House of Representatives

Indirect Tax Laws Amendment (Assessment) Bill 2012

Explanatory Memorandum

(Circulated by the authority of the Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP)

Chapter 3 Net amounts

Outline of chapter

3.1 Schedule 3 to this Bill amends the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) to clarify the definition of 'net amount'.

Context of amendments

3.2 Schedule 3 implements Recommendation 42 of the Board of Taxation's Review of the Legal Framework for the Administration of the Goods and Services Tax (Board's report). This Schedule also creates a single definition of 'net amount' to apply differently in differing circumstances.

Amounts of luxury car tax and wine equalisation tax

3.3 Recommendation 42 of the Board's report provided that the law should be amended to clarify that the luxury car tax (LCT) and the wine equalisation tax (WET) are part of the net amount that is calculated under the GST Act.

3.4 Sections 21-5 and 21-15 of the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act) provide that amounts of WET payable or refundable are added to or subtracted from the net amount under the GST Act. Sections 13-5 and 13-10 of the A New Tax System (Luxury Car Tax) Act 1999 (LCT Act) provide that amounts of LCT payable or LCT adjustments are added to or subtracted from the net amount under the GST Act. These are not included in the definition of 'net amount' in the GST Act.

3.5 On the other hand, section 17-5 of the GST Act defines the net amount to be the taxpayer's total GST payable less any input tax credit entitlements, subject to any adjustments. Amounts of WET and LCT are not specifically identified in the definition.

3.6 However, taxpayers and the Commissioner of Taxation (Commissioner) have consistently treated these amounts as part of the net amount in accordance with the LCT and the WET Acts.

Definitions of net amount

3.7 Currently, 'net amount' is defined in section 195-1 of the GST Act by reference to sections 17-5, 126-5 and 162-105. The definition in section 17-5 applies to most of the Act.

3.8 Divisions 123 (Simplified accounting methods for retailers and small enterprise entities), 126 (Gambling) and 162 (Payment of GST by instalments) create their own definitions of net amount to apply for the purposes of those Divisions.

Summary of new law

3.9 Schedule 3 clarifies that the term 'net amount' in the GST Act also accounts for amounts of LCT and WET payable or refundable.

3.10 These amendments also create a single 'net amount' definition that applies differently to reflect differing circumstances.

Comparison of key features of new law and current law

New law Current law
The GST Act explicitly states that the 'net amount' is increased or decreased by amounts of WET and LCT payable or refundable. The WET and LCT Acts provide that amounts of WET and LCT payable or refundable are included in the net amount. These amounts are not specifically identified in the definition of 'net amount' in the GST Act.
The term 'net amount' has a single definition that applies differently to reflect differing circumstances. The term 'net amount' has multiple definitions applicable to different situations.

Detailed explanation of new law

3.11 This Schedule clarifies the definition of 'net amount' in the GST Act to account for amounts of LCT and WET payable or refundable and clarifies that the net amount in the GST Act may be increased or decreased by any amounts of WET or LCT payable and refundable. [Schedule 3, items 1, 4 and 5, subsections 17-5(2 ), 123-15(1A) and 126-5(2) of the GST Act]

3.12 The amendments will not have any practical impact on taxpayers, as both taxpayers and the Commissioner have treated these amounts as part of the net amount in accordance with the LCT and the WET Acts.

3.13 This Schedule also amends the definition of 'net amount' in section 195-1 to stipulate the application of the definitions in sections 126-5, 123-15 and 162-105. [Schedule 3, item 7, section 195-1 of the GST Act]

3.14 Consequential references are inserted into subsection 123-15(1) [Schedule 3, items 2 and 6, subsection 123-15(1) and paragraph 162-105(a) of the GST Act]

3.15 These amendments do not have any practical impact on taxpayers, as they merely restructure the definitions to avoid having multiple definitions.

3.16 A further minor amendment is made to replace 'method' with 'simplified accounting method' in subsection 123-15(1), to clarify that the method referred to is the simplified accounting method. [Schedule 3, item 3, subsection 123-15(1) of the GST Act]

Application and transitional provisions

3.17 These amendments apply to tax periods commencing on or after 1 July 2012. No transitional provisions are required as the amendments merely reflect the existing law.

Consequential amendments

3.18 Schedule 3 makes consequential amendments to the LCT Act and the WET Act to clarify that net amounts in the GST Act are:

·
increased by amounts of LCT [Schedule 3, items 8 and 9, section 13-5 of the LCT Act] ;
·
increased by amounts of wine tax [Schedule 3, items 10 and 11, section 21-5 of the WET Act] ; and
·
reduced by amounts of wine tax credits [Schedule 3, items 12 and 13, section 21-15 of the WET Act] .

STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Schedule 3 - Net amounts

3.19 This Schedule is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 .

Overview

3.20 This Schedule amends the GST Act, the LCT Act and the WET Act to clarify that the LCT and the WET are part of the net amount that is calculated under the GST Act.

Human rights implications

3.21 This Schedule does not engage any of the applicable rights or freedoms.

Conclusion

3.22 This Schedule is compatible with human rights as it does not raise any human rights issues.

Assistant Treasurer, Senator the Hon Mark Arbib


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