Senate

A New Tax System (Indirect Tax and Consequential Amendments) Bill (No. 2) 1999

Revised Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)
THIS MEMORANDUM TAKES ACCOUNT OF AMENDMENTS MADE BY THE HOUSE OR REPRESENTATIVES TO THIS BILL AS INTRODUCED

General outline and financial impact

Amendment of the A New Tax System (Goods and Services) Act 1999

Schedule 1 to this Bill makes a number of amendments to the GST Act. Most are minor policy and technical amendments, and include amendments to:

·
ensure that payment of compensation and damages are subject to GST if the payment relates to an initial supply that is taxable;
·
make it clear that contributions to mutual organisations by members are taxable where the organisation is registered or required to be registered;
·
ensure that payments made from a government related entity to another government related entity are not subject to GST if the payment is specifically covered by an appropriation under an Australian law;
·
clarify that the supply of a right to receive a supply that would be GST-free or input taxed will be GST-free or input taxed.
·
clarify that the supply of a right to a non-resident that will be exercised in Australia is not GST-free;
·
ensure that adjustments are calculated correctly when a change in creditable purpose or a bad debt occurs before an adjustment event;
·
ensure that an adjustment for a bad debt will be made 12 months after a debt becomes overdue for payment rather than 12 months after it becomes owing;
·
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;
·
ensure that supplies of HIV detection tests are GST-free;
·
ensure that supplies of all authorised pre-school courses are GST-free;
·
provide that the delivery of foreign postal articles in Australia on behalf of foreign postal administrations will be GST-free;
·
ensure that goods returning to Australia are only non-taxable in appropriate circumstances;
·
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 and that the group's representative member will not be responsible for these adjustments;
·
ensure that an entity that ceases to be a participant in a GST joint venture will become responsible for adjustments relating to supplies or acquisitions that the joint venture operator made on its behalf during the time the entity was a participant of the joint venture;
·
adjust the provisions dealing with second-hand goods so that:

-
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;
-
the input tax credit on second-hand goods acquired for $300 or less can be claimed for the tax period in which they are acquired;
-
livestock, other animals and plants are expressly excluded from the scope of the provisions; and
-
record keeping requirements are appropriately established for acquisitions from persons not registered for GST purposes;

·
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;
·
provide that GST is payable on a voucher with a face value at the time it is redeemed for goods or services rather than at the time the voucher is purchased;
·
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;
·
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;
·
ensure that an adjustment for a bad debt is calculated correctly when the debt is in respect of a mixed-purpose supply or acquisition;
·
ensure that an adjustment is made when taxable goods are taken from stock and applied to a private or domestic purpose;
·
allow a newly registered entity to obtain a credit for GST included in the purchase price of stock held for sale or manufacture at the date they become registered;
·
permit, but not require, a government entity to register for GST and allow registered government entities to group with other registered government entities;
·
insert interpretative rules that will give certain terms used in Commonwealth Acts the same meaning as those defined in the GST Act; and
·
make it clear that unincorporated bodies are carrying on the enterprise and not the members.

Date of effect : 1 July 2000.

Proposal announced : Not announced.

Financial impact : Negligible.

Compliance cost impact : Negligible.

Non-profit sub-entities

Amendments to the GST Act, ABN Act and TAA 1953 will allow certain non-profit entities to treat separately identifiable units of their organisations as though they are separate entities for GST purposes.

Date of effect : 1 July 2000.

Proposal announced : Treasurer's Press Release No. 73 of 29 October 1999.

Financial impact : Negligible.

Compliance cost impact : 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 general insurance, including amendments that:

·
remove the insured's GST liability on settlements;
·
remove the insurer's input tax credit entitlement on settlements;
·
provide for insurers to have an adjustment on settlements. That adjustment being equivalent to the difference between what would have been their input tax credits and what would have been the insured's GST liability;
·
remove the requirement that insureds notify the Commissioner if they wish to claim input tax credits on the acquisition of insurance policies in the first 3 years of GST;
·
ensure that State stamp duties on insurance premiums are not subject to GST;
·
allow prescribed statutory compensation schemes to be brought within the operation of Division 78;
·
allow certain government insurance schemes to be excluded from Division 78 through regulation; and
·
deny input tax credits on premiums paid for compulsory third party insurance 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.

Amendment of the A New Tax System (Luxury Car Tax) Act 1999

Schedule 1 also makes minor policy and technical amendments to the LCT Act including a change to the definition of 'car'.

Date of effect : 1 July 2000.

Proposal announced : Not announced.

Financial impact : Nil. The amendments give effect to the measures as originally intended.

Compliance cost impact : Negligible.

Amendment of the A New Tax System (Wine Equalisation Tax) Act 1999

Schedule 1 amends the WET Act to allow refunds of WET to persons who are taking wine with them out of Australia as accompanied baggage and to ensure that certain applications to own use of wine are not taxable.

Date of effect : 1 July 2000.

Proposal announced : Not announced.

Financial impact : Nil. The amendments give effect to the measures as originally intended.

Compliance cost impact : Negligible.

Indirect tax transition

Schedule 2 amends the GST Transition Act to:

·
provide that the grant of a right under a voucher with a stated monetary value will not be taken to be supplied after 1 July 2000;
·
ensure that the time limit for claiming the special credit for sales tax on goods held at 1 July 2000 is covered by the Commissioner's announced extension of time to lodge certain GST returns;
·
clarify the situation for adjustments to the special credit claim resulting from later events which affect the amount of the claim;
·
ensure that long term leases entered into between 2 December 1998 and 1 July 2000 are not subject to GST;
·
ensure that the provisions relating to rights granted for life between 2 December 1998 and 1 July 2000 operate as intended;
·
apply a special credit for certain alcoholic beverages held at 1 July 2000 that are not covered by the WET; and
·
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 Schedule 6 to the A New Tax System (Indirect Tax and Consequential Amendments) Act 1999 , which is taken to commence immediately after the commencement of the GST Transition 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.

Income tax deductions for GST-related expenditure

Schedule 5 amends the ITAA 1997 to allow small and medium sized businesses an immediate income tax deduction for the cost of acquiring or upgrading plant or software to assist in:

·
meeting existing or future obligations under the GST law; or
·
exercising entitlements under the GST law.

To qualify for the immediate deduction the business must have an annual turnover of not more than $10 million and acquire or upgrade the plant or software during the period 1 July 1999 to 30 June 2000. The business must also be registered for GST purposes immediately before 1 July 2000.

Date of effect : The amendments will apply to plant or software that a business acquires or upgrades during the period 1 July 1999 to 30 June 2000.

Proposal announced : Treasurer's Press Release No. 51 of 19 August 1999.

Financial impact : The cost of the revenue of this measure has been estimated as $175 million for 2000-2001.

Compliance cost impact : Negligible.

Diesel Fuel Rebate Scheme

Schedule 6 amends the Customs Act, DFRS Act and Excise Act to change the reference from marine use to marine transport and set a diesel fuel rebate rate for marine and rail transport.

Date of effect : The amendments will commence immediately after the commencement of the DFRS Act , which is taken to commence immediately after the commencement of the GST Act.

Proposal announced : The expansion of the Diesel Fuel Rebate Scheme was announced by the Government on 28 May 1999.

Financial impact : The continuation of the current averaging provisions will provide savings of $60 million for 2000-2001.

Compliance cost impact : Negligible.

Amendments relating to international obligations

Schedule 7 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:

·
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;
·
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
·
make it clear that international organisations in Australia will not be able to register for GST purposes.

Schedule 7 also makes amendments to the GST Act, WET Act, LCT Act and TAA 1953 to ensure that following the introduction of the GST, WET and LCT, Australia meets its obligations in relation to visiting forces and other agreements.

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.

Income tax consequences of GST

Schedule 8 amends the ITAA 1997 to:

·
apply transitional rules to exclude GST liabilities that relate to amounts derived as income before 1 July 2000 and to exclude an amount equal to input tax credits that relate to deductions incurred before 1 July 2000; and
·
include amounts equal to special credits conferred by the GST Transition Act in assessable income.

Date of effect : Immediately after commencement of Schedule 3 to the A New Tax System (Indirect Tax and Consequential Amendments) Act 1999 .

Proposal announced : Not announced.

Financial impact : Nil. The amendments reflect the intended benchmark for the income tax treatment of the relevant amounts.

Compliance cost impact : Minimal, as input tax credits will be ascertainable from documents provided by suppliers.

Amendment of the Petroleum Resource Rent Tax Assessment Act 1987

Schedule 8 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.

Reliance on the Commissioner's interpretation of the law

Schedule 8 also amends the TAA 1953 to extend the scope of rulings issued by the Commissioner on which taxpayers may rely.

Date of effect : 1 July 2000.

Proposal announced : Not announced.

Financial impact : Nil.

Compliance cost impact : Nil.

Wool tax amendment

Schedule 8 amends the WTAA 1964 to exclude GST from the tax base for calculating wool tax.

Date of effect : 1 July 2000.

Proposal announced : Not announced.

Financial impact : Nil. The amendment prevents a distortion that would otherwise occur.

Compliance cost impact : Negligible. Suppliers will be aware of the GST component of sale prices as a consequence of meeting their GST obligations.


View full documentView full documentBack to top