Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)General outline and financial impact
Indirect Tax Acts
Schedule 1 to this Bill makes a number of amendments to the GST Act, the LCT Act and the WET Act. Consequential amendments to other Acts, including the ITAA 1997, are contained in Schedule 6 to this Bill. Most are minor policy and technical amendments, and include amendments to:
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- make a minor technical amendment in relation to GST-free supplies;
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- ensure that payments made to local government bodies that are specifically covered by an appropriation are not subject to GST;
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- ensure the obligation to issue an adjustment note arises only if a tax invoice has been issued or requested in relation to the supply that is the subject of the adjustment;
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- ensure that a member exiting a GST group will become responsible for adjustments relating to transactions made to entities outside the group during the time the entity was a member of the GST group. Also, that the group's representative member will not be responsible for these adjustments;
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- adjust the provisions dealing with second-hand goods so that:
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- the input tax credit on second-hand goods that are divided and sold as separate items can be offset against the GST that would otherwise be payable on those supplies;
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- the input tax credit on second
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- hand goods acquired for $300 or less can be claimed for the tax period in which they are acquired;
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- livestock, other animals and plants are expressly excluded from the scope of the provisions; and
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- record keeping requirements are appropriately established for acquisitions from persons not registered for GST purposes.
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- ensure that telecommunications services that are used or enjoyed in Australia, are subject to GST regardless of whether the supplier is in Australia or offshore;
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- provide consistency with other provisions in the GST Act in relation to the transport component of the value of a taxable importation for goods that were exported from Australia for repair or renovation;
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- permit, but not require, a government entity to register for GST and allow registered government entities to group with other registered government entities;
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- clarify that the adjustment period when disposal, loss or destruction occurs in the same year as that in which the acquisition or importation is made is the period ending 30 June in that year; and
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- ensure that certain applications to own use of wine are not taxable.
Date of effect: 1 July 2000.
Proposal announced: Not announced.
Financial Impact: Negligible.
Compliance cost impact: Compliance costs for these measures are expected to be negligible.
Insurance
Schedules 1 and 2 to this Bill also make a number of amendments to the GST Act and the GST Transition Act in relation to the treatment of insurance, including amendments that:
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- ensure that State stamp duties on insurance premiums are not subject to GST;
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- allow prescribed statutory compensation schemes to be brought within the operation of Division 78;
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- allow certain government insurance schemes to be excluded from Division 78 through regulation;
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- amend the workers' compensation and CTP insurance provisions to reduce compliance costs that would otherwise arise; and
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- deny input tax credits on premiums paid for CTP insurance that ensure no GST is payable on any related settlements, for the first 3 years of the GST.
Date of effect: 1 July 2000.
Proposal announced: Not announced.
Financial Impact: Negligible.
Compliance cost impact: These amendments are expected to reduce compliance costs.
Indirect Tax Transition
Schedule 2 to this Bill makes a number of amendments to the GST Transition Act. These include amendments to:
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- ensure that long term leases entered into between 2 December 1998 and 1 July 2000 are not subject to GST;
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- ensure that the provisions relating to rights granted for life between 2 December 1998 and 1 July 2000 operate as intended;
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- apply a special credit for certain alcoholic beverages held at 1 July 2000 that are not covered by the WET; and
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- allow for a credit for certain petroleum products held at 1 July 2000.
Date of effect: The amendments will commence immediately after the commencement of the A New Tax System (Indirect Tax and Consequential Amendments) Act 1999, which is taken to commence immediately after the commencement of the GST Act.
Proposal announced: Not announced.
Financial Impact: Nil. The amendments give effect to the measures as originally intended.
Compliance cost impact: Negligible.
Commonwealth-State financial arrangements
Schedule 3 amends the CSFA Act to ensure that the calculation of GST revenue to be distributed to the States and Territories will include any general interest charge relating to GST and to ensure that any effect that the WET and LCT laws may have on GST revenue will not be included in the calculation.
Date of effect: The amendments will be taken to commence immediately after the commencement of the CSFA Act.
Proposal announced: Not previously announced.
Financial Impact: Nil.
Compliance cost impact: Nil.
ABNs
Schedule 4 to this Bill amends the ABN Act to ensure that overseas businesses that are required to register for GST purposes are able to obtain an ABN.
Date of effect: Royal Assent.
Proposal announced: Not announced.
Financial Impact: Nil.
Compliance cost impact: Negligible.
Amendments relating to diplomatic, consular and related privileges and immunities
Schedule 5 to this Bill makes a number of amendments to the CP & I Act, the DP & I Act, the IO(P & I) Act, and the OM(P & I) Act. These include amendments to:
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- ensure that Australia continues to meet its obligations in respect of taxation concessions for goods imported by diplomatic missions, consular posts, overseas missions, international organisations and their officials;
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- provide for an indirect tax concession scheme for these bodies to allow Australia to provide taxation concessions for local purchases on a reciprocal basis; and
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- make it clear that international organisations in Australia will not be able to register for GST purposes.
Date of effect: 1 July 2000.
Proposal announced: Not announced.
Financial Impact: Minimal. There will be a net financial gain to Australia.
Compliance cost impact: Negligible.
Petroleum Resource Rent Tax Assessment Act 1987
Schedule 6 to this Bill will exclude GST from the tax base for calculating PRRT.
Date of effect: 1 July 2000.
Proposal announced: Not announced.
Financial Impact: Nil.
The amendment prevents a distortion in collections that would otherwise occur.
Compliance cost impact: Negligible. The GST component of receipts and expenditure are expected to be recorded for accounting and income tax purposes.