Revised Supplementary Explanatory Memorandum
Chapter 5 - Other Payments
Overview
5.1 The proposed additions to Part 3 of the Bill will provide the States and Territories with an entitlement to RRPs in 2000-01 which will be equal to the amount of business franchise fee safety net revenues (less administrative costs) collected after 30 June 2000 with respect to transactions taking place in 1999-2000. The proposed amendments also reflect the recent transfer of responsibility for excise collections from the Australian Customs Service to the Australian Taxation Office.
Summary of the legislation
5.2 To provide a State or Territory with an entitlement to an amount of RRPs in 2000-01.
5.3 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. States and Territories will be entitled to RRPs from 1 July 2000 following the repeal of the existing States Grants (General Purposes) Act 1994 .
Background to the legislation
5.4 On 5 August 1997 the High Court ruling on tobacco franchise fees in New South Wales ( Ha and Lim v. New South Wales and Walter Hammond & Associates Pty Ltd v. New South Wales ) cast into doubt the constitutional validity of all State business franchise fees. At the unanimous request of the States, the Commonwealth announced 'safety net' arrangements to protect State finances. These arrangements provided for an increase in the rate of Commonwealth customs and excise duty on tobacco and petroleum products and an increase in the rate of wholesale sales tax on alcoholic beverages. All revenue collected by the Commonwealth under these arrangements is returned to the States and Territories (less administrative costs) as RRPs.
5.5 Due to the delay between the time at which a business incurs a liability to pay an amount of safety net surcharge and the time when it is received by the Commonwealth, an amount of surcharge liabilities will be paid to the Commonwealth after 30 June 2000 and will need to be provided to the States and Territories as RRPs in 2000-01.
Explanation of the legislation
5.6 Clause 14A specifies entitlement of the States and Territories to RRPs in 2000-01. The total amount of RRPs is subject to determination by the Commissioner of Taxation and the Chief Executive Officer of Customs.
5.7 A technical amendment is also made to clause 14(2) of the Bill to clarify the base amount of competition payments to be provided to the States and Territories under the States Grants (General Purposes) Act 1994 in 1999-2000.