $14,001 and $30,000;
$2.00 between $30,001 and $60,000; and
$2.50 above $60,000.

The same rates, calculated by reference to the value of the consideration, apply to transfers or assignments of other leases of land situated in the ACT.

For all relevant transfers or assignments, the present maximum marginal rate of $2.50 is to be limited to that part of the value of the interest in the land - or any consideration - between $60,001 and $100,000. For that part of the value of the interest or of the consideration above $100,000, the new maximum marginal rate is to be $3.50.

The increased rate of duty will apply to instruments of conveyance of real property executed on or after the first day of the month following the month in which the Bill receives the Royal Assent.

Grants of leases of land by the Commonwealth (Clauses 4 and 5)

This Bill will also implement the 1986-87 Budget proposal to impose Australian Capital Territory stamp duty on grants by the Commonwealth of leases of land situated in the ACT.

The rates of duty on such leases are to be the same as those on transfers or assignments of interests in land, which are set out under the preceding heading. As with duty on transfers of freehold interests in land and of Crown leases for more than 5 years, the duty is to be calculated by reference to the value of the interest in the land.

The new duty is to apply to Crown leases which commence on or after the first day of the month following the month in which the Bill receives the Royal Assent.

Chattels transferred or leased with residential land (Clause 3)

By amendments proposed by the Bill, the value of, or consideration for, chattels transferred or hired with the transfer or lease of an interest in residential land in the Australian Capital Territory is to be added to the value of, or consideration for, the interest in the land for the purposes of calculating the ACT stamp duty payable on transfers or leases of interests in land. This proposal was announced in the 1986-87 Budget.

The amendments will apply to transfers or leases of interests in land executed on or after the first day of the month following the month in which the Bill receives the Royal Assent.

Leases of land (Clause 4)

The Bill will also give effect to the 1986-87 Budget proposal to set the rate of Australian Capital Territory stamp duty on the non-rent component of consideration for a lease of land situated in the ACT at the rate that applies to the rent component.

The rate of duty on the rent component of consideration for a lease of land is 35 cents for every $100, and for any fractional part of $100, of the amount or value of that component specified in the lease. In addition, duty is presently payable on the non-rent consideration (e.g., a premium) for the lease at the following rates:

For every $100, and any fractional part of $100, of the total amount or value of consideration other than rent given or agreed to be given -
$1.25 up to $14,000;
$1.50 between $14,001 and $30,000;
$1.75 between $30,001 and $50,000;
$2.00 between $50,001 and $100,000;
$2.25 between $100,001 and $250,000; and
$2.50 above $250,000.

Those marginal rates are to be replaced by the one rate of 35 cents for every $100, and any fractional part of $100, of the total amount or value of non-rent consideration that is given or agreed to be given for the lease.

The leases to be subject to the new rate of duty on the non-rent consideration will be those executed on or after the first day of the month that next follows the month in which the Bill receives the Royal Assent.

Australian Capital Territory Tax (Transfers of Marketable Securities) Bill 1986

This Bill will give effect to the proposal announced on 10 June 1986 by imposing Australian Capital Territory tax on the transfer of marketable securities listed on a register of a company incorporated in the ACT where the register is kept outside the ACT.

The proposed new tax, which is to be imposed on the registration of transfers of marketable securities, complements the existing ACT stamp duty on instruments of transfer of marketable securities registered in a register kept by a company or unit trust in the ACT. The rate of tax will be 15 cents for every $25, or part thereof, of the unencumbered value of the marketable security. This is the same rate as the rate of stamp duty imposed on transfers of marketable securities registered in the ACT.

Certain transfer registrations will be exempt from the tax. The exemptions will be broadly the same as those available in respect of ACT stamp duty and the other similar ACT taxes imposed on transfers, sales and purchases of marketable securities. In addition, provision is made for regulations to prescribe certain registrations that are to be exempt from the tax, so that there will be no need to seek a credit for stamp duty or similar tax paid in the jurisdiction in which the marketable security was registered where the rates of duty or tax are broadly equivalent to those in the ACT.

Sales Tax (Exemptions and Classifications) Amendment Bill (No. 2) 1986

First Schedule (Clause 4)

Existing provisions of the sales tax law allow, inter alia, imported and locally manufactured excisable articles -

·
for the personal use of the Governor-General, State Governors or members of their families; or
·
for the personal or official use of members of the staff of the Governor-General or a State Governor, who are not Australian citizens,

to be cleared from bond without payment of sales tax. In the case of locally manufactured excisable articles, in order to be freed from tax, the articles have to be owned by the person by whom they are to be used or by the Commonwealth or the relevant State, as the case may be, before their clearance from bond or duty.

Until recently, there were similar provisions in the customs and excise laws. Those laws were, however, amended by the Customs Tariff Amendment Act 1986 (Act No.36 of 1986) and the Excise Tariff Amendment Act 1986 (Act No.21 of 1986) to remove the exemption from those duties for the imported and locally manufactured excisable articles described above. Amendments proposed by this Bill will, with effect from the date on which the amending Act receives the Royal Assent, bring the sales tax law into line with the customs and excise laws in this area.

Exemptions (Clause 3)

Broadly stated, the present wholesale sales tax operates to tax all goods at the general rate of 20% unless they are specified to be taxed at a different rate or to be exempt. There are presently 6 Schedules to the Sales Tax (Exemptions and Classifications) Act 1935 that specify goods or classes of goods for this purpose.

The various detailed and general descriptions of goods in the 6 Schedules can be the source of some uncertainty. Certain goods may be described in specific terms in an item or sub-item in one of the taxing Schedules - i.e., the Second and subsequent Schedules - but may also be construed as falling within a general description of goods in an item or sub-item in the exemption Schedule - i.e., the First Schedule. It has been suggested that, in these circumstances, it is not clear whether there is any liability to sales tax.

As a matter of statutory interpretation, a specific taxing item is regarded as overriding a more generally expressed exemption item. However, in order to remove any doubt for practitioners and taxpayers alike, this Bill will amend the Exemptions and Classifications Act to embody that principle of statutory interpretation in the sales tax law. This amendment will not alter the practical administration of that law.

A more detailed explanation of the provisions of the Bills is contained in the following notes.


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