House of Representatives

Tax Laws Amendment (2009 GST Administration Measures) Bill 2009

Explanatory Memorandum

Circulated By the Authority of the Treasurer, the Hon Wayne Swan MP)

Chapter 2 - Australian External Territory refund collection system

Outline of chapter

2.1 Schedule 2 to this Bill amends the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) and the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act) to allow residents of Australia's External Territories (such as Norfolk, Cocos (Keeling) and Christmas Islands) to claim refunds of goods and services tax (GST), or GST and wine equalisation tax (WET) under the tourist refund scheme. Claims can be made if Australian External Territory residents can show proof that the goods have been exported to their External Territory within the required period after the goods were acquired.

Context of amendments

2.2 Exports and other supplies for consumption outside Australia are GST-free under certain circumstances. For GST purposes, Australia's External Territories are considered to be outside Australia. As such, supplies of goods exported to Australian External Territories are generally GST-free. Similarly, sales of wine to Australian External Territories are generally not subject to WET.

2.3 A supply by a business to a visiting Australian External Territory resident will generally be GST-free as an export, provided the External Territory resident can provide evidence that the goods have been exported.

2.4 In addition, the tourist refund scheme operates to entitle individuals who take goods outside Australia (including to an Australian External Territory) to a refund of the GST and WET that was payable on the supply of the goods. The scheme is administered for the Commissioner of Taxation (Commissioner) by the Australian Customs and Border Protection Service. Goods must be of a kind specified in the Regulations and exported as accompanied baggage to qualify for a refund.

2.5 The Board of Taxation, in its Review of the Legal Framework for the Administration of the Goods and Services Tax , recommended that a system be introduced under which residents of Australia's External Territories (such as Norfolk, Cocos (Keeling) and Christmas Islands) can claim refunds under the tourist refund scheme on unaccompanied baggage if they can show proof of shipping of exported goods to their External Territory (recommendation no. 31).

2.6 The Government's response to the Board of Taxation's recommendations was announced in Media Release No. 042 by the then Assistant Treasurer on 12 May 2009 in the context of the 2009-10 Budget.

2.7 Amendments to the Regulations to give effect to the provisions in this Bill are intended to be made to the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations) and A New Tax System (Wine Equalisation Tax) Regulations 2000 (WET Regulations).

Summary of new law

2.8 The amendments allow residents of Australia's External Territories (such as Norfolk, Cocos (Keeling) and Christmas Islands) to claim refunds under the tourist refund scheme on goods not taken as accompanied baggage. Australian External Territory residents must show proof that the goods have been exported to their External Territory within the required period after the goods were acquired to qualify for a refund of GST and/or WET. It is intended that Regulations will be enacted requiring the goods to be exported within 60 days.

2.9 Unless otherwise stated, it is intended that the current tourist refund scheme rules must be met for an Australian External Territory resident to qualify for a refund of GST or GST and subsequently WET. This includes the need for Australian External territory residents to present goods that are taken as 'accompanied baggage' to an officer of the Australian Customs and Border Protection Service on request at the tourist refund scheme facility.

2.10 The amendments seek to prevent goods being sold to Australian External Territory residents as GST-free exports where the recipient has also claimed a refund of the GST, or GST and subsequently WET under the tourist refund scheme. For goods to be sold as GST-free exports, the recipient must declare to the supplier that the goods were not subject to a refund claim for GST and/or WET under the tourist refund scheme.

2.11 Similarly, the amendments seek to ensure that a supply of wine is not free of WET where a claim for a refund of the tax paid is also made under the tourist refund scheme.

2.12 In the event that an Australian External Territory resident makes a tourist refund scheme claim on a GST-free supply, any wrongly paid refund is payable to the Australian Government. A general interest charge (GIC) is payable on the whole, or any part, of the recoverable amount that remains unpaid. The GIC is calculated from the later of the day the refund was made and the day the supply became GST-free.

Comparison of key features of new law and current law

New law Current law
Refund collection system - GST Act

Division 168 is expanded to also allow unregistered residents (who are not required to be registered) of Australian External Territories to claim refunds of GST on goods that are exported otherwise than as accompanied baggage to their External Territory under the tourist refund scheme. The goods must have been a taxable supply and exported in the manner specified in the Regulations to qualify.

An entity must satisfy one of the following to be classified as a resident of an Australian External Territory:

·
the entity resides in an External Territory;
·
the entity's domicile is in an External Territory; or
·
the entity has actually been in an External Territory, continuously or intermittently, during more than half of the last 12 months.

In addition, if a refund is paid under the new scheme for unaccompanied baggage, and the supply is or has become a GST-free supply, then the recipient is liable to repay that amount under new section 168-10. This amount is subject to a GIC.

Refund collection system - GST Act

Division 168 provides for the refund of GST borne on goods by tourists who make a claim at a tourist refund scheme facility prior to departure. The supply must have been a taxable supply and goods must be exported as accompanied baggage in the manner specified in the Regulations.

Recipients of GST-free exports declaration

In addition to the existing requirements under subsection 38-185(3), goods cannot be sold to Australian External Territory residents as a GST-free export unless a declaration is held that a refund claim has not been made under the tourist refund scheme for the GST borne.

Similarly, wine cannot be sold without WET unless a declaration is held that a claim has not been made for GST and therefore the WET borne by the Australian External Territory resident.

Recipients of GST-free exports

Subsection 38-185(3) sets out when a supplier of goods is treated as having exported the goods from Australia as a GST-free export. These include:

·
before export, the supplier supplies the goods to an entity that is not registered or required to be registered;
·
that entity exports the goods from Australia;
·
the goods have been entered for export under the Customs Act 1901 ;
·
the goods have not been altered in any way, except as necessary to prepare them for export; and
·
the supplier has sufficient documentary evidence to show that the goods were exported.

Section 7-5 of the WET Act states that wine tax is not payable if it is a GST-free supply.

Refund collection system - WET Act

Division 25 is expanded to allow unregistered residents (who are not required to be registered) of Australian External Territories to claim refunds of wine tax borne on wine that is not exported as accompanied baggage to their External Territory. To qualify, the Australian External Territory resident must also be able to claim a refund of GST under the tourist refund scheme, the goods must have borne wine tax and be exported in the manner specified in the Regulations.

In addition, if a refund is paid under the new scheme for unaccompanied baggage, and the supply is or has become a GST-free supply, then the recipient is liable to repay that amount under new section 25-10. This amount is subject to a GIC.

Refund collection system - WET Act

Division 25 provides for the refund of WET borne on wine to tourists who make a claim at a tourist refund scheme facility prior to departure. The supply must have borne wine tax and the wine must be exported as accompanied baggage in the manner specified in the Regulations.

Detailed explanation of new law

2.13 Under the GST Act, a supply to an entity that subsequently exports the goods for consumption outside Australia will generally be GST-free as an export.

2.14 For GST purposes, Australia's External Territories (such as Norfolk, Cocos (Keeling) and Christmas Islands) are considered to be outside Australia. As such, supplies of goods exported to Australian External Territories are generally GST-free. Similarly, sales of wine to Australian External Territories are generally not subject to WET.

2.15 Alternatively, Australian External Territory residents can claim a refund of GST on the taxable supply, or a refund of GST and subsequently WET on any wine tax borne via the tourist refund scheme for accompanied baggage.

2.16 The tourist refund scheme operates to entitle individuals who take goods outside Australia (including to an Australian External Territory) to a refund of the GST and WET that was payable on the supply of the goods. The scheme is administered for the Commissioner by the Australian Customs and Border Protection Service. Exported goods must satisfy the following to qualify:

·
the goods acquired must have been a taxable supply or have borne wine tax;
·
the goods purchased must total A$300 (GST inclusive) or more;
·
the goods are of a kind included in the GST Regulations or the WET Regulations; and
·
the individual leaves Australia and exports the goods from Australia as accompanied baggage, in the circumstances set out in the Regulations.

2.17 The amendments allow unregistered residents (who are not required to be registered) of Australian External Territories to claim refunds of GST, or GST and subsequently WET on goods that are exported to their External Territory under the tourist refund scheme. The amendments only apply to goods not exported as accompanied baggage. For accompanied baggage, claims can still be made under subsection 168-5(1). [Schedule 2, item 7, subsection 168-5(1A) of the GST Act, item 14, subsection 25-5(1A) of the WET Act]

2.18 For an Australian External Territory resident to qualify for a refund of GST, or GST and subsequently WET on unaccompanied baggage, they must satisfy the conditions outlined in the GST Regulations. If the goods are wine, the conditions in the WET Regulations must also be satisfied for an Australian External Territory resident to qualify for a refund of GST and subsequently WET. The intended conditions for lodging a tourist refund scheme claim and providing documentary evidence of export are outlined below for completeness. However, these conditions are not contained in the legislation but are intended to be included in the Regulations to be issued.

2.19 Section 168-10 ensures that amounts are recoverable where supplies are later found to be GST-free supplies and where claimants have also been paid a refund under subsection 168-5(1A). Similarly, section 25-10 ensures that amounts of WET are recoverable where the corresponding purchase of wine becomes a GST-free supply and the claimant has also been paid a refund under subsection 25-5(1A). In these circumstances, claimants will be liable to repay the amount claimed under the tourist refund scheme. This applies for GST and for GST and subsequently WET. A GIC is payable on the whole, or any part, of the recoverable amount that remains unpaid. The general interest charge is calculated from the later of the day the refund was made and the day the supply became GST-free. [Schedule 2, item 11, section 168-10 of the GST Act, item 18, section 25-10 of the WET Act]

Lodging Tourist Refund Scheme claim

2.20 The conditions for lodging a claim are intended to be contained in the Regulations. Australian External Territory residents must present themselves at a tourist refund facility within the required period after the goods were acquired, to claim and prove an entitlement to a refund of any tax payable. When making the tourist refund scheme claim, Australian External Territory residents must also show evidence of exportation, or evidence that they have put in place arrangements so that the goods will be exported from Australia to an Australian External Territory within the required period after the goods were acquired. It is intended that Regulations will be introduced that will require that the goods must be exported within 60 days after they were acquired.

2.21 The intention of extending the tourist refund scheme is to provide a direct mechanism for Australian External Territory residents to obtain refunds of GST and WET on goods that are unable to be exported as accompanied baggage to an Australian External Territory.

2.22 Unless otherwise stated, it is intended that the current tourist refund scheme rules must continue to be met for an Australian External Territory resident to qualify for a refund of GST or WET for accompanied baggage. This includes the need for Australian External territory residents to present goods that are taken as 'accompanied baggage' to an officer of the Australian Customs and Border Protection Service on request at the tourist refund scheme facility.

Providing documentary evidence of export

2.23 The conditions regarding documentary evidence are intended to be contained in the Regulations. It is intended that when Australian External Territory residents lodge a refund claim at a tourist refund facility, they must provide documentary evidence to the Australian Customs and Border Protection Service that:

·
the goods have been exported; or
·
evidence that they have put in place arrangements so that the goods will be exported from Australia to an Australian External Territory within 60 days after the day on which the goods were acquired.

2.24 It is intended that the documentary evidence include:

·
proof of Australian External Territory residence;
·
a tax invoice that includes GST or GST and consequently WET; and
·
proof that the goods have been exported, or arrangements have been put in place for the goods to be exported, within 60 days after the day on which the goods were acquired.

2.25 If documentary evidence of actual export within 60 days after the day on which the goods were acquired, is not provided at the time of making the tourist refund scheme claim, it is intended that such evidence must be provided to the Australian Customs and Border Protection Service within 90 days after the day on which the goods were acquired.

2.26 The GST and/or WET refund will be paid once all documentation has been received and processed by the Australian Customs and Border Protection Service on the Commissioner's behalf.

Example 2.1 Julian, a resident of Norfolk Island (who is not registered or required to be registered for GST), purchases a washing machine for $400 on 3 September 2010. The supply to Julian was a taxable supply. Julian makes arrangements for the washing machine to be separately exported on 22 October 2010. Julian arrives at the airport on 15 October 2010 to board his flight home. Prior to departure, Julian makes a claim at the tourist refund scheme facility for a refund of the GST paid on the washing machine. To make a claim Julian provides the officer of Australian Customs and Border Protection Service with:

·
proof of Norfolk Island residence;
·
a tax invoice showing the amount of GST paid;
·
a bill of lading showing arrangements have been put in place for the washing machine to be exported to Norfolk Island within 60 days after the day on which the goods were acquired; and
·
other necessary documentation specified in the GST Regulations.

As documentation of actual exportation was not provided at this time, the refund claim is put on hold. After returning home to Norfolk Island, Julian sends documentation to the Australian Customs and Border Protection Service that the washing machine was exported from Australia within 60 days of its purchase. The Australian Customs and Border Protection Service receive this documentation on 29 October 2010 and complete Julian's refund claim.

Declaration by Australian External Territory recipients of GST-free exports

2.27 Subsection 38-185(3) of the GST Act allows a supplier of goods to export goods from Australia as a GST-free export. The Bill clarifies that goods can only be sold as a GST-free export to an Australian External Territory resident if the recipient declares to the supplier that the goods were not the subject of a refund claim for GST and/or WET under the tourist refund scheme. [Schedule 2, item 1, paragraph 38-185(3 )( f)]

2.28 The declaration must be presented to the supplier at the time 'sufficient documentary evidence of exportation' is provided. The purpose of the declaration is to ensure that taxpayers do not obtain GST-free supplies from suppliers and also make claims under the tourist refund scheme.

2.29 This principle also seeks to ensure that a supply of wine is not free of WET where a claim for a refund of the tax paid is also made under the tourist refund scheme.

2.30 Schedule 6 to the Bill treats supplies to an associate made without consideration as GST-free if exported from Australia (see Chapter 6). Schedule 2 to the Bill replicates paragraph 38-185(3)(f) for associates, requiring an associate to make a declaration to the supplier that a claim has not been made under the tourist refund scheme. [Schedule 6, item 2, subsection 38-185(4), Schedule 2, item 3, paragraph 38-185(4 )( f)]

Example 2.2 Kathryn, a resident of Cocos (Keeling) Islands, purchases a television from an Australian retail outlet. The television cost $3,000 including GST. The supply to Kathryn was a taxable supply as the Australian retailer was not satisfied the GST-free provisions of subsection 38-185(3) were met. Namely, Kathryn did not provide sufficient documentary evidence to show that the goods were exported.Upon returning home, Kathryn fills out a declaration stating a tourist refund scheme claim was not made for a refund of the GST. Kathryn sends the completed declaration, along with sufficient documentary evidence to show the goods were exported, to the Australian retailer. After receiving the declaration and evidence of export, the Australian retailer provides a refund of GST to Kathryn and treats the supply as a GST-free supply.

Example 2.3 Jimmy, a resident of Cocos (Keeling) Islands, purchases a fridge from an Australian retail outlet. The fridge cost $1,500 including GST. The supply to Jimmy was a taxable supply as the Australian retailer was not satisfied the GST-free provisions of subsection 38-185(3) were met. Namely, Jimmy did not provide sufficient documentary evidence to show that the goods were exported. However, upon leaving Australia, Jimmy satisfies the amended rules of the tourist refund scheme and receives a refund of the GST borne.After returning home, Jimmy sends sufficient documentary evidence to the Australian retailer to show the goods were exported. Jimmy is not entitled to a refund of GST from the supplier in this instance, as a refund of the GST borne was supplied via the tourist refund scheme. In addition, Jimmy did not provide the Australian retailer with a completed declaration.

Application and transitional provisions

2.31 The amendments commence on 1 July 2010 and apply to goods purchased on or after 1 July 2010. [Schedule 2, subitem 23(1)]

2.32 The amendments for associates in the new paragraph 38-185(4)(f) apply in relation to goods acquired, and wine purchased, on or after the day the Bill receives Royal Assent if this occurs after 1 July 2010. This ensures the declaration requirement that applies to External Territory associates of suppliers making GST-free exports does not come into operation before the associated legislation in new paragraphs 38-185(4)(a) to (e) is enacted upon Royal Assent. [Schedule 2, subitem 23(2), Schedule 6, item 2, subsection 38-185(4)]


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