Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)Chapter 5 - Quarterly remittance
Overview
5.1 Item 4 of Schedule 1 to the Sales Tax Assessment Amendment Bill 1997 will amend the Sales Tax Assessment Act 1992 (the Act) to ensure that the increase in the rate of sales tax on alcoholic beverages does not affect the current requirements for quarterly remittance.
Summary of the amendments
5.2 The current sales tax law provides for quarterly, rather than monthly, remittance of sales tax where the amount of sales tax is below a certain threshold. The amendments to the Act will ensure that the increase in the rate of sales tax on alcoholic beverages does not force taxpayers over the quarterly remittance threshold.
5.3 The amendments will apply from 6 August 1997.
Background to the legislation
5.4 A sales tax payer is required to remit on a quarterly or monthly basis. Section 62 of the Act provides that a payer may remit on a quarterly basis if their 'total sales tax that became payable' for the previous financial year does not exceed a specified threshold ($57,570 for the 1996/97 financial year). This concession reduces compliance costs for taxpayers and results in reduced administration costs for the Australian Tax Office.
5.5 A consequence of the increase in the rate of sales tax on alcoholic beverages is that some sales tax payers who are currently paying sales tax on a quarterly basis will be required to pay sales tax on a monthly basis because their 'total sales tax that became payable' may exceed the threshold in section 62.
Explanation of the amendment
5.6 Section 62 of the Act is to be amended to ensure that the additional 15% sales tax on alcoholic beverages is not included in the 'total sales tax that became payable' for determining whether a taxpayer exceeds the quarterly remittance threshold. [Item 4 of Schedule 1 - new subsection 62(6)]
Example
Assume that a wine producer has wine sales of $200,000 in the 1997-98 year and has no other taxable dealings. Currently the potential sales tax on that wine would be $52,000 (i.e., $200,000 x 26%). Also assume that the quarterly remittance threshold for the 1997-98 year is $58,000 (Note: This is not the actual threshold, the correct figure will not be known until 1998). As the wine producer's sales tax is less than the quarterly remittance threshold (i.e., $58,000) the wine producer would remit sales tax in the 1998-99 year on a quarterly rather than a monthly basis.
As a result of the increase of 15 percentage points in the rates of sales tax on alcoholic beverages, the potential tax on the wine would be $82,000 (i.e., $200,000 x 41%) placing the wine producer over the quarterly remittance threshold. This would result in the wine producer having to remit on a monthly basis for the 1998-99 year. However, as the additional 15% on alcoholic beverages is not to be included in the total sales tax that became payable for the purposes of determining whether the threshold is exceeded, the tax payable for purposes of the threshold will be $52,000 which is less than the threshold. This ensures that the wine producer continues to remit on a quarterly basis.