Revised Supplementary Explanatory Memorandum
Chapter 3 - Providing GST revenue to the States and Territories
Overview
3.1 The proposed amendments to Part 1 of the Bill provide that the total amount of GST revenue grants will include local government assistance grants withheld from local government authorities which do not comply with the GST system. It also removes the reference to diesel fuel credits in the definition of GST revenues to be distributed to the States and Territories.
Summary of the amendment
Purpose of the amendment
3.2 The Intergovernmental Agreement requires the States and the Northern Territory to withhold local government financial assistance grants from local government authorities which do not comply with the GST system. Amounts withheld from local government represent GST payments or GST equivalent payments not directed to the Australian Taxation Office. Amounts withheld will therefore be added to the GST revenue pool and redistributed to the States and Territories according to the principle of horizontal fiscal equalisation.
3.3 Clause 5 of the Bill also needs to be amended to remove the reference to diesel fuel credits as these will not affect the definition of GST revenues.
Date of effect
3.4 Clause 2 of the Bill provides that this Bill, once enacted, will commence when it has received Royal Assent or after the A New Tax System (Goods and Services Tax Act) 1999 ; the GST imposition Acts; and the A New Tax System (Goods and Services Tax Act Administration) Act 1999 have commenced, whichever is later. The Intergovernmental Agreement will commence between the Commonwealth, States and the Territories on 1 July 1999 unless otherwise agreed by the Parties.
Background to the amendment
3.5 The Intergovernmental Agreement records the Parties' intention of having local government and their statutory corporations and authorities operating as if they were subject to the GST. The Intergovernmental Agreement also stipulates that a system will be implemented to allow States and the Northern Territory to withhold local government financial assistance grants from local government authorities which do not comply with the GST. As the amounts withheld represent amounts of GST that should have been paid, these will be added to the pool of GST revenues.
3.6 In addition, the original tax reform plan proposed to administer the diesel fuel credits scheme through the GST. However, these credits will now be administered through an outlays programme and will not be netted off the GST revenues. The definition of GST revenues provided to the States and Territories no longer needs to refer to diesel fuel credits.
Explanation of the amendment
3.7 Sub-clause 5(3)(ca) provides that the amount, determined in a manner agreed by the Commonwealth and the States and Territories, that represents amounts of GST that should have, but has not, been paid by local government bodies be added to the pool of GST revenues to be distributed to the States and Territories.
3.8 The amendment removes sub-clause 5(3)(d) as diesel fuel credits no longer needs to be taken into account when determining the GST revenues to be distributed to the States and Territories.