House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)

Chapter 4 - Miscellaneous

Overview

4.1 The following Chapter provides an explanation of the miscellaneous provisions of the luxury car tax and identifies some provisions of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) which will apply to the luxury car tax.

Miscellaneous provisions

4.2 Division21 of the A New Tax System (Luxury Car Tax) Bill 1999 (LCT Bill) contains administrative provisions unique to the functioning of the LCT Bill. Most of the provisions that support the collection and administration of luxury car tax, such as penalty provisions and information sharing, will be contained in new Part VI of the Taxation Administration Act 1953.

Commonwealth and Commonwealth entities not liable for luxury car tax

4.3 Liability to luxury car tax cannot extend to the Commonwealth or to a defined category of a Commonwealth entity. To ensure that Commonwealth entities are also effectively covered by luxury car tax, the entities will be notionally liable to luxury car tax and notionally have luxury car tax adjustments. [Section21-1] . If you supply a luxury car to a Commonwealth entity you are required to charge luxury car tax on the value of the car above the luxury car tax threshold.

Cancellation of exemptions from luxury car tax

4.4 This provision expressly overrides an existing Commonwealth law that would otherwise provide an exemption from liability to luxury car tax. [Section21-5]

Application of the Criminal Code

4.5 The Criminal Code will apply to all offences under the LCTBill. [Section21-10]

Regulation power

4.6 The Governor-General will be authorised to make regulations prescribing matters that are either required or permitted by the LCT Bill to be prescribed, or that are necessary or convenient to be prescribed for carrying out or giving effect to the LCT Bill. [Section21-15]

Provisions of the GST Act

4.7 Rather than separately remitting the amount of luxury car tax on taxable supplies of luxury cars that is payable by you, you attribute the luxury car tax to a tax period and incorporate it in your net amount for that tax period under Division17 of the GST Act. See paragraphs 3.4 to 3.13. Certain provisions of the GST Act apply to you. These include provisions dealing with:

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registration;

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net amount;

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tax periods;

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tax invoices;

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goods and services tax (GST) returns; and

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general anti-avoidance.

4.8 A general guide to those provisions is provided below. However, you should examine the GST Act to determine how they apply to your particular circumstances.

Registration

4.9 You are not required to be separately registered for luxury car tax. The rules that apply to registration under the GST Act will apply. Some of the key rules are:

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If you are carrying on an enterprise, you are required to be registered for GST if your annual turnover or your projected annual turnover is $50,000 or above.

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If your current annual turnover is less than $50,000 you are not required to be registered. However, you will be required to register if the Commissioner of Taxation (Commissioner) is satisfied that your projected annual turnover is above $50,000.

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Even if you are not required to be registered for GST you can choose to register if you are carrying on an enterprise. You may also choose to register if you are not carrying on an enterprise but intend to do so in the future.

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Generally, you register by applying to the Commissioner for registration in the form approved by the Commissioner. If you are not already registered, you must apply for registration within 21 days of becoming required to be registered.

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Generally, the date of effect of your registration will be the date you put in your application. However, there are provisions that enable the Commissioner to specify another date.

Net amount

4.10 The net amount is the sum of GST attributable to the tax period, less the input tax credits that are attributable to that period. The amount of luxury car tax payable by you is included in your net amount. Some of the key rules are:

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If your net amount is greater than zero, you must pay that amount to the Commissioner.

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If your net amount is less than zero, your net amount (expressed as a positive amount) is the amount the Commissioner must pay to you for that tax period.

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If your net amount is zero, you are not liable to pay anything to the Commissioner nor are you entitled to a refund from the Commissioner.

Tax periods

4.11 Tax periods are the periods for which you work out your net amount. You are required to lodge a GST return for each tax period that applies to you. Some of the key rules are:

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Generally, your tax periods will be quarterly and end on 31 March, 30 June, 30 September and 31 December. However, you may elect to account on a monthly basis. These will be the calendar months of the year.

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You must use calendar month tax periods if:

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your annual turnover is at or above the tax period turnover threshold (currently $20 million);

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you will only be carrying on your enterprise in Australia for less than three months;

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the Commissioner is satisfied that you have a history of not complying with your tax obligations; or

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you have a substituted accounting period for income tax.

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To fit in with the end of one of your commercial accounting periods, you can end your tax period seven days earlier or later than when the relevant tax period would otherwise end. Your next tax period starts on the day after the day on which your tax period now ends.

Tax invoices

4.12 A tax invoice substantiates a creditable acquisition and is generally issued by suppliers. The GST Act requires that tax invoices must:

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show the Australian Business Number of the entity issuing it;

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show the price for the supply;

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contain such information as the regulations require; and

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be in the form approved by the Commissioner.

Returns

4.13 If you are registered or required to be registered, you must lodge a GST return for each tax period that applies to you. Some of the key rules are:

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You must give your return to the Commissioner on or before the 21st day of the month following the end of the tax period to which the return relates.

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Your GST return must be in the approved form, state your net amount (including luxury car tax on taxable supplies of luxury cars) and include any other information required by the approved form. The return must be signed.

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You must lodge a return even if your net amount is zero or you made no taxable supplies that are attributable to that tax period.

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You may lodge your GST return electronically.

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You are required to lodge electronically if your annual turnover is at or above the electronic lodgement turnover threshold (currently $20million).

General anti-avoidance provisions

4.14 Division165 of the GST Act, the general anti-avoidance provisions, applies to amounts of luxury car tax payable. This is achieved by incorporating luxury car tax payable on taxable supplies of luxury cars in the net amount under Division17 of the GST Act. However, luxury car tax on importations of luxury cars is not incorporated into the net amount but is generally paid with customs duty. Section 13-30 expressly states that Division165 of the GST Act applies to amounts payable upon an importation of a luxury car as if it were payable under the GST Act.

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Division165 of the GST Act will operate to deter avoidance schemes that are designed to obtain GST benefits by taking advantage of GST law in circumstances other than that intended by GST tax law.

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The general anti-avoidance rules will only apply to negate any GST benefit under a scheme if it can be established that the dominant purpose for entering into the scheme or principal effect of the scheme is to give an entity any such benefit.