Supplementary Explanatory MemorandumAmendments to be moved on behalf of the Government (Circulated by authority of the Treasurer, the Hon Peter Costello, MP)
Chapter 2 - Visiting forces and other international obligations
Outline of Chapter
2.1 This Chapter explains the amendments to the GST Act, the LCT Act, the WET Act and the TAA 1953 to ensure that, following the introduction of the GST, WET and LCT, Australia meets its international obligations in relation to visiting forces and other international agreements.
Detailed explanation of the amendments
2.2 Australia is party to a number of international agreements including status of forces agreements with other countries. These agreements provide for certain taxation concessions to be granted. These amendments will ensure that Australia is able to grant these taxation concessions as required.
2.3 The taxation concessions relate to the GST, WET and LCT. The concessions will be granted by way of an exemption for goods imported by the eligible body or person and by way of a refund by the Commissioner for eligible goods purchased in Australia. This is a departure from the way in which concessions for local purchases are currently granted under the wholesale sales tax system. However, given the wider application of the GST in terms of the range of goods and services covered and the number of businesses involved, the refund mechanism is considered the most effective way of providing these concessions, while preserving the integrity of the GST system and at the same time continuing to meet Australia's international obligations.
2.4 Amendment 31 adds items 4, 8 and 15 in Schedule 4 to the CTA 1995 to section 42-5(1) of the GST Act (non-taxable importations). These items relate to concessions for visiting forces and members of visiting forces. In addition, item 4 covers goods owned by a foreign government and brought into Australia for the official use of that government. This amendment will ensure that importations covered by these items are non-taxable. The goods covered by these items reflect the concessions provided for in the status of forces agreements.
2.5 Amendment 87 adds the same items in Schedule 4 of the CTA 1995 to paragraph 7-10(3)(c) of the LCT Act. Subsection 7-10(3) of the LCT Act relates to importations of luxury cars that are not taxable. These items reflect the concessions provided in the status of forces agreements.
2.6 Amendment 91 adds items 4 and 8 in Schedule 4 of the CTA 1995 to subsection 7-15(1) of the WET Act. This subsection refers to customs dealings that are not taxable.
2.7 Amendment 32 repeals section 42-15 of the GST Act. This section qualifies the circumstances in which goods covered by item 15 in Schedule 4 to the CTA 1995 would be non-taxable importations. As all importations of goods covered by item 15 will now be non-taxable importations, section 42-15 is no longer required.
Other international obligations
2.8 Amendment 31 (item 18C) inserts new subsection 42-5(1C) into the GST Act. This subsection provides that an importation of goods is non-taxable if the goods are covered by:
- item 1A, 1B, 1C, 1D, 1E, 5, 6, 9, or 16 in Schedule 4 to the CTA 1995; and
- regulations made for the purposes of this subsection.
2.9 These items in the CTA 1995 relate to importations where Australia has an international obligation. Importations made under these items will only be non-taxable if they are also specified in the regulations. This will allow the regulations to specify those importations where Australia is required to provide an indirect tax concession.
Amendments to the Taxation Administration Act 1953
2.10 Amendment 110 inserts new section 62B into the TAA 1953. This provides for a refund scheme for defence related international obligations. This relates to refunds of GST, LCT and WET for eligible local purchases. The range of taxation concessions to be granted for local purchases by visiting forces and other bodies will be covered by a determination, (which is a disallowable instrument for the purposes of section 46A of the AIA 1901 to be made by the Defence Minister.
2.11 New section 62B sets out the areas where the Defence Minister can determine that a refund of tax is payable. These cover the bodies or persons who are entitled to the concessions, the types of acquisitions, the eligible uses of acquisitions and any conditions or limitations. The refund of tax will be made by the Commissioner within the period and manner set out in the determination.
2.12 New section 62C relates to a refund scheme for other international obligations. This allows regulations to be made providing for a refund of tax to entities covered by the regulations. The regulations will specify the kind of entities and the kind of acquisitions that are eligible. However, the regulations can only specify entities and acquisitions for which the Commonwealth is under an international obligation to grant indirect tax concessions in relation to the kind of entity and the kind of acquisition. Refunds will be payable by the Commissioner.
2.13 The types of international obligations under which indirect tax concessions may be required include:
- treaties, which are binding under international law;
- memoranda of understanding, arrangements and other documents of less than treaty status, which implement general obligations under a treaty; and
- memoranda of understandings etc., which stand alone but which document Australia's international political and moral obligations.