Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)Chapter 3 - Taxable value of goods
Overview
3.1 Item 2 of Schedule 1 to the Sales Tax Assessment Amendment Bill 1997 will amend the Sales Tax Assessment Act 1992 (the Act) to ensure that any refund, rebate or similar payment made by a State or Territory to a sales tax payer in relation to alcoholic beverages does not reduce the taxable value of the goods.
Summary of the amendments
3.2 Sales tax is imposed on the taxable value of goods. The amendments to the Act will ensure that any refund, rebate or similar payment made by a State or Territory to a sales tax payer in relation to alcoholic beverages does not reduce the taxable value of the goods.
3.3 The amendments will apply from 6 August 1997.
Background to the legislation
3.4 The increase in the rate of sales tax on alcoholic beverages is to protect States and Territories from potential lost revenue because of liquor franchise fees possibly being invalid under section 90 of the Constitution. In order to ensure the revenue collected from the increase in sales tax on alcohol covers the forecast revenue from liquor franchise fees, the increase in the sales tax rate is set at 15 percentage points. However, in some States and Territories, the liquor franchise fee on certain types of alcohol was less than 15%. In some cases, the States and Territories intend to implement arrangements to rebate the difference between the new sales tax rate and the previous rate of franchise fee.
3.5 The rebate from the State or Territory may cause uncertainty as to the correct taxable value of the goods. Section 34 of the Act deals with how to work out the taxable value of a taxable dealing.
Explanation of the amendment
3.6 Section 34 is to be amended so that in working out the taxable value of the alcoholic beverages (as set out in section 15A) to which the 15 percentage point increase in the rate of sales tax applies, any rebate, refund or other payment or credit made by a State or Territory in respect of the alcoholic beverages is to be disregarded. [Item 2 of Schedule 1 - new subsection 34(4)]
Example
Assume a wholesaler sells low alcohol beer for $100. The beer was previously exempt from liquor franchise fees. The State in which the wholesaler resides decides to pay a rebate of $15. The invoice should read as follows:
Taxable value (i.e., price (excluding tax)) $100 Sales Tax (at 37%) 37 ---- Sales tax inclusive price $137 Less: State rebate 15 ---- Amount payable $122 ====
The rebate from the State is to be disregarded in determining the taxable value of the beer. Therefore, despite the rebate, the taxable value of the beer does not change and the sales tax payable is still $37.