Senate

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Ralph Willis, MP)

General outline and financial impact

Passenger motor vehicles

Increases the sales tax payable on passenger motor vehicles to the general rate (currently 21 per cent).

Date of effect: Applies to dealings with goods after 7.30 pm eastern standard time on 9 May 1995.

Proposal announced: 1 995-96 Budget, 9 May 1995

Financial impact: Gain to revenue:

Compliance cost impact: The proposed measures should not impose any new compliance costs on the majority of taxpayers except for a minor one-off cost associated with adjustments of sales tax calculations.

Safes, musical instruments and ornaments

Modifies the sales tax law to make it clear that freestanding safes, musical instruments and ornaments are not entitled to the concessional treatment afforded to furniture.

Date of effect: Applies to dealings with goods after 7.30 p.m. eastern standard time on 9 May 1995.

Proposal announced: 1995-96 Budget, 9 May 1995

Financial impact: This measure will prevent the potential for revenue leakage, rather than directly increase revenue.

Compliance cost impact: This measure will provide greater certainty in the law, thus reducing the need for professional advice and rulings. In general, the goods affected by this measure have long been accepted as being subject to sales tax at the general rate.

Model aircraft

Modifies the sales tax law to ensure that sales tax is paid on model aircraft at the general rate of 21%. A recent court decision has overturned the long standing treatment of model aircraft.

Date of effect: Applies to dealings with goods after 7.30 p.m. eastern standard time on 9 May 1995.

Proposal announced: 1995-96 Budget, 9 May 1995

Financial impact: Not quantifiable.

Compliance cost impact: In general, the increase in compliance costs will be small. Persons manufacturing, or trading in, model aircraft will now have to pay sales tax, and will incur some costs in fulfilling their obligations in that regard. Most taxpayers affected by this measure will be familiar with the requirements to fulfil their sales tax obligations since, prior to a recent court decision, model aircraft had long been accepted as subject to sales tax.

Scaffolding, racking and shelving and wall and floor safes

Modifies the sales tax law to ensure that sales tax is paid on scaffolding components, wall and floor safes and racking and shelving systems. Recent court decisions have overturned or put in doubt the long standing treatment of these items.

Date of effect: Applies to dealings with goods after 7.30 p.m. eastern standard time on 9 May 1995.

Proposal announced: 1995-96 Budget, 9 May 1995

Financial impact: This measure will prevent the potential for revenue leakage, rather than directly increase revenue.

Compliance cost impact: These measures will mean that some persons will be required to pay sales tax where previously they were not required to do so, and will incur some costs in fulfilling their obligations in that regard. The costs will be the same as for other taxpayers whose goods are subject to sales tax. Most taxpayers affected will be familiar with the requirements to fulfil their sales tax obligations since, prior to recent court decisions, scaffolding components, wall and floor safes and shelving systems had generally been accepted as being subject to sales tax.

Building materials

Modifies the sales tax law to remove exemption from a range of building materials, which will become taxable at the rate of 12%. The broad categories of goods covered are builders' hardware; wall and floor tiles; plaster and plaster mixtures; taps, nozzles, tap handles and shower heads; bonding, setting and sealing agents; wooden floor coverings; paints, putties, fillers, thinners, pigments and driers; wallpaper; prefabricated household cupboards, cabinets and storage units and office partitions and workstation panelling.

Date of effect: Applies to dealings with goods on or after 1 July 1995.

Proposal announced: 1995-96 Budget, 9 May 1995

Financial impact: Gain to revenue:

Compliance cost impact: The removal of the exemption will mean that some persons will be required to pay sales tax where previously they were not required to do so, and will incur some costs in fulfilling their obligations in that regard; however, they will not incur any particular costs in excess of those borne by other taxpayers who deal with goods that are subject to sales tax.

Sales tax - motor vehicles for eligible disabled persons

Extends the operation of the sales tax exemption for motor vehicles for certain disabled persons for transport to and from work, to persons who have lost the use of any of their limbs. The exemption currently only applies to persons who have lost the use of one or both legs.

Date of effect: 1 July 1995.

Proposal announced: Amendments to the Sales Tax (Exemptions and Classifications) Modification (Excise), (General) and (Customs) Bills 1995 moved in the House of Representatives on 7 June 1995.

Financial impact: Negligible cost to the revenue.

Compliance cost impact: Persons applying for this exemption may incur costs in obtaining the necessary certificate from the Secretary of the Department of Human Services and Health. For motor vehicle dealers, compliance costs will be no greater than for any other sale where the purchaser claims exemption .

Recycled paper

Modifies the sales tax law to remove the sales tax exemption for certain 100% recycled paper products.

Date of effect: Applies to dealings with goods on or after 1 November 1995.

Proposal announced: 1995-96 Budget, 9 May 1995.

Financial impact: Gain to revenue:

Compliance cost impact: The removal of the exemption will mean that some persons will be required to pay sales tax where previously they were not required to do so, and will incur some costs in fulfilling their obligations in that regard; however, they will not incur any particular costs in excess of those borne by other taxpayers who deal with goods that are subject to sales tax.