House of Representatives

Sales Tax (Exemptions and Classifications) Bill 1992

Explanatory Memorandum

(Circulated by the authority of the Treasurer, the Hon. J.S. Dawkins, M.P.)

General Outline

Background

The Government announced, in the 1990-91 Budget, a simplification review of the Wholesale Sales Tax system. On 2 April 1992, the Treasurer announced that the Government had accepted the recommendations of the Review and that legislation to implement those recommendations should be introduced in the Parliament during the Autumn Sittings 1992.

The new sales tax legislation comprises 6 Bills:

·
Sales Tax Assessment Bill 1992
·
Sales Tax Imposition (Excise) Bill 1992
·
Sales Tax Imposition (Customs) Bill 1992
·
Sales Tax Imposition (General) Bill 1992
·
Sales Tax (Exemptions and Classifications) Bill 1992
·
Sales Tax Amendment (Transitional) Bill 1992.

This explanatory memorandum describes the Sales Tax (Exemptions and Classifications) Bill 1992 .

Main Features of Bill

The main purposes of the Exemptions and Classifications Bill will be:-

·
to identify goods which are exempt from sales tax, either unconditionally or in particular circumstances; and
·
to classify other goods for the purpose of determining the rate of tax to be imposed on those goods.

The Exemptions and Classifications Bill will replace the Sales Tax (Exemptions and Classifications) Act 1935 but not repeal it. Although the scope of existing exemptions and classifications for sales tax purposes will be preserved as nearly as possible, there are some areas of change.

The Sales Tax (Exemptions and Classifications) Bill 1992 will commence on the 28th day after it receives Royal Assent. However, it will not operate to exempt or tax any assessable dealings under the new law until the first taxing day. Under the Sales Tax Assessment Bill 1992, assessable dealings will not be taxable until the first taxing day, which will be the first day of the fourth month after the month in which the Assessment Bill receives Royal Assent. Because of the linkages between the Exemptions and Classifications Bill and the Assessment Bill, the exemptions contained in the Exemptions and Classifications Bill will also not operate to exempt assessable dealings until the first taxing day. Until then, the Sales Tax (Exemptions and Classifications) Act 1935 will continue to operate. The impact of the transitional provisions in the Sales Tax Amendment (Transitional) Bill on the new law is discussed in Chapter 23 of the explanatory memorandum for the Sales Tax Assessment Bill (Volume 1).

The Bill will mainly comprise 5 Schedules. These Schedules are:

Schedule 1: Contains the goods which will be exempt
Schedule 2: Goods taxable at 10%
Schedule 3: Goods taxable at 15%
Schedule 4: Goods taxable at 20%
Schedule 5: Goods taxable at 30%

The Bill will also contain a number of general rules for interpreting the descriptions of goods in the various exemption and classification Items.

Summary of Main Changes

The main changes to the existing law proposed by the Bill are summarised below. Where relevant, a statement of the particular revenue impact of the change has been included.

Changes of general application

Changes in structure and groupings of Schedule Items

Change: The goods covered by Items in the Schedules in the new law will be described in simpler language. Some items will be omitted and replaced with new or re-structured Items which are easier to read and cover the same goods. The order in which the Items appear will be changed, so that similar kinds of goods will be grouped more closely together.

Financial impact: Nil.

Intention to use goods in accordance with "use requirement"

Change: A person who claims an exemption for goods on the basis of an exemption Item requiring that the goods be "for use" in a particular manner will need to have an intention to use the goods in that way for a minimum period, usually 2 years or the effective working life of the goods, which-ever is shorter.

Existing law: There is no specific guidance on this point.

Financial impact: Unquantifiable.

Consistency of language

Change: Key concepts which recur in the descriptions of goods in the Schedules will be standardised and expressed in uniform or standard terminology each time they occur.

Existing law: Different terms with similar or overlapping meanings are used in the Schedules to describe very similar concepts.

Financial impact: Unquantifiable.

Exemption based on particular use of goods

Change: Many exemptions from sales tax will be conditional upon goods being for use in a particular way. Often, goods will have to be for use to the extent of more than 50% in a particular way if they are to be exempt. Other goods will be exempt if they are for use exclusively in a particular way or if they are simply for use in a certain way, without the extent of use being specified. These will be the only ways that the extent or degree of use to qualify goods for exemption will be measured.

Existing law: The existing law also contains many conditional exemptions. The degree of use that qualifies goods for a particular conditional exemption is described in many different ways. For instance, some goods have to be for use "exclusively or primarily and principally" in a specified way, for use "primarily and principally", for use "primarily", "principally" or "exclusively" in a specified way.

Financial impact: Unquantifiable.

Favourable treatment for some Australian goods removed

Change: The following goods will be exempt:-

Food for poultry;
briquettes consisting principally of coal dust and marketed principally as fuel;
charcoal;
coke;
firewood;
certain goods for use exclusively as fuel in internal combustion engines (except power alcohol);
hydraulic power;
electric power; and
printed matter issued by a non-profit body to advertise tourist resorts or to disseminate information concerning tourist traffic.

Existing law: These goods are only exempt if they are manufactured or produced in Australia. With regard to fuels for internal combustion engines, some goods such as petrol and crude oil are exempt whether they are produced in Australia or overseas. However, other substances for use as fuel for internal combustion engines are only exempt if they are of Australian origin.

Financial impact: A negligible cost.

Certain exemptions and classifications omitted

Change: Exemptions and classifications for organisations no longer operating in Australia or goods no longer used in Australia will be omitted. Some other exemptions will also be omitted because the mechanism for granting these exemptions will now be found in the Assessment Bill. These include the exemptions for small business, for exports and for certain containers. Omitted items are further discussed in Chapter 9.

Financial impact: Negligible.

Changes to Business Inputs exemptions

Vehicles for use in agricultural industry

Change: There will be an exemption for certain kinds of vehicles that are used in agricultural industry. The exemption will not include certain trucks.

Existing law: The existing exemption for certain kinds of 4-wheel drive vehicles requires the Commissioner to exercise a discretion as to which vehicles are, and are not, of a kind used in agricultural industry. Certain trucks have recently been ruled to be exempt under this item.

Financial Impact: Negligible cost.

Food making at retail outlets

Change: The exemption for certain inputs used in the manufacture of biscuits, pizzas and thick-shakes in retail premises or vehicles, for sale from those premises, will be removed.

Existing law: Some inputs to the manufacture of these goods are taxable and some are exempt. Biscuit mixes and special purpose biscuit making machines for use on retail premises are taxable, while general purpose equipment used in the manufacture of biscuits for sale at retail outlets is exempt. Equipment for use in the manufacture of pizzas for retail sale is currently taxable. However, exemption is available for pizza manufacturers who establish wholesale entities to own the pizza making equipment. In these cases the pizza makers are manufacturers who make wholesale sales of the pizzas to the retail part of their operation. The wholesale part of the operation can obtain exemption for equipment used to make the pizzas. Mixes used by registered persons in the manufacture of thick-shakes are exempt, whether the thick-shakes are made at retail premises or not. Some large retailers of take-away food, who have obtained registration in respect of some of their taxable activities, have incidentally obtained inputs to the manufacture of thick-shakes tax free.

Revenue impact: A maximum gain of $2m in a full year.

Specific agricultural industry exemptions

Change: A stricter main use (i.e. more than 50%) test will be imposed on various agricultural, fishing and pearling exemption Items.

Existing law: Exemption on the basis of an unquantified use of goods in certain activities in agricultural, pearling and fishing industry has allowed exemption to be obtained in some cases of 20-30% use of goods in exempt circumstances.

Revenue impact: A maximum gain of $2m in a full year.

Mining vehicles used in townships

Changes: (a) To extend exemption to general-purpose road vehicles used in mining when used in connection with domestic or staff facilities other than townships or accommodation complexes or similar places. (b) For consistency with the mining industry, general-purpose road vehicles used in townships or accommodation complexes located within manufacturing premises will be taxable.

Existing law: Vehicles used in the mining industry, if they travel to any extent within areas used mainly in connection with any domestic or staff facilities, are excluded from exemption. There is also an anomaly by which the exclusion in the mining industry for vehicles used in connection with domestic or staff amenities does not apply to the manufacturing sector.

Revenue impact: A maximum cost of $2m in a full year.

Excluded property

Change: The exemption for ancillary equipment used mainly in connection with other property which is specifically excluded from the business inputs exemptions will be removed.

Existing law: Exemption is allowed for ancillary equipment, such as repair and maintenance equipment, used in relation to plant and equipment which is expressly excluded from the business inputs exemptions.

Revenue impact: A maximum gain of $3m in a full year.

Airports on mining leases

Change: The exclusion for general-purpose road vehicles used in connection with the operation of airports on mining leases will be removed. The exclusion for rehabilitation equipment used in connection with airports on mining leases will be removed.

Existing law: General-purpose road vehicles and rehabilitation equipment used to any extent in connection with an airport on a mining lease are excluded from exemption.

Revenue impact: Negligible cost.

Print-related activities

Change: Allow exemption for certain printing equipment used in the preparation of technical manuals and documentation for use in non-manufacturing business inputs activities, such as cargo handling.

Existing law: Exemption is only available for equipment used in connection with the preparation of technical manuals for use in actual manufacturing activities.

Revenue impact: A maximum cost of $3m in a full year.

Cargo handling activities

Change: To exempt goods for use mainly in connection with handling qualifying cargo, even if the goods are located at premises which are not mainly used for handling that cargo.

Existing law: Exemption is only available if the exemption goods are located at premises that are used mainly for carrying out eligible cargo handling activities.

Revenue impact: A maximum cost of $15m in a full year.

Engineering and Technical design

Change: To exempt equipment and materials used in the engineering and technical design of business inputs which support actual manufacturing activities (such as scheduling equipment).

Existing law: Exemption is available only for equipment and materials used in the engineering and technical design of final products, goods used in the manufacture of those products, the processes of manufacturing those products or computer instructions for manufacturing equipment.

Revenue impact: A maximum cost of $5m in a full year.

Changes to Other Exemptions and Classifications

Plastic and rubber sheeting

Change: The specific exemption for plastic and rubber sheeting will be removed. Plastic and rubber sheeting will only be exempt if it is to be used in certain ways, e.g. as raw materials in the manufacture of other goods.

Existing law: Plastic and rubber sheeting is always exempt, no matter how it is used or who uses it.

Financial impact: A maximum gain of $10m in a full year.

Containers for take-away food

Change: Containers for take-away food will generally be taxable at the rate of 20%.

Existing law: Containers for take-away food are taxable at the rate of 10%.

Financial impact: A maximum gain of $4m in a full year.

Pet food for dog breeders etc

Change: Food for guide dogs and for animals kept in animal shelters will be exempt; however, pet food used by breeders of domestic pets, and by greyhound breeders and trainers, boarding kennels and catteries will usually be taxable at 20%.

Existing law: These pet foods have been treated as exempt.

Financial impact: A maximum gain of $3m in a full year.

Crockery and glassware

Change: Crockery, glassware and other goods will only attract the concessional rate of 10% if they are used in cooking, preserving, storing, preparing, serving or consuming of food or beverages (and are of a kind ordinarily used for household purposes).

Existing law: The extent of the concession for crockery, glassware and other goods used for similar purposes is unclear.

Financial impact: A maximum gain of $3m in a full year.

Imports of Australian manufactured goods

Change: Goods imported into Australia that:-

* were originally manufactured in Australia;

* were exempted from tax because they were exported; and

* if they had not been exported would have been exempt will not be

exempt unless they fall within an exemption for imported goods.

Existing law: The goods described above are exempt; however, the exemption has little practical effect.

Financial impact: Negligible gain.

Sensors and thermostats

Change: Sensors, thermostats and other goods used to control electrical appliances will be specifically excluded from the exemption for electrical fittings, accessories and materials. They will generally be taxable at the rate of 20%.

Existing law: Many sensors and thermostats are exempt under the equivalent provision in the existing law.

Financial impact: A maximum gain of $2m in a full year.

Dried hops

Change: The specific exemption for dried hops will be removed. Dried hops will only be exempt if they are dried naturally or if they are to be used in certain ways, for example as ingredients in the commercial production of beer. Some dried hops for sale to home brewers will be taxable at 20%.

Existing law: Dried hops are always exempt.

Financial impact: Negligible gain.

Pest killers

Change: Appliances for use with insecticides will only be exempt if they are for use exclusively in the course of business or industrial operations.

Existing law: Commercial type appliances of a kind used with insecticides are unconditionally exempt, even if they are actually used in the home.

Financial impact: Negligible gain.

Switch lampholders

Change: The specific exemption for switch lampholders will be removed and these goods will only be exempt if they are used for an exempt purpose.

Existing law: Switch lampholders are always exempt.

Financial impact: Negligible gain.

Water tanks

Change: Domestic hot water tanks, water tanks for sewerage systems and water tanks for motor vehicles will be specifically excluded from the general exemption for water tanks. Hot water tanks and sewerage tanks will generally be taxable at the rate of 10%. Water tanks for motor vehicles will generally be taxable at 20%.

Existing law: There is an exemption for water storage tanks but it overlaps with provisions covering domestic hot water tanks and water tanks for sewerage systems. Similarly, it is intended that water tanks for motor vehicles be taxed at 20%. Without this specific exclusion, the position is unclear.

Financial impact: Negligible gain.

Tea, coffee, chocolate and malt drinking preparations

Change: There will be two main changes to the sales tax treatment of tea, coffee, chocolate, cocoa, malt and drinking preparations. First, manufactured ready-to-drink beverages will be specifically excluded from the exemption. Secondly, substitutes for these goods will be exempt.

Existing law: It is not clear whether the existing exemption only covers the ingredients for making beverages or whether it applies to the beverage itself. Coffee substitutes made of cereals are exempt, but substitutes for other beverages are not.

Financial impact: Negligible gain.

Clothing

Change: Goods such as hair nets, hat bands and bust improvers, which might not normally be considered to be clothes will generally be taxable at 20%.

Existing law: There are specific exemptions for a number of goods, such as those noted above, which are not normally considered to be clothes.

Financial impact: A maximum gain of $1m in a full year.

Fish and other marine animals

Change: Fish and other marine animals will be exempt if they fall within the exemptions for primary produce or food for human consumption. There will however be no specific exemption for these goods. Unprocessed fish used as bait by recreational fishermen will remain exempt but processed bait will generally be taxable at 20%.

Existing law: Fish, oysters, crayfish, prawns, crabs and other marine animals are always exempt, regardless of how they are used. Bait for recreational fishermen is therefore exempt if it is made of fish.

Financial impact: Negligible gain.

Earthmoving equipment for local government contracts

Change: There will be an exemption for machinery, implements and apparatus for use for earth-moving in the course of carrying out a contract with a local government authority.

Existing law: Machinery and equipment is exempt if it is for use for earth-moving in the course of carrying out a contract with a local government authority.

Financial impact: Nil.

Bottled water

Change: Water marketed as mineral water will be exempt from tax if it has not been subject to a manufacturing process (other than filtration and bottling).

Existing law: Water marketed as mineral water is subject to tax at the rate of 20%.

Financial impact: A maximum cost of $5m in a full year.

Building materials - Glass and glass substitutes

Change: There will be an exemption for glass and substitutes for glass which are of a kind ordinarily used as raw materials in building work.

Existing law: There is an exemption for various forms of glass but no exemption for glass substitutes.

Financial impact: Negligible cost.

Pallets

Change: Pallets for storing or transporting goods will always be exempt.

Existing law: Pallets are only exempt if they are used in certain circumstances.

Financial impact: A maximum cost of $2m in a full year.

Bitumen mixtures

Change: Substances used in a plastic or fluid condition as raw materials in the construction of roads, paths, buildings or fixtures will be exempt, regardless of the composition of those substances.

Existing law: Substances which are used in a plastic or fluid condition in constructing or repairing roads, paths, buildings or other fixtures are only exempt if they are mixtures of asphalt, tar and bitumen.

Financial impact: Nil.

Gases

Change: All gases except for carbon dioxide, refrigerant gases and gases marketed principally for inflating balloons will always be exempt.

Existing law: There are exemptions for specified gases and gases used as business inputs are exempt, but no general exemption for gases.

Financial impact: Negligible cost.

Yarns and threads

Change: Any yarns or threads marketed principally for knitting, weaving, crocheting, embroidery, sewing or mending, rug-making or tapestry will be exempt.

Existing law: The exemption for some yarns and threads, in particular cotton and sewing thread, is restricted to goods marketed for household purposes.

Financial impact: A maximum cost of $1m in a full year.

Surgical appliances

Change: Goods such as dispensing plant, drip feed lamps, eye droppers, scales and staining bottles will now qualify for exemption if they are marketed principally as surgical instruments or appliances and are of a kind ordinarily used in hospitals or by medical practitioners.

Existing law: There is a range of exclusions, including the goods named above, from the exemption for medical and surgical goods.

Financial impact: A maximum cost of $1m in a full year.

Veterinary prescriptions

Change: Instruments, appliances and materials ordinarily used by veterinary surgeons and preparations ordinarily prescribed by veterinary surgeons for the treatment of animals will be exempt.

Existing law: Exemption is limited to instruments etc ordinarily used by veterinary surgeons. Certain medications prescribed for animals may not be technically used by vets.

Financial impact: Negligible cost.

Radio receivers

Change: Radio receivers of the kind used in public commercial telecommunication services will generally be taxable at 20%. These are radio receivers which have characteristics particularly adapted to use in public commercial telecommunication services.

Existing law: Radio receivers which are for use in public commercial telecommunication services are taxable at 20%. These can be any kind of radio receiver, provided they are actually used in that way. This is a wider class of goods than that proposed by the new law.

Financial impact: Negligible cost.

Works of art

Change: All works of art will be exempt.

Existing law: Virtually all works of art are exempt, except for works of art produced overseas by overseas artists, which are neither paintings, sculptures nor engravings.

Financial impact: Negligible cost.

Lubricants

Change: Lubricants will be exempt when they are for use exclusively as raw materials in the construction or repair of ships and aircraft, or when they are for use mainly in sound recording or film developing in producing motion picture films.

Existing law: These goods are taxable at 20%.

Financial impact: Negligible cost.

Goods for use by the State governments

Change: It will not be a requirement that State and Territory governments enter into agreements to pay tax on goods sold by their trading enterprises, before they can claim exemption on goods for their own use.

Existing law: There is a provision that requires State and Territory governments to enter into agreements to pay tax on goods sold by their trading enterprises before they can claim exemptions on goods for use by them. However, there is no evidence that these agreements have ever been entered into.

Financial impact: Nil.

Thick-shakes

Change: Thick-shakes or similar goods made on retail premises or vehicles will be exempt from tax.

Existing law: Tax is not presently collected on the sale of thickshakes made in retail premises as these sales are considered to be outside the scope of the sales tax legislation. Nevertheless, this specific exclusion is thought to be necessary to put the matter beyond doubt.

Financial impact: Nil

Warranty goods

Change: There will be a credit entitlement in the Assessment Bill for goods for use as replacements, under warranty, for faulty goods.

Existing law: These goods are exempt by virtue of an exemption in the Sales Tax (Exemptions and Classifications) Act.

Financial impact: Nil.

Financial Impact

The new sales tax legislation will provide a gain to the revenue of $61m in 1992-93 (assuming a 1 October 1992 commencement date) and $91m in 1993-94. These figures include changes to the existing law proposed by the Sales Tax (Exemptions and Classifications) Bill 1992.

The more important changes are briefly described in the Summary of Main Changes above. There is a separate costing for the revenue effect of each of the main changes which can be quantified.

Chapter 2 Glossary of Terms

Glossary of Terms

Set out below are brief descriptions of some terms which are commonly used in the new law. This Bill uses terms which also appear in the Sales Tax Assessment Bill. Unless the context indicates otherwise, they have the same meaning in the Exemptions and Classifications Bill as they in the Assessment Bill. Some of these terms are included here for ease of reference. Other terms discussed below only relate to the Exemptions and Classifications Bill.

The reference after each description refers to the main place where the term is discussed either in this explanatory memorandum or the explanatory memorandum for the Sales Tax Assessment Bill 1992 (Assessment Bill E.M.).

Agriculture: Agriculture will be a defined term in the new law. It will cover viticulture, horticulture, pasturage, apiculture, poultry farming and dairy farming and other operations connected with the cultivation of the soil, the gathering in of crops and the rearing of livestock. [paragraph 5.47]
Always exempt goods: Goods described in an exemption Item and which, because of that description, can never be the subject of a taxable assessable dealing, regardless of how, or by whom, the goods are dealt with. All of the requirements of the exemption must be satisfied at the time of the assessable dealing and the exemption for these goods cannot depend on what happens later with the goods. [paragraph 3.10]
Ancillary activities: Activities that assist in the conduct of higher-level activities covered by business inputs exemption items. Broadly, there are four kinds of ancillary activities: scheduling, sequencing etc. the higher-level activities; ordering, storing, repairing etc. goods used in the higher-level activities; training people undertaking the higher-level activities; and supporting the efficient performance of the higher-level activities. [paragraphs 5.24 - 5.26]
Application to own use (AOU): A dealing with goods which, if done with assessable goods when they are in Australia, will cause them to become Australian-used goods. Includes the grant of a lease, a gift and the use of goods in a manufacturing, construction or repair process as raw materials. An AOU can be an assessable dealing if certain other conditions are satisfied. [paragraph 5.3 Assessment Bill E.M.]
Assessable dealing: A dealing with assessable goods will be taxable unless an exemption applies. Broadly, there are 5 kinds of dealings: sale, application to own use, delivery of customer's materials goods, local entry and removal from a Customs clearance area . [paragraph 7.2 Assessment Bill E.M.]
Assessable goods: The class of goods which can be taxable if they are the subject of an assessable dealing and no exemption applies. It will cover Australian goods and imported goods. Australian goods will be goods manufactured in Australia (but not including certain goods sent out of Australia and brought back into the country) and goods which have been applied to own use in Australia. Imported goods will be goods imported into Australia, including goods that were manufactured in Australia and subsequently exported, provided that they have not been applied to own use in Australia. [paragraph 6.3 Assessment Bill E.M.]
Biscuit goods: Biscuit goods will generally be an exception to the rule that foods are exempt and will be taxable at 10%. The term will cover biscuits, cookies, crackers, pretzels, cones and wafers and goods which consist principally of these goods. It will not include breakfast food, rusks for infants or invalids, or goods consisting principally of rusks or crispbreads. Clause 14 will exclude biscuit goods from the general exemption for food. [Chapter 8, Item 11, Schedule 2]
Business inputs: A term used in the explanatory memorandum, but not in the new law. It refers to goods (including raw materials and equipment) for which exemption will be available under the exemptions for business or industry contained in Chapter 1 of Schedule 1. [Chapter 5]
Confectionery: Confectionery will also be an exception to the rule that foods are exempt and will generally be taxable at 10%. There will not be an exhaustive definition of "confectionery" in the Bill but it will include certain goods which would not normally be regarded as confectionery. Clause 14 will exclude confectionery from the general exemption for food. [Chapter 8, Item 11, Schedule 2]
Credit: Credits for tax paid by a person, or for an amount of tax included in the acquisition price of goods, are available in certain circumstances. Credits will usually be available to prevent double taxation of goods, where there has been an overpayment of tax, or to give effect to an exemption. Credits can take two forms: a direct payment to the person by the Commonwealth or they can be claimed as a deduction on returns. [paragraph 11.2 Assessment Bill E.M.]
Eligible long-term lease: A lease of goods that is for a period at least as long as the statutory period, and the lessee intends to use the goods for an exempt purpose for the whole of the statutory period. An eligible long-term lease of assessable goods will be exempt from tax. [paragraph 3.17]
Eligible raw materials and parts: Goods for use exclusively as materials by the exemption user in constructing, repairing or maintaining goods/equipment for use mainly in carrying out one or more of the specified activities, and parts for that goods/equipment. [paragraph 5.27]
Exemption: An assessable dealing will not be taxable if one of the general exemptions applies. Broadly, there are five general exemptions, one of which will be that an exemption Item is satisfied in relation to the goods. [paragraph 3.9; Chapter 8, Assessment Bill E.M.]
Exemption declaration: A declaration given by an unregistered person in respect of goods to the effect that the person intends to use the goods so as to satisfy an exemption Item. The giving of an exemption declaration will be a quote, and will relieve an assessable dealing from tax. [paragraph 3.18; paragraphs 8.18, 14.9 & 15.7 Assessment Bill E.M.]
Exemption goods: Goods covered by an Item in Schedule 1. [paragraph 5.20]
Exemption Item: An Item or subitem contained in Schedule 1. [paragraph 3.4]
Exemption user: The person who must use goods described in an exemption Item in order for the benefit of an exemption Item to be claimed. [paragraph 3.21]
Generally-excluded property: This will be a class of property that is always excluded from the business inputs exemption Items. [paragraph 5.29]
General-purpose road vehicle: Road vehicles of a kind ordinarily used for the transport of persons or the transport or delivery of goods or other property will be excluded from the exemptions for goods for use in mining, primary production, manufacturing, printing and other businesses, unless they are for use exclusively in the exemption user's premises or in going between adjacent premises (Chapter 1, Schedule 1) . There are, however, specific exemptions for various kinds of motor vehicles for use by primary producers. [paragraph 5.37]
Goods: Any form of tangible personal property, but does not include second-hand property manufactured from Australian-used goods. [paragraph 3.5; paragraph 6.7 Assessment Bill E.M.]
Ice-cream goods: An exclusion from the exemption for foodstuffs, generally taxable at 10%. [Chapter 8, Item 11, Schedule 2]
Livestock: Some of the Items relating to primary production and agricultural industry refer to livestock. Livestock is to be a defined term in the new law. It will cover animals that are reared for producing food, fibres, skins, fur or feathers, or for use in farming the land (including breeding stock for such animals); or horses. It will not include fish, crustaceans or molluscs, or animals kept, or to be kept, as domestic pets. [paragraph 5.49]
Lower-level operation of excluded property: A proposed rule which will prevent an exemption user from counting uses of one item of property where those uses relate to other property which is excluded. This rule will only apply in the case of the business inputs exemption Items. [paragraph 5.44]
Mainly: Many exemptions will require that goods be for use "mainly" in a specified way. This will mean that the exemption user will have to intend to use the goods to the extent of more than 50% in exempt circumstances in order to claim the benefit of the exemption. [paragraph 4.11]
Non-profit body: There will be several exemptions for goods for use by various "non-profit bodies". A non-profit body will be a society, institution, organisation or other body that is not carried on for the profit of individuals. [paragraph 4.27]
On-site: One class of exempt raw materials will be raw materials used in on-site construction of certain goods/equipment. "On-site" will refer to the construction or repair of property in the place where it will be used after it is constructed or repaired. [Chapter 6, Item 19 Schedule 1]
Parts: Parts for some goods covered by exemption Items will be exempt goods. Parts for some goods covered by the Rating Schedules will be taxable at the same rate as those goods. Parts for motor vehicles will include bodies for road vehicles, such as insulated bodies or tank-bodies, and underbody hoists and other equipment ordinarily fitted to road vehicles for use in connection with the transport or delivery of goods. [paragraphs 4.13 to 4.17]
Principally: Some exemption and classification Items will refer to goods "marketed principally as..." or goods "marketed principally for ...". The term "principally" will include "exclusively". It will be used where the existing law says "exclusively or principally". [paragraph 4.22]
Qualifying goods: Qualifying goods will be a defined term in the new law. It will describe goods that can be the subject of certain transport, storage, handling and other activities. Qualifying goods will be goods manufactured or produced by the exemption user, raw materials, work in progress or finished goods of the exemption user, or goods covered by listed business inputs exemption Items. [paragraph 5.50]
Quote: A mechanism that prevents sales tax being payable on an assessable dealing (other than application to own use). Applies to quotation of a registration number by a registered person (usually to obtain trading stock or business inputs tax-free) or quotation of an exemption declaration by an unregistered person ( to take advantage of an exemption Item). [paragraph 14.3 Assessment Bill E.M.]
[R] Items: Some Items in Chapter 1 in Schedule 1 will be marked [R]. This means that only registered persons will be able to access them to obtain the exemption sought. Unregistered persons will not be able to quote exemption declarations to obtain goods covered by these Items tax free. All of these Items will apply to business inputs goods. [paragraph 5.5]
Rating Item: A term used in the explanatory memorandum but not in the new law to refer to Items in the Schedules that cover goods that are generally subject to tax. [paragraph 3.26]
Raw materials: Goods that are to be dealt with, or are dealt with, so as to become an integral part of other goods in their finished condition. It will include goods to be used as raw materials in manufacturing other goods as well as raw materials used in constructing or repairing other property. [paragraph 5.27 and Chapter 6, Item 19, Schedule 1]
Registration: Registration by the Commissioner. A pre-condition to quoting a registration number. Broadly, persons who regularly engage in assessable dealings will be entitled to be registered so that they can quote a registration number to acquire business inputs and wholesale selling stock tax-free. [paragraph 13.3 Assessment Bill E.M.]
Registration number: The number allocated to a registered person by the Commissioner of Taxation. [paragraph 13.2 Assessment Bill E.M.]
Savoury snacks: Savoury snacks will be excluded from the general exemption for foods and will usually be taxable at 10%. Savoury snacks are certain goods marketed principally as food for human consumption without further treatment or cooking. [Chapter 8, Item 11, Schedule 2]
Ship: There will be an exemption for certain ships. There will also be exemptions for certain goods to be used mainly in handling ships' cargoes. "Ship" will mean any vessel designed for use in navigation by water. [Chapter 6, Item 30 & Chapter 7, Item 59, Schedule 1)]
Statutory period: The minimum period for which goods must be used by a person in order for an exemption Item with a use requirement to be satisfied. The statutory period will usually be two years but may be less if the goods ordinarily have a shorter working life or are being used in harsh conditions. [paragraph 3.23]

Chapter 3 Structure of the Bill and Key Concepts

A. Introduction

3.1 This chapter describes the structure of the Exemptions and Classifications Bill and the Schedules to the Bill. It also discusses some key concepts in the new law including the system of exemptions from tax and how the Exemptions and Classifications Bill will relate to the Assessment Bill.

B. Structure of the Bill

3.2 The Sales Tax Exemptions and Classifications Bill 1992 comprises:-

Part 1: Commencement. The Act will commence on the 28th day after it receives Royal assent.
Part 2: Definitions of terms.
Part 3: Rules for interpreting Schedule 1. This Part will contain three divisions. Division 1 will provide general rules for interpreting Schedule 1. Division 2 will contain rules which relate to goods for use in business and industry. Division 3 will cover certain exclusions from the exemptions for foodstuffs.
Part 4: Effect of the Taxing Schedules. Schedules 2, 3, 4 and 5 will specify the rates of tax which apply to goods covered by those Schedules.
Part 5: Power to make regulations.

3.3 Schedules: There will be 5 Schedules to the Bill. They will describe goods which are either exempt from tax or taxable at particular rates:

Schedule 1 Describes goods which are exempt from tax
Schedule 2 Describes goods which are taxable at 10%
Schedule 3 Describes goods which are taxable at 15%
Schedule 4 Describes goods which are taxable at 20%
Schedule 5 Describes goods which are taxable at 30%.

3.4 Each Schedule will consist of Items. Items will sometimes be divided into subitems. An Item or subitem in Schedule 1 will be called an "exemption Item". Related exemption Items in Schedule 1 will be grouped in Chapters for easier reference. The Chapters are listed below:-

Chapter 1: Goods for use in business or industry
Sub-Chapter 1.1: Mining and primary production
Sub-Chapter 1.2: Manufacturing and industrial etc.
Sub-Chapter 1.3: Containers, transport, storage etc.
Sub-Chapter 1.4: Research and development, design etc.
Sub-Chapter 1.5: Miscellaneous
Chapter 2: Building Materials
Chapter 3: Irrigation, water supply etc.
Chapter 4: Fuel, power etc.
Chapter 5: Transport
Chapter 6: Primary products
Chapter 7: Food and drink for human consumption
Chapter 8: Clothing and footwear for human wear
Chapter 9: Human health and hygiene
Chapter 10: Books, printed matter, paper etc.
Chapter 11: Scientific and educational goods
Chapter 12: Works of art, collectors' pieces, antiques etc
Chapter 13: Monuments, memorials, trophies etc
Chapter 14: Goods for use by governments, hospitals etc
Sub-Chapter 14.1: Australian governments and government representatives
Sub-Chapter 14.2: Foreign governments and government representatives
Sub-Chapter 14.3: Miscellaneous bodies
Chapter 15: Miscellaneous

C. Key Concepts

Goods

3.5 Goods: References in the exemptions and classification Items to goods will mean goods as defined in the Assessment Bill. While an exemption Item or rating Item can only ever apply to an assessable dealing with assessable goods, references in an Item to goods does not necessarily always mean assessable goods. For example, a reference to parts for goods covered by a particular item is not restricted to parts for goods that are still assessable goods (see paragraph 4.20).

Note:
Goods are defined in the Assessment Bill to include any form of tangible personal property, except for second-hand property made from Australian-used goods which retain their character as Australian-used goods throughout the manufacturing process. [AA subclause 5 (definition of 'goods') and EC subclause 3(1)]

3.6 Goods used outside Australia: References to "goods" can also include goods that are outside Australia. Consequently, if an Item will exempt goods that are for use in particular circumstances, then that Item can be satisfied even though some of that use is outside Australia. However, the goods must in all cases be first used for the exempt purpose in Australia in order for the exemption to apply.

3.7 Australian and imported goods: Several items in the existing law apply only to Australian goods or to imported goods, but not to both. In many cases, these distinctions will largely be omitted by the new law. In most cases, there is little or no reason to retain the distinction.

3.8 Use after goods cease to be goods: A reference to goods being used in a particular manner will apply to a use after they cease to be goods. For example, machinery would be entitled to exemption although it is intended to be attached to the floor in such a way that it will become a fixture and no longer be goods. Similarly, raw materials will be exempt even though it is intended that they will be incorporated into property which may not be goods. [EC clause 7]

Note:
In the absence of this provision, many goods will not qualify for exemption because they would not be goods for the whole of the statutory period (see paragraph 3.23).

Schedule 1

3.9 Schedule 1 will describe goods which are exempt from tax. There will be two different kinds of goods described under exemption Items: always exempt goods and goods which must satisfy a particular condition before they will be exempt (for example, they must be for use for a particular purpose by a particular body). Goods in other Schedules will never have to satisfy a condition before they will fall within the Schedule.

Note:
An exemption Item will be an Item or subitem in Schedule 1, i.e. an Item or subitem which describes goods which may be exempt from tax. Exemption Items are the equivalent of the items presently contained in the First Schedule to the Sales Tax (Exemptions and Classifications) Act 1935 .

3.10 Always exempt goods: These are goods which will always be exempt no matter how they are actually used or who intends to use them. These goods may simply be listed in Schedule 1, e.g. leather (Item 152, Schedule 1) . Alternatively, they may be described either by reference to a class of goods ordinarily used in a certain way, or by reference to the marketing of the class of goods e.g. paints ... of a kind marketed principally for application to buildings or fixtures (Item 44, Schedule 1) .

Note :
In common parlance, goods which are always exempt are sometimes referred to as "unconditionally exempt goods".

3.11 Use requirement: Most goods will only be exempt if they are intended to be used in such a way that they satisfy a particular condition or requirement. This can happen in three ways:-

·
the goods are to be used in a particular way e.g. piping and tubing for use by a person mainly for the purposes of irrigation (subitem 50(1), Schedule 1) ;
·
the goods are intended for use by a particular person e.g. goods for use by a university, or school, that is conducted by a non-profit body (Item 109, Schedule 1) ; or
·
the goods are intended for use by a particular person in a particular way, e.g. machinery ... for use by a life saving club, mines' rescue station or ambulance society mainly in connection with preserving human life, or transporting persons for the purpose of medical or surgical treatment (Item 99, Schedule 1) .

Note 1:
In common parlance, goods which are exempt because they are to be used in accordance with a particular condition or requirement are sometimes referred to as "conditionally exempt goods".
Note 2:
Goods which are exempt because they are intended to be used so as to satisfy a condition or requirement will be described as "goods for use by a person ..." or "goods for use by a person mainly ..." or goods for use by a person exclusively ... ". These expressions are discussed further in Chapter 4.

Links between the Sales Tax Assessment Bill and the Sales Tax (Exemptions and Classifications) Bill.

3.12 The Exemptions and Classifications Bill will not of itself have the effect of exempting a dealing from sales tax; rather, the system of exemption will operate through the Assessment Bill. The Assessment Bill will provide that assessable dealings with assessable goods will be subject to tax unless an exemption applies. This will provide the link between the Assessment Bill and the Exemptions and Classifications Bill. [EC clause 4(1)]

3.13 There will be three exemptions based directly on exemption Items. There will also be an exemption for cases where a person quotes at the time of a dealing and the ground for quoting is that the quoter intends to satisfy the requirements of an exemption Item.

Exemptions based directly on exemption Items

3.14 There will be three situations in which goods will be exempt from tax because an exemption Item applies and quotation will not be required to obtain exemption.

3.15 (i) Exemption Item is unconditionally satisfied: Tax will not be payable on an assessable dealing if the goods are covered by an exemption Item which is in force at the time of the dealing, and all the requirements of the Item have been satisfied at or before that time. [AA clause 24 and EC paragraph. 4(2)(a)]

Note:
The goods referred to in an exemption Item that will be unconditionally satisfied at the time of a dealing will be known as always exempt goods. It will be available to all assessable dealings.

3.16 (ii) Non-lease application to own use if applier intends to satisfy an exemption Item: An assessable dealing will not be taxable if it is an application to own use which does not involve the granting of a lease, and the applier or user of the relevant goods intends to use them so as to satisfy an exemption Item which is in force at the time of the dealing. [AA clause 25 and EC paragraph.4(2)(b)]

Note:
This exemption will be available to persons who apply goods to own use and who rely on an exemption Item with a "for use" requirement e.g. goods for use by a registered person as a business input.

3.17 (iii) Lease application to own use - eligible long term lease: An assessable dealing will not be taxable if it is an application to own use which involves the granting of an eligible long-term lease. An eligible long-term lease will be a lease under which all of the following conditions are satisfied:-

(a)
the term of the lease is at least as long as the statutory period (see paragraph 3.23);
(b)
at the time of granting the lease the lessee intends to use the goods so as to satisfy an exemption Item for the whole of the statutory period; and
(c)
if the lessor has paid any tax on the goods before granting the lease, none of that tax has been passed on to another person.

[AA clause 26, clause 5 (definition of 'eligible long-term lease') and EC paragraph 4(2)(c)]

Note:
A lease application to own use that is not an eligible long-term lease will be taxable unless the assessable goods are always exempt goods or the goods are to be exported without being used in Australia by the lessee.

Exemption based on quotation

3.18 Quotation when exemption Item applies: If a person claims the benefit of an exemption Item with a "for use" requirement, and the dealing is not an application to own use, the person will have to quote to take advantage of the exemption. It will be a ground for quoting that a person intends, at the time of the dealing, to use the goods so as to satisfy the exemption Item which is in force at that time. If the dealing is a sale or a delivery of customer's materials goods, a purchaser or customer will be able to quote, at or before the time of sale or delivery. A taxpayer will be able to quote on a local entry or removal of goods from a Customs clearance area on the same basis. [AA clauses 27 and 28; EC paragraph 4(2)(d)]

Note:
The Assessment Bill will introduce a new system of exemption declarations to allow unregistered persons to quote when they obtain goods for which they seek exemption. Exemption declarations will replace conditional exemption certificates, currently given under administrative arrangements approved by the Commissioner. A person will be able to give a declaration that the person intends to use goods so as to satisfy the use requirement in an exemption Item. This will be a form of "quoting".

Credit entitlements

3.19 In addition, Schedule 1 will sometimes give rise to credit entitlements. A credit entitlement will arise if, for instance, tax has been overpaid because an exemption Item applied to a dealing with goods on which tax had already been paid. There will also be a credit entitlement where tax has been paid on goods which are sold to a purchaser tax free under quotation, the basis for the quotation being that an exemption Item will be satisfied. A further credit entitlement will arise where the taxpayer has granted an eligible long-term lease and the taxpayer has borne tax on the goods before the granting of the lease. [AA subclause 51(1) and EC paragraph 4(2)(e)]

Intention to satisfy use requirement

3.20 A common condition in the situations described above (except for paragraph 3.15) will be an intention to use goods so as to satisfy the requirements of an exemption Item. Without the necessary intention, an exemption Item with a use requirement which has not been satisfied at the time of the dealing will not exempt goods from tax or provide a credit ground.

3.21 There will be 2 elements to this intention. First, it must be held by the specified person at the time of the dealing. This person will be the exemption user . Secondly, there must be an intention, at the time of the dealing with the exemption goods, to use them in accordance with the particular exemption Item for a certain period of time, usually 2 years. This is the statutory period , discussed further at paragraph 3.23. [EC subclause 5(1)]

Note 1:
The existing law gives little guidance as to the degree of use of goods required to satisfy the use requirement of a conditional item.
Note 2:
An exemption will be available if the exemption user has the intention, at the time of the assessable dealing, of satisfying an exemption Item. If a person quotes on the purchase of goods, because that person intends to satisfy an exemption Item, but later applies the goods to own use in a way which will not satisfy an exemption Item, then the goods will be subject to tax at the time of the application to own use.

3.22 The intention which will be necessary in order to claim exemption in relation to particular dealings is set out below:-

(a)
Item unconditionally satisfied: use requirement not applicable.
(b)
Non-lease application to own use: the applier must intend to use the goods in the way required by the Item for the whole of the statutory period.
Note:
The applier must intend to use the goods itself for the application to own use to be exempt. For example, there is an exemption for goods for use by a shire council (Item127, Schedule1) . However, a manufacturer who bails garbage bins to a council will not be able to claim exemption on the basis that the goods are for use by the council. In this case, it is the manufacturer will apply the garbage bins to own use when it supplies the garbage bins. Use by the manufacturer will not meet the requirement for exemption.
(c)
Lease application to own use - eligible long-term lease: the lessee must intend to use the goods in the way required by the Item for the whole of the statutory period.
Note:
If the lessee is not an exempt body, it must intend to actually use the goods itself. The goods will not be exempt if the lessee plans to allow another person to use them, whether or not that use is in accordance with an exemption Item. If the lessee is an exempt body, use which the lessee allows to another person will still be regarded as use by the exempt body. For example, a shire council leasing garbage bins will of course allow householders to use the bins. Provided the lease to the shire council is for the whole of the statutory period, the lease will be exempt as an eligible long-term lease even though both the council and the householders are, in effect, using the bins.
(d)
Ground for quoting: the quoter must intend to use the goods in the way required by the Item for the whole of the statutory period.
Note 1:
As is the situation with (c), the quoter must intend to use the goods itself for the statutory period for the exemption to apply.
Note 2:
Quotation will only have the effect of exempting an assessable dealing if the quotation is made at or before the time of the dealing. For example, there is an exemption for goods for use by a public hospital (Item 130, Schedule 1) . Usually a retailer who purchases goods which it then sells to a public hospital will not have quoted on the purchase, because the retailer will not know that the goods are to be purchased by a person who will quote on the sale. There will be no exemption on the wholesale sale of the goods to the retailer. In this type of situation, the public hospital may quote to the retailer. The retailer will have a credit entitlement for tax excluded from the selling price to the hospital.
(e)
Credit entitlement for eligible long-term lease: In order for a lessor to claim a credit on the basis of an eligible long-term lease, the lessee must intend to use the goods in the way required by the Item during the whole of the term of the lease.

3.23 Statutory Period: If an exemption Item has a use requirement, goods will only be exempt if the exemption user intends, at the time of the dealing, to use the goods in accordance with the use requirement for the whole of the statutory period. The statutory period will be a period of time which runs from the time of the first application to own use of goods in Australia until the earliest of the following times:-

(i)
after 2 years;
(ii)
when the goods are no longer reasonably capable of being used for the purpose for which goods of that kind are ordinarily used; or
(iii)
at a time that the Commissioner considers appropriate in special circumstances.

[AA clause 5 definition of 'statutory period']

Note 1:
The purpose of (ii) is to cover situations where the working life of the goods is less than 2 years. Situation (iii) will enable the Commissioner to determine a period other than (i) or (ii) if the circumstances of use are such that a shorter period is appropriate. An example would be where harsh conditions limit the usual working life of goods.
Note 2:
Many goods will have to be for use "mainly", that is, more than 50%, in the way required by the exemption Item, for the whole of the statutory period in order for a dealing with those goods to be exempt. If the statutory period is 2 years, it will not satisfy the use requirement for the goods to be used in the way required by the exemption Item for, say, 1 year and in another way for the next year.

Exception 1: Associated goods i.e. parts, fittings, accessories and attachments will not have to be used for the whole of the statutory period in order to qualify for exemption. [EC subclause 5(2)]
Exception 2: The rules governing statutory period will apply unless the contrary intention appears in an exemption Item. [EC subclause 5(3)]

3.24 Change of intention: A change of intention or change of use after the time of application to own use will not disqualify goods from exemption, if the intention at the time of the assessable dealing was to satisfy an exemption Item for the whole of the statutory period. If, for instance, a manufacturer applied a machine to own use in a manufacture-related activity, intending at that time to use the machine in that way for 2 years but after 1 year was forced out of the market by declining demand and sells the machine, it would not become taxable.

Note:
Once the statutory period has ended, a person will be able to sell the goods without incurring a sales tax liability.

3.25 Goods for use and not for sale: Some items in the existing law specifically exclude sale from the use requirement by the words "goods for use and not for sale". These words will not be necessary in the new law. A person cannot intend both to satisfy a use requirement for the statutory period and to sell the goods during that period.

Rating Schedules

3.26 The rating or taxing Schedules will specify the rates of tax which apply to dealings with particular goods. In calculating the amount of tax on a taxable dealing, the rate that will be used is the rate applicable under the Exemptions and Classifications Bill. [EC subclause 15(1) and AA subclause 16(2)]

Note 1:
In the existing law, the Sales Tax Acts specify the rates of tax applicable to goods covered by the various Schedules.
Note 2:
An Item in a rating Schedule is commonly referred to as a rating Item.

3.27 The relationship between the Schedules in the existing law and the Schedules in the new law is set out below:-

NEW SCHEDULE RATE IN NEW LAW EXISTING SCHEDULE
Schedule 1 Exempt First Schedule
Schedule 2 10% Third Schedule
Schedule 3 15% Fifth Schedule
Schedule 4 20% Fourth Schedule
Schedule 5 30% Second Schedule

3.28 Schedule 4 will apply to "goods not covered by any Item in Schedules 2, 3 and 5". These will be the goods to be taxed at the rate of 20%, known as the general rate. In the new law, all goods are covered by an Item in a Schedule.

Note:
In the existing law, the Schedules to the Sales Tax (Exemptions and Classifications) Act only cover the specified goods. The many goods which fall outside the Schedules are taxed at the general rate.

3.29 Goods covered by more than one Schedule: If goods are covered by more than one Rating Schedule, then the rate of tax which applies will be the lowest rate. [EC subclause 15(2)]

Note:
The existing law provides that the First Schedule to the Sales Tax (Exemptions and Classifications) Act shall prevail over the other Schedules to the Act. A similar statement in the new law will not be necessary because goods covered by an exemption Item will be exempt from tax by virtue of the Assessment Bill.

Exemptions for goods incorporated in other goods

3.30 There are a number of exemptions for goods incorporated in other goods which will be effected by the Sales Tax Assessment Bill. These are goods incorporating videotex equipment, goods incorporating solar panels or milk tanks, and goods which are partly exempt from Customs duty because they are imported by an eligible Australian traveller and exceed the $400 duty-free limit. The mechanism for granting exemptions in these cases will be to reduce the taxable value by the amount that relates to the exempt goods. With regard to pre-fabricated buildings and pre-fabricated building sections, there will be a substitute taxable value equal to the value of the taxable components incorporated in the building. [AA Part 3 Divisions 3 and 4]

Note:
In the existing law, these goods are covered by sections 6AA, 6AB, 6AC and 6AD of the Sales Tax (Exemptions and Classifications) Act.

Chapter 4 Standard Expressions of General Application

A. Introduction

4.1 This chapter discusses certain standard expressions which will be used in the Schedules to the Bill. Each of these expressions will have the same meaning each time it appears. This chapter also discusses some of the notations found throughout the Schedules.

4.2 In the existing Sales Tax (Exemptions and Classifications) Act 1935, similar concepts are expressed in different ways in different items. This has led to confusion and difficulties in interpretation. To overcome this problem, standard expressions will be adopted in the new law to replace a variety of the existing phrases. Each standard expression will represent a particular concept. It will not be possible always to use the standard expressions, because of the vast variety of situations covered by the Schedules, but clarity and certainty will be promoted by using standard expressions wherever possible. Inevitably, this will mean that the treatment of goods under the proposed legislation will change, but most of the changes will be minor.

B. Explanation and Commentary

'Goods'

4.3 Some Items in the Schedules will be wide enough to apply to any goods which satisfy the conditions of the Item. Other items will only apply to a narrower class of goods, for instance, machinery, implements and apparatus or anthropological specimens.

4.4 Goods: The term goods will be a standard expression to be used where it is clear that the scope of the Item applies to all goods and not to a narrower class.

Note:
Terms such as "equipment" and " appliances" in the existing law will be replaced by "goods" wherever it is appropriate. The term "articles" will not be used in the new law.

4.5 Machinery, implements and apparatus etc.: The phrase machinery, implements and apparatus will be the preferred expression to be used in place of other descriptions of limited classes of goods (wherever it is appropriate). However, other words such as instruments, materials or equipment will also be used where the exemption is only intended to apply to a more limited field of goods.

Note:
"Machinery, implements and apparatus" will be used in place of the expression "machinery and equipment" in the existing law.

4.6 Australian and imported goods: In the existing sales tax law, there are eleven Sales Tax Assessment Acts. Beside each item or subitem in the First Schedule to the Sales Tax (Exemptions and Classifications) Act, is a reference to the Assessment Act or Acts to which the exemption applies. This shows whether the exemption is intended to apply to Australian goods, imported goods or both Australian and imported goods. Because the new sales tax law will have only one Assessment Bill, the distinctions between Australian goods and imported goods will now be contained in the descriptions of goods in the Items themselves.

Note:
Generally, where an exemption Item will be restricted to imported goods it will state imported goods . Some other Items will state that the goods are only exempt if they are of Australian origin or manufacture.

Raw materials

4.7 There will be some exemptions for goods for use exclusively as raw materials and goods marketed exclusively as raw materials for various other goods or property. Goods will be treated as raw materials in manufacturing other goods, or in the construction or repair of property, if they are dealt with in such a way that they, or an essential element of them, become an integral part of the manufactured goods or the property in its finished condition. Eligible raw materials will be a category of exempt raw materials which are to be used as business inputs (see paragraph 5.27). [AA clause 7]

Note:
The expression raw materials will replace the phrase "used in the construction or repair of, and wrought into or attached to so as to form part of" and variations of that expression in existing Division XII of Schedule 1 to the Sales Tax (Exemptions and Classifications) Act. It will also replace various references to "goods for use in construction or repair" of certain property in the existing law.

Schedule 1 - Use Requirements

4.8 As has already been noted, a number of exemptions from sales tax will contain a use requirement. In nearly every case, these Items will be indicated by the basic form of words - "goods for use by a person" and variations on that form such as "goods for use by a person mainly for ..." and "goods for use by a person exclusively as ...". In each instance when the exemption depends on use, the Item will refer to use by a person. This might be a nominated person or body, or any person.

Note:
The reference to a person will be necessary to link the "use" Items to clause 5 in the Bill.

4.9 Extent of use: In most cases, it will not be necessary that the goods be intended to be used solely in the specified way in order to qualify for exemption. There will be three different degrees or levels of use in the exemption Items which depend on use. These will be exclusive use, main use and unquantified use. The Bill will not state how use is to be measured. For instance, there will be no rules to say that it will depend on the time that the goods are to be used in a particular way or the proportion or volume of the goods used in that way. The way in which the use of the goods will be measured will depend on the circumstances of each case and the Item in question.

4.10 For use exclusively: Some exemption Items will refer to goods for use by a person exclusively in a certain way. The effect of this will be that the relevant goods must be for use entirely in the way contemplated by the Item if they are to qualify for exemption. If any other use of the goods is intended, they will not be exempt.

Note:
The exclusive use test will be retained where it is presently found in the existing law. It will also be used for exempt parts and raw materials.

4.11 For use mainly: Some exemptions will require that the goods be goods for use by a person mainly in a certain way. "Mainly" will mean to the extent of more than 50%.

Note:
The existing law has a number of ways of describing the degree of use requirement. Goods are said to be "for use principally", "for use primarily", "for use primarily and principally" or "for use exclusively or primarily and principally". In nearly every case, "for use mainly" has been used in place of these terms. "For use mainly" has also been inserted in cases where the existing item simply says "for use" and a main use is consistent with the intention of the new Item.

4.12 Unquantified use: In some cases, exemption will depend on the goods simply being for use in the manner required by the Item e.g. motor vehicles for use by an eligible disabled person for his or her personal transportation to and from gainful employment (Item 97, Schedule 1) . Similarly, where an exemption will depend on goods being for use by a particular person or body, with no restriction on the way in which the goods are to be used, no extent or degree of use will be specified e.g. Goods for use by the Anglo-Australian Telescope Board (Item 130, Schedule 1) .

Note:
The unquantified use test for exemptions which depend on goods being for use in a certain way will be retained where it is the intention that goods be exempt if they are to be used to a real or significant extent in the way required by the Item. A transient or insubstantial use will not be enough. With regard to exemption Items covering goods for use by particular persons or bodies where there is no restriction on the manner of use, no degree of use will be specified because the exemption user, must intend to use the goods itself for the statutory period for exemption to apply.

Parts, fittings and other associated goods

4.13 Certain associated goods such as parts, fittings, accessories and attachments for particular goods will attract the same rate of tax or exemption from tax as the goods themselves (the main goods), if certain conditions are satisfied. These conditions are discussed below. For ease of reference, "parts" is to be taken to include fittings, accessories and attachments.

4.14 Parts for exempt goods: Certain exemption Items will contain a note at the end of the Item or subitem in the form [Parts] or, for example, [Parts and fittings]. This will mean that there will be an exemption for parts or parts and fittings for the goods covered by the exemption Item.

Note:
Where an exemption is for goods for use by a specified body, there will be no need to have a separate exemption for parts, as long as there is no restriction on the kinds of goods which will qualify for exemption.

4.15 If the main goods are always exempt goods , the exemption for parts will be available if the goods satisfy one of 2 conditions. Either the parts will be goods marketed exclusively as parts for the main goods, i.e. parts which are recognisable in the market as parts for the main goods, or the parts are goods for use by the exemption user exclusively as parts for the main goods. These will be goods which are actually intended to be used as parts but which are not dedicated parts for the main goods. [EC clause 8(2)]

Example: Item 52, Schedule 1 will refer to water bore casings . There will be a note at the end of the Item which will read [Parts and fittings] . This will mean that goods which are marketed exclusively as parts for water bore casings will be exempt. There will also be an exemption for goods which are not marketed exclusively as parts for water bore casings but which are for use by a person exclusively as parts for water bore casings.

4.16 If an exemption Item has a for use requirement, the exemption for parts will only be available for goods for use by a person exclusively as parts for the goods covered by the exemption Item. [EC clause 8(3)]

Example: Item 17, Schedule 1 will refer to cranes and winches for use by a person mainly for hauling log timber in the timber-getting industry. There will be a note at the end of the Item reading [Parts, accessories and attachments]. This will mean that there will be an exemption for goods for use by a person exclusively as parts, accessories or attachments for cranes and winches covered by the Item.

Note 1:
The exemption for goods which are marketed exclusively as parts for exempt goods will avoid the need to quote on those goods.
Note 2:
Because of the interchangeable nature of many parts, exemption will be available only if the parts are for use exclusively as parts for the exempt goods.
Note 3:
As previously noted, the rules concerning the statutory period will not apply to parts for exempt goods.
Note 4:
The existing legislation does not specify whether exemptions for parts are restricted to goods which are obviously parts for the main goods or whether it extends to goods which are to be used as parts in the particular case but also have other uses. It also does not specify the extent of use which will qualify goods as parts. The approach to associated goods adopted by the new law is intended to overcome these problems.

4.17 Parts for taxable goods: The standard expression for referring to parts for taxable goods will be goods marketed principally as parts for goods covered by ... . Goods will therefore only be regarded as parts for taxable goods if they are clearly recognisable in the market as parts for those goods. Because there are no conditional rating items, there will not be a "for use" test for parts for taxable goods.

Note:
The "marketed principally" test will be used for parts for taxable goods because it will cover a wider group of goods than that covered by "marketed exclusively". This will bring more parts within the range of taxable goods.

"Covered by"

4.19 "Goods covered by" will be a standard expression to indicate goods which fall within the terms of an Item or subitem.

4.20 With regard to parts, the exemption or classification will refer to parts for goods "covered by" the Item or subitem. It will not be necessary for the main goods to be assessable goods for the parts to qualify for exemption. Goods will be "covered by" an Item or subitem even though they are Australian-used goods at the time when parts are being purchased. So long as the main goods are being used in a way to which an exemption Item applies at the time when the parts are obtained or applied to own use, then the parts will be exempt.

Of a kind ordinarily used

4.21 Some goods will be exempted, or classified at a certain rate, because they are goods of a kind ordinarily used in a particular way. This description envisages a settled or common use of goods. Goods which are ordinarily used in more than one way can qualify for exemption, or be classified at a certain rate, if one of the settled or common uses of the goods falls within the description of "goods of a kind ordinarily used" in a particular way. In measuring ordinary use, it is the actual ordinary use of the goods by users or buyers of the goods, as opposed to the ordinary use contemplated by manufacturers or vendors, which will determine if goods fall within the description of goods of a kind ordinarily used in a particular way.

Example: There is an exemption for goods of a kind ordinarily used for repairing footwear. If there are goods which are of a kind ordinarily used in repairing footwear, i.e. the goods are commonly used for that purpose, then the goods will be exempt even though they can also be used for some other purpose.

Note 1:
In Schedule 1, the standard expression goods of a kind ordinarily used will indicate always exempt goods.
Note 2:
The term goods of a kind ordinarily used will be used in the new law in place of references in the existing law to "of a kind used", "of a kind ordinarily used" or "of a kind used exclusively or primarily and principally".

Marketing Test

4.22 Some goods will be either exempt or classified at a particular rate on the basis of their marketing. Standard expressions goods marketed for ... or goods marketed as ... will indicate these cases. "Marketed" will be modified either by the word "principally" or, in the case of associated goods and raw materials, "exclusively". "Principally" will be defined to include "exclusively". Marketing will involve an examination of the activities of the sellers of the relevant goods.

Note 1:
In Schedule 1, the standard expression "marketed principally" will indicate always exempt goods.
Note 2:
In the existing law the marketing test is expressed as "marketed as or for", "put up for sale as", "sold as" , "put up and sold as" or "made up for use". These terms will be replaced by "marketed principally". In addition, a "marketed principally" test will be adopted in some Items where there is presently a "for use" or "used" requirement. These are Items where the current practice is to consider marketing of goods to decide if particular goods fall within it.

The following goods ...

4.23 The opening words of a number of Items will be the following goods for ... a certain purpose or the following goods if ... they are used in a certain way. Under the opening words will be a list of goods. The goods in the list will have to fall within the opening words if they are to be brought within the Item.

Note:
A common construction in the existing law is to have an introductory description of goods followed by "namely" or "viz" and a specific list of goods. This causes confusion because it is not clear whether the opening words limit the goods covered by the Item or whether the goods in the list fall by definition into the opening words. This will be overcome by the use of "the following goods". It will also be used in cases where a common condition or description applies to a group of goods.

Official use

4.24 There are some exemptions which are expressed to apply to goods for official use by government representatives e.g. a Trade Commissioner (Item 132, Schedule 1) . However, these words will be omitted where the exemption user cannot have a private or domestic capacity e.g. the Commonwealth or a State.

Note:
This will not change the scope of those exemptions.

Consisting of

4.25 The word consisting will be used to refer to the composition of goods. For example, Item 12(2), Schedule 3 covers flavoured beverages that consist principally of soy milk . The term contains will also be a reference to the composition of goods.

Note:
In some cases in the existing law, e.g. subitem 68(2) and items 69, 70 and 70A in the First Schedule to the Sales Tax (Exemptions and Classifications) Act 1935 , "consisting of" is used in the sense of "being". In these cases "consisting of" will be either omitted altogether or replaced by "being", depending on the context.

References to the Customs Tariff

4.26 A number of exemptions will be tied to goods covered by an item of the Customs Tariff. In order to work out the scope of such Items, the reader will need to look at the Customs Tariff 1987 and sometimes the by-laws. The new law will adopt the approach of including, at most, only a brief description of the subject matter of the exemption.

Note:
The existing sales tax law often spells out details of the Tariff item. However, some of the Tariff items are quite lengthy and for the sake of brevity, these details generally will not be included in the new Schedule 1.

Non-Profit body

4.27 There will be several exemptions for goods for use by non-profit bodies. A non-profit body will be a society, institution, organisation or other body that is not carried on for the profit of individuals. [EC subclause 3(2) definition of 'non-profit body']

Note:
"Non-profit body" will be used in the new law in place of a variety of existing terms, such as "society, institution or organisation not carried on for the profit of an individual" or "organisation not carried for the profit of individuals".

Established and maintained

4.28 The expression established and maintained principally for will frequently be used in connection with "non-profit bodies" and other organisations. It will refer to the reason for establishing the organisation and the purpose behind its continuing, day to day, conduct and existence. As previously noted, "principally" will be defined to include "exclusively".

Note:
"Established and maintained principally for" will be used in place of phrases in the existing law such as "established and maintained exclusively or principally for", "established and carried on exclusively or principally for" or "established".

Local entry

4.29 An exemption Item marked [local entry only] only has effect if the particular dealing with goods is a local entry. The goods may later be taxable, if they are subject to another assessable dealing. [EC clause 6]

Note:
The notation [local entry only] has been used where the existing law says "Act No. 5". Local entry will be used in the new law in place of "entered for home consumption" in the existing law.

CHAPTER 5 SCHEDULE 1

BUSINESS INPUTS EXEMPTION ITEMS

KEY PRINCIPLES

Key Principles

A. Introduction

5.1 This chapter describes the key principles and standard expressions which will be used in the new law dealing with the exemption Items for goods used in business or industry. These exemption Items will be contained in Chapter 1 of Schedule 1 to the Exemptions and Classifications Bill. Division 2 of Part 3 of the Exemptions and Classifications Bill will contain the general rules that will apply to the exemption Items in Chapter 1 of Schedule 1.

B. Explanation and Commentary

Overview

5.2 This chapter will deal with the following issues:

General issues
1.
Structure of Chapter 1
2.
Registration requirements
Business inputs Items
3.
Core activities
4.
Ancillary activities
5.
Eligible raw materials and parts
6.
Exclusions
7.
Defined terms used

1. Structure of Chapter 1

5.3 The location of the new exemption Items for goods for use in business or industry will differ significantly under the new law. Chapter 1 of the First Schedule will contain the most frequently used exemption Items relating to business or industry. This will enable users of Schedule 1 to have quicker and easier access to the exemption Items most often used for business purposes. The exemption Items will be grouped into Sub-Chapters according to the industry or activity to which they relate, as follows:

Sub-Chapter 1: Mining and primary production;
Sub-Chapter 2: Manufacturing and industrial etc;
Sub-Chapter 3: Containers, transport, storage etc;
Sub-Chapter 4: Research and development, design etc;
Sub-Chapter 5: Miscellaneous.

5.4 The exemption Items in Chapter 1 can be grouped as follows:

Business inputs exemption Items marked [R]
Mining (Item 1)
Primary production (Item 2)
Manufacture-related activities (Item 18)
Raw materials (Item 19)
Activities relating to printing (Item 23)
Storage, transport etc (Item 28)
Transport by rail, pipeline (Item 29)
R&D by manufacturer (Item 33)
Engineering and technical design (Item 35)
Mixed activities (Item 38)
Business inputs exemption Items not marked [R]
Handling ship's cargo or international air cargo (Item 30)
R&D by approved R&D body (Item 34)
Subcontractors (Item 36)
Other specific exemption Items.
Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 20, 21, 22, 24, 25, 26, 27, 31, 32 and 37.

5.5 Business inputs exemptions marked [R]: A number of exemption Items for goods for use in business or industry will be marked [R]. These Items will be referred to as [R] Items . These Items will operate so that only registered persons can quote to acquire goods covered by the Items tax-free. Unregistered persons will not be able to quote exemption declarations to obtain goods covered by these Items tax-free. Unregistered persons will be required to acquire goods covered by the Items tax-paid, and may be entitled to claim a credit (see paragraph 5.17).

Additionally, exemption will only apply to the subsequent application to own use (AOU) of the goods if the person is registered at the time of the AOU and intends to deal with the goods so as to satisfy the requirements of the exemption [R] Item.

The goods to be covered by these Items will be broadly equivalent to several of the categories of eligible business goods in the existing law. Exemption for raw materials will also be covered. These Items can be characterised as providing exemption for input goods for use in connection with the manufacture or production of assessable goods .

5.6 These Items will describe types of activities for which exemption will be available, rather than include lists of goods of a specific description. Each of these Items will be structured in a similar way (see Figure 5.1 at the end of this chapter), and there will be a number of general principles which will be common to each Item. These principles will be discussed later in this Chapter.

Note:
Each of the Items forms part of a new general approach to exempting business inputs which was introduced in the Sales Tax Laws Amendment Act (No. 3) 1991 .

5.7 Business inputs exemption Items not marked [R]: A number of business inputs exemption Items will not be [R] Items. This will allow unregistered persons to obtain goods covered by these Items free of tax by quoting an exemption declaration. Registered persons will be required to quote their registration numbers to obtain goods covered by these Items on a tax-free basis. Additionally, exemption will apply to the subsequent AOU of the goods where the registered or unregistered person intends to satisfy the requirements of the exemption Item at the time of the AOU.

Note:
If the registered person does not quote at the time of the acquisition of goods covered by these Items, then the goods will be acquired on a tax-inclusive basis. The registered person will be entitled to a credit under Credit Ground 2 of Table 3 of the Sales Tax Assessment Bill for the tax borne on the goods (see discussion of this Credit Ground at paragraph 11.10 of the Assessment Bill explanatory memorandum).

5.8 Other specific exemption Items: The remaining Items in Chapter 1 will provide exemption for specific activities or classes of goods which are not covered by the business inputs exemption Items. These Items are discussed individually in Chapter 6.

Separate exemption Items for each industry

5.9 There will be a separate exemption Item in the new law for each industry or activity covered by the eligible business goods provisions in the existing law. This will replace the current approach under which the term eligible business goods is referred to in an exemption Item, but where the term actually covers 13 separately defined categories of goods used in different industries or activities.

Reason for changes: The new structure will allow taxpayers to have easy access to the key exemption Item which applies to their particular industry. They will generally not be required to become familiar with exemption Items or concepts which are not directly relevant to their industry.

5.10 The structure of the business inputs exemption Items will be similar for all industries. This will overcome many of the inconsistencies in the existing treatment of different industries. Much of the complexity and duplication within the existing exemptions for eligible business goods and aids to manufacture will be removed.

Multiple effects of each business inputs exemption Item

5.11 As discussed in paragraphs 3.12-3.17 , each exemption Item will have the following effects:

(a)
a quoting ground will be available under which a person who intends to use the goods in the way required by the Item will be entitled to acquire the goods tax-free, either by quoting a registration number or an exemption declaration at or before the time of the dealing (note that [R] items are only available to registered persons);
(b)
an assessable dealing will not be taxable if it is an application to own use which does not involve the granting of a lease, and the applier or user of the goods intends to use them in the way required by the Item;
(c)
a dealing will not be taxable if it is an application to own use which involves the granting of an eligible long-term lease where the lessee intends to use the goods in the way required by the Item;
(d)
a credit entitlement may arise where the taxpayer has granted an eligible long-term lease, and the lessee intends to use the goods in the way required by the Item. [clause 5]

5.12 This approach will differ from the approach in the existing law under which separate exemption Items are required for different transactions involving business inputs.

Reasons for changes: These multiple effects for each business inputs exemption Item will overcome the complex structure of the existing business inputs exemptions. Under the new law, exemption users will generally only have to deal with one exemption Item for all dealings in relation to a particular industry.

Under the existing law there are separate exemption Items to deal with different transactions, acts or operations for any particular category of business inputs. For example, existing Items 113A, 113B and 113C deal with three separate transactions in respect of goods which are aids to manufacture; and Items 155, 156 and 157 deal with three separate transactions in respect of eligible business goods. However, in other areas in the existing law, there is only one exemption Item dealing with all transactions in relation to goods used in a particular industry.

2. Registration requirements

5.13 There will be new registration requirements in relation to [R] Items.

Operation of [R] Items

5.14 Only registered persons will be permitted to quote to acquire tax-free goods covered by [R] Items.

5.15 Requirement to be registered: Under the new law, [R] Items will only be effective (through the Assessment Bill) as a ground for quoting where the exemption user is a registered person who quotes their registration number at or before the time of the dealing. This rule is contained in clauses 5 and 9 of the Exemptions and Classifications Bill. Similarly, an [R] Item will only be effective (through the Assessment Bill) as an exemption for a non-lease application to own use, if the exemption user is a registered person at the time of AOU. See paragraphs 3.9-3.19 for a detailed discussion of how the system of exemptions will operate through the Assessment Bill.

5.16 This change will encourage regular users of [R] Items to register and to quote registration numbers when obtaining their inputs. This will enable a significantly greater number of goods producers to benefit from the ease and simplicity of quoting a registration number, rather than having to continue with the more cumbersome process of completing an exemption declaration for every purchase. This change will also result in a significant reduction in the numbers of exemption declarations being retained by suppliers.

Note:
Producers of always exempt goods , such as primary producers, who choose to be registered in order to obtain business inputs tax-free under quote, will not be required to lodge sales tax returns in relation to their dealings with those exempt outputs.

Credits for unregistered persons

5.17 An unregistered exemption user will have to purchase business inputs covered by [R] Items at tax-inclusive prices. They may then be entitled to a credit, for the tax borne on the inputs, at the time of subsequent assessable dealings with the outputs. [Credit Grounds 6 and 7 of Table 3 of the Sales Tax Assessment Bill]

Business inputs exemption Items not marked [R]

5.18 Exceptions for R&D, cargo handling and subcontractors: The exemption Items for goods for use mainly in undertaking research and development by an approved R&D entity (new Item 34), goods for use mainly in handling ship's cargo or international air cargo (new Item 30) and goods for use mainly by a subcontractor to one or more manufacturers or other persons (new Item 36) will not be marked [R].

Reason: The activities covered by these Items may not be connected with the manufacture or production of assessable goods (i.e. outputs) that will be the subject of a later assessable dealing. Broadly, the [R] Items will be available for activities undertaken by goods producers only e.g. activities connected with the manufacture, production, or processing or treatment of assessable goods, such as mining, primary production or manufacturing activities.

If an activity can take place without assessable goods being produced (e.g. such as handling ship's cargo), then the activity is most likely of a service nature. It would not be appropriate for a person exclusively carrying out such activities to be able to obtain sales tax registration.

Example: The activities of independent cargo handlers do not involve the production of assessable goods, and will not be the subject of later assessable dealings (i.e. because the cargo handlers do not sell the cargo which they load for other persons).

Result: Cargo handlers will therefore be treated on the same basis as other users of non-business inputs exemption Items: the exemption users will have no grounds for registration (in relation to that activity alone); they will be able to provide an exemption declaration to obtain tax-free supplies of goods which they intend to use so as to satisfy the requirements of the exemption Item; and they will not generally be entitled to claim a credit if they obtain the goods on a tax-paid basis (e.g. where they did not quote an exemption declaration, or their quote was not accepted).

3. Business inputs exemption Items - Core activities

5.19 The new exemption Items for business inputs will generally be structured in a similar way. This new structure will provide grounds for exemption for the following goods:

·
Goods for use mainly in carrying out one or more of the following activities:

(a)
a core activity described in the Item (e.g. carrying out mining operations);
(b)
an ancillary activity to one or more activities covered by paragraph (a);
(c)
an ancillary activity to one or more ancillary activities covered by paragraph (b). [subitem (1)]

·
Goods for use exclusively as eligible raw materials and parts in relation to activities referred to above (see discussion at paragraph 5.27). [subitem (2)]

Each business inputs exemption Item will also specifically list the goods not covered by the Item. [subitem (3)]

Each business inputs exemption Item will also include, where practicable, the defined terms used in the Item. [subitem (4)]

The structure of the business inputs exemption Items is represented in Figure 5.1 at the end of this chapter.

5.20 Core activity: This is the central activity for which exemption will be available under each Item. It will not be a defined term in the new law. A short description of the activity is included in the headnote of each business inputs exemption Item, as is the case for all Items in the Schedules of the Exemptions and Classifications Bill, e.g. manufacture-related activities (Item 18), activities relating to printing (Item 23).

Exemption goods: The goods for which the exemption user is seeking exemption can be referred to, for ease of use, as the exemption goods . In the business inputs exemption Items in particular, it will often be important to distinguish between the exemption goods , and other goods in relation to which the exemption goods must be used if the exemption goods are to be exempt. For example, exemption will be available under new Item 28 for storage racking (i.e. the exemption goods) for use mainly in storing the manufactured goods (i.e. other goods) of the manufacturer. However, exemption will not be available for the storage racking if the other goods to be stored have been imported by the manufacturer to sell by wholesale (without any further process or treatment being applied).

5.21 The new law will emphasise activities for which goods are used, rather than descriptions of goods, i.e. whether goods can be characterised as falling within a specifically defined class.

Reason for change: The existing definitions of classes of business inputs such as eligible business goods , aids to manufacture , auxiliaries to aids to manufacture , eligible primary production goods etc. will not be used in the new law. This will simplify the structure of the business inputs exemption Items. It will also allow exemption users to focus on the activities which they carry out and the activities for which exemption will be available. They will be better able to make a straight forward judgement as to whether or not exemption will apply in their particular circumstances.

5.22 Removal of the definition of 'goods producer': There will not be a definition of goods producer in the new law. The new exemption Items will operate on the basis of linkages between the person using the exemption Item and the carrying out of the core or ancillary activities described in the Item. This will generally not alter the scope of the existing exemption Items.

Reason for change: Most of the existing provisions dealing with eligible business goods identify a class of persons involved in the production of goods. These persons are defined to be goods producers. Goods can only currently qualify for business inputs exemption if they are for use by a person who is a goods producer. The new Items will not require this identification because they are activity-based. Any person will be able to claim exemption under the new Items if they are carrying out the specified activities and meet all of the requirements of the Item. The status of the person will not be relevant.

Example: Under Item 28 of the new law, exemption will be available for goods used mainly by the exemption user in the storage of qualifying goods. In the case of the storage of manufactured goods, the Item requires that the person using the exemption Item is the same person who has manufactured the goods which are to be stored. If this essential requirement is satisfied, then it is not relevant whether the person can be characterised as being a goods producer or not.

Deemed manufacturers: Under the existing law, certain supplies of materials for incorporation into goods manufactured for the supplier by another person are deemed to be manufactured by the supplier of the materials, and not by the real manufacturer. The supplier of the materials is deemed to be a manufacturer under the existing law, and is treated as a goods producer for business inputs purposes.

Under the new law, the supplier will no longer be treated as the manufacturer of the goods, and therefore the goods delivered back to the supplier will not be qualifying goods of the supplier. The supplier may not be entitled to business inputs exemptions in relation to the goods concerned. This is consistent with the changed tax treatment of those assessable dealings to be known as deliveries of customer's materials goods (see paragraph 7.30 of the Sales Tax Assessment Bill explanatory memorandum).

5.23 Removal of unnecessary definitions: The new business inputs Items will feature the removal, where practicable, of unnecessary definitions from the existing exemption Items.

Reason for change: The reduction in the use of defined terms within exemption Items is a simplification measure. Exemption Items will be easier to use. Where definitions need to be retained, they will be located, wherever possible, in the body of the exemption Item to which they apply.

Example: There are five existing defined terms which are relevant to goods for use in carrying out the rehabilitation of a mine site. These will be omitted in the new law.

Result: The equivalent exemption provision relating to rehabilitating a mine site will only rely on one expression i.e. 'rehabilitating or restoring a site' (see new subitem 1(b)). The scope of the exemption will not be changed by omitting these definitions.

4. Ancillary activities

5.24 Concept: The concept of ancillary activities will be retained in the new law. Ancillary activities in the existing law are a list of defined activities that complement or assist in the conduct of core activities, or of ancillary activities themselves.

An example of an ancillary activity to a core activity under the existing law is the carrying out of (computer-assisted) scheduling of car production activities. An example of a lower level ancillary activity in the existing law is the cleaning of the room in which the computer-assisted scheduling of car production is carried out.

5.25 Structure: The structure of ancillary activities will be changed. In the new law, the two levels of ancillary activities which may qualify goods for exemption will be described in subitem (1) of each business inputs Item, rather than within the definition of ancillary activities .

Reason for change: This is a simplification measure to allow easier access to the levels of exemption that will be available for goods used in ancillary activities. There will be no substantive change to the scope of the exemptions available.

Example: Core activities can be referred to, for convenience, as level 1 activities. The production line equipment discussed above would be exempt as a core activity at this level. Exemption will also be available for goods used mainly in carrying out activities (i.e. level 2 activities) that are ancillary to one or more level 1 activities. The computer used mainly to schedule the car production would be exempt at this level. Finally, exemption will also be available for goods used mainly in carrying out activities (i.e. level 3 activities) that are ancillary to one or more level 2 activities. The vacuum cleaner used mainly to clean the room in which the production scheduling takes place, would be exempt at this level. Further levels of ancillary activity will not be available . This is consistent with the approach in the existing law. This structure is demonstrated in Figure 5.2 and Figure 5.3 at the end of this chapter.

Note 1:
The new approach will also allow users to add together the uses of a piece of equipment in carrying out ancillary activities in respect of one or more higher level activities, in order to satisfy the mainly used test within the exemption Item concerned, i.e. without having to use the mixed-use exemption Item (Item 38).
Note 2:
This is a minor change from the existing law, where an ancillary activity can only relate to one core activity at a time. Under the existing law, the adding together of uses of a piece of equipment in respect of one or more core activities to satisfy the main use test will only be available under the mixed-use exemption Item. [clause 10]

5.26 Ancillary activities to be covered: Ancillary activities will be defined to be the following four categories of activities:

(a)
scheduling, sequencing, monitoring, controlling or costing the higher-level activities;
(b)
ordering, storing, handling, transporting, monitoring, controlling, costing, repairing or maintaining goods/equipment , raw materials or eligible raw materials and parts for use in carrying out the higher-level activities;
(c)
training for the purposes of developing, improving or maintaining a person's skills in performing higher-level activities; and
(d)
a wide range of activities which will be broadly equivalent to the supporting activities in the existing law e.g. activities undertaken mainly to provide access to a building, provide lighting, control temperature etc. [subclause 10(1)]

Note 1:
Repair or maintenance in the existing law is a separate ancillary activity. In the new law these activities will be included in paragraph (b) above.
Note 2:
The references to (a) - (d) above are references to the paragraph numbers in subclause 10(1).

Goods to which these categories will apply are discussed below.

(a)
Scheduling, sequencing, monitoring etc: This activity will cover arranging how production operations or other core activities will be undertaken, as well as controlling and monitoring the various stages of production processes. There will be no change to the range of goods covered by this category of ancillary activity.
(b)
Ordering, storing, handling etc: There will be five types of goods that can be ordered, stored, handled etc. They are:

(i)
goods/equipment used, or for use, mainly in carrying out the higher-level activities;
(ii)
goods which are to be processed or treated (i.e. raw materials);
(iii)
goods for use exclusively as raw materials in the on-site construction of goods/equipment for use mainly in carrying out higher-level activities;
(iv)
goods for use exclusively as parts for goods/equipment for use mainly in carrying out higher-level activities;
(v)
goods for use exclusively as raw materials in repairing or maintaining goods/equipment for use mainly in carrying out higher-level activities. [subclause 10(1)(b)]

Note:
The references to (i) - (v) above are references to sub-paragraph numbers in subclause 10(1)(b).

(i)
Goods/equipment: A number of clauses in the Bill will apply to goods, as well as machinery, implements or apparatus which are not goods. This term will cover machinery which has legally ceased to be goods (i.e. because it is attached to a floor so as to become a fixture), as well as machinery that never was goods (i.e. because it was constructed as a fixture at the place where it is to be used). This range of property is referred to as, for convenience, goods/equipment . As long as the machinery is used mainly in carrying out the higher-level activities, exemption will be available for the listed activities undertaken in relation to the goods/equipment.
Reason for change: The existing law specifies certain activities in relation to goods used mainly in carrying out the core activity. Where machinery or equipment used in carrying out the core activity is not goods at the time of undertaking the ancillary activity, these activities would not be covered.
(ii)
Goods which are to be processed or treated: Exemption will continue to be available for storage etc. of raw materials and work-in-progress. However, exemption will not be available for goods for use mainly in storing, handling etc. of finished goods under this activity.
Reason for change: This is consistent with current policy that goods for use in ordering, storing, handling etc of finished goods will not be eligible for exemption as an ancillary activity. Exemption for storage of finished goods will only be available when the special conditions in the general storage Item (Item 28) are satisfied in relation to the premises where the finished goods are to be stored.
(iii)-(v)
Eligible raw materials and parts: Exemption will be available for goods for use mainly in ordering, storing, handling etc of the eligible raw materials and parts covered by subitem (2) of each new business inputs exemption Item (see discussion of what this term covers at paragraph 5.27).
Reason for change: Under the existing law, these goods are considered to be used in carrying out core activities, and the ordering, storing, handling etc of such goods is covered. The specific inclusion of these goods is a simplification measure that will not change the scope of the existing exemption.

(c)
Training: There will be no change to the scope of the training activities covered under the existing law.
(d)
Supporting activities: One specific group of ancillary activities in the existing law is supporting activities. These are seventeen activities directed at keeping the production or other premises in a suitable condition for the efficient conduct of core and ancillary activities. There will be no separate definition of supporting activity in the new law, because these activities are merely another class of ancillary activities. This is a simplification measure. (A detailed discussion of the scope of the activities covered by this paragraph is contained in the explanatory memorandum to the Sales Tax Laws Amendment Act (No. 3) 1991 at pages 3.6 - 3.8).

5. 'Eligible raw materials and parts'

5.27 Exemption will be available under subitem (2) of each of the new business inputs exemption Items for goods for use as eligible raw materials and parts in relation to activities covered by subitem (1) of the Item. Eligible raw materials and parts will be defined in clause 11 to mean goods for use exclusively as:

(a)
raw materials in the on-site construction of goods/equipment for use mainly in carrying out one or more of the activities specified in subitem (1) in each Item (e.g. manufactured components which will become an integral part of a fixed crane to be constructed at a wharf);
(b)
parts for such goods/equipment (e.g. replacement parts for a computer used in just-in-time ordering of components to be used in manufacturing motor vehicles);
(c)
raw materials for use in repairing or maintaining such goods/equipment (e.g. fabricated metal pieces which will become an integral part of manufacturing equipment during necessary repairs or preventative maintenance activities carried out on the manufacturing equipment).

Note 1:
The references to (a) - (c) above are references to paragraph numbers in subclause 11(1). [clause 11]
Note 2:
The purpose of specifically including eligible raw materials and parts in each new business inputs exemption Item is to clarify that such goods will be covered by the Items. This will not extend the scope of the exemptions available for goods for use in those activities, because materials for use in the construction or repair of these goods are covered in the existing law as goods for use in carrying out the core activity. Parts for goods used in carrying out the core activity are also specifically covered under the existing law.
Note 3:
The term raw materials is used in two different ways and is defined in clause 7 of the Assessment Bill. The term is most frequently used to describe the materials that are combined in the manufacturing process to form part of newly manufactured goods to be sold (such as raw wool used to make clothing). However, in the context discussed above, goods may be used as raw materials in constructing or repairing property. This will occur where some essential element of the goods becomes an integral part of the property at the completion of the construction or repair activities (such as metal to be welded into place to repair cracked housing of manufacturing equipment).

6. Exclusions

5.28 One of the general principles underlying the proposed business inputs exemption Items will be a new approach to dealing with goods which will not be exempt under these Items. Each business inputs exemption Item will list, at subitem (3), the goods which will not be covered by the Item. This is a simplification measure which will make it possible for exemption users to identify, within the exemption Item they are using, those goods which will be excluded from exemption. These goods will be taxable, unless covered by another exemption Item . There will be four categories of these goods:

(a)
generally-excluded property - a class of excluded property which will be excluded from all business inputs exemption Items;
(b)
general-purpose road vehicles which are not used exclusively within and/or in going between certain adjacent premises controlled by the exemption user;
(c)
goods which are specifically excluded from that Item only; and
(d)
goods which will be excluded by the operation of the rule in clause 13 (the lower level operation of excluded property rule) which may preclude exemption for goods used mainly in connection with excluded property. [clause 12]

(a) Generally-excluded property'

5.29 Generally-excluded property will be taxable unless covered by another exemption Item. The term will broadly cover goods excluded from the definition of eligible business goods in the existing law.

5.30 The proposed exclusions will relate to property of certain descriptions, instead of goods. This will ensure that machinery, implements and apparatus which are fixtures (e.g. because they have been attached permanently to the ground and therefore are no longer goods, or have been built on-site and therefore have never been goods in their own right) can still be generally-excluded property. This will allow the proposed rule concerning the lower level operation of excluded property to operate in relation to such machinery etc. (see paragraph 5.44 ). [clause 12]

Specific classes of 'generally-excluded property'

5.31 Several changes will be made to the scope of generally-excluded property. These are discussed below.

Food making at retail outlets

5.32 Goods for use in connection with the preparation of food in hotels, restaurants, catering establishments etc. are currently taxable. The existing exclusion will be rewritten in plain English. This will simplify the exclusion. The changes to the scope of the exclusion are discussed below. [subclause 12(3)]

Note 1:
Places used for the preparation of meals to be consumed on aircraft are currently treated as catering establishments. Equipment used in these establishments is therefore taxable. Such equipment will continue to be taxable under the new law.
Note 2:
Equipment used by bakers and pastry cooks is currently exempt, even though they manufacture food at retail outlets for sale from those outlets. This equipment will continue to be exempt. The definition of eligible manufacturer in the new law will impose a status test, on a similar basis to the existing law. For example, a baker will be a person whose occupation is that of a baker, and will not include a person who merely carries out the activity of baking in the course of other business activities. For example, although a hotel or restaurant may have an oven used only for baking bread, the owner of the equipment is not a person who can be characterised as conducting business as a baker . These ovens would therefore be taxable.

5.33 Biscuit making equipment: General-purpose property for use in the manufacture at retail outlets of biscuits for retail sale from those outlets will be taxable under the new law.

Reason for change: The change will correct an anomaly in the treatment of goods for use in the manufacture (at retail premises) of biscuits for retail sale from those premises. These biscuits are specifically exempted from tax (see new Item 68). The anomaly is that manufacturers of these exempt biscuits are required to pay tax on special purpose biscuit-making machines for use on retail premises, but general-purpose equipment they use is exempt.

Note:
Under the existing law, mixes for making biscuits at retail outlets are taxable, but other raw materials used in making such biscuits are exempt. Under the new law, all raw materials for use in the manufacture of biscuits at retail outlets will be taxable, other than those raw materials that are exempt for other reasons, such as milk, butter, sugar, etc. (see new Item 19).

5.34 Pizza making equipment: Goods for use in the manufacture, at retail outlets, of pizzas for sale from those retail outlets will become taxable under the new law.

Reasons for change: This will remove an existing anomaly that gives retail pizza manufacturers a competitive advantage over other restaurants and take-away food outlets. Under the existing law, restaurants and other retail food outlets are not entitled to exemption for raw materials or machinery and equipment for use in manufacturing food at the retail premises. Bakers and pastry cooks are an exception to this rule. Because a pizza is pastry, manufacturers of pizzas for retail sale may be entitled to exemption on raw materials or machinery and equipment, thereby gaining an advantage over other restaurants and take-away food outlets. Pizzas will be specifically excluded from the meaning of pastry under the new law. [subclause 12(3)]

Other goods

5.35 Parts: Parts for excluded property will be taxable, unless covered by another exemption Item. However, there will be no specific reference to parts in the definition of generally-excluded property.

Reason for change: Parts for excluded property will be taxable because of the rule in clause 13 which will prevent an exemption user obtaining exemption for goods used in relation to excluded property (see paragraph 5.44).

5.36 Infrastructure of telecommunications networks: In the new law, property that forms, or is to form, part of the infrastructure of a telecommunications network will continue to be taxable. This property is taxable under the existing law. In the case of the public telecommunications network operated by Telecom, the infrastructure of the network is owned by Telecom. The equipment that is owned or leased by goods producers and located on their premises will generally not be part of this infrastructure. This equipment may qualify for exemption, depending on whether the use of the equipment satisfies a business inputs exemption Item.

For example, PABX systems owned by manufacturers and others will not be part of the telecommunications network infrastructure, and may qualify for exemption. However, in the case of privately owned telecommunications networks, the infrastructure equipment (such as land-lines) may be owned by the network user. This infrastructure equipment will be taxable.

(b) 'General-purpose road vehicles'

5.37 General-purpose road vehicles will generally be taxable, unless they are used exclusively within and/or in going between certain premises owned by the exemption user. The exclusion for general-purpose road vehicles will be located within each new Item. Although the structure of the exclusion will change, it will have broadly the same effect as in the existing law.

5.38 General principles: General-purpose road vehicles will be defined as road vehicles of a kind ordinarily used for the transport of persons or the transport or delivery of goods. This is similar to the definition in the existing law. The term does not include special purpose vehicles such as mobile manufacturing units or large mining dump trucks. General-purpose road vehicles will generally be required to satisfy two use tests in order to qualify for exemption. They must be used mainly to perform listed activities, and they must be used exclusively in travelling within and/or in going between certain adjacent premises. [subclause 3(2)]

General-purpose road vehicles for use to any extent in a township or accommodation complex will be excluded from exemption under Items 1 and 18. Vehicles for use by mining or manufacturing employees to travel within townships or large accommodation complexes located within the exemption user's premises will therefore be taxable. Under the existing law, general-purpose road vehicles for use in mining are taxable when for use within areas used mainly in connection with any domestic or staff amenities. This has been too restrictive, and the new test will also apply to manufacturers for consistency.

5.39 Changed structure: The structure of the exemption in the existing law will change in the new law. The existing law regards general-purpose road vehicles as eligible business goods if ownership, premises and use tests are satisfied. The new structure treats general-purpose road vehicles as excluded goods unless certain premises, ownership and use tests are satisfied.

Reason for change: This is a simplification measure which will allow users to more readily identify whether their general-purpose road vehicles will be exempt or taxable.

5.40 Premises owned, leased or controlled: The existing expression owned, leased or controlled will be covered in the new law, for convenience, by the expression controlled . This term will be defined to include owned or leased. The scope of the types of premises within which general-purpose road vehicles must be used to qualify for exemption, will not be altered by this change. [subclause 3(2)]

5.41 Mixed-use general-purpose road vehicles: There is a separate exemption Item in the existing law to enable general-purpose road vehicles to qualify for exemption in limited circumstances when used outside of production premises and to enable use of the vehicle in a mixture of activities. In the new law, each business inputs exemption Item will contain a provision enabling general-purpose road vehicles to be exempt when used in going between adjacent premises. If users need to be able to aggregate the uses of general-purpose road vehicles across different exemption Items, then they will be able to use the general Item for mixed uses (new Item 38).

Reason for change: This is a simplification measure. It will reduce the number of definitions in the law.

5.42 Adjacent premises: The reference in the existing law to contiguous premises will be changed to adjacent premises.

Reason for change: Adjacent is a more commonly used word. This change will not alter the scope of the current exemption.

(c) Specifically excluded goods

5.43 In addition to generally-excluded property, some business inputs exemption Items will contain specific exclusions. These specific exclusions will generally cover the same goods that are excluded from the equivalent category of eligible business goods under the existing law. There will be variations in specific Items. These are explained in Chapter 6.

(d) Lower level operation of excluded property

5.44 An important principle in the new law will be the rule regarding the lower level operation of excluded property. In deciding whether business inputs exemption Items marked [R], and exemption Items 30, 34 and 36 apply, the exemption user will not be able to rely on uses of the exemption goods which relate directly to excluded property or waste products resulting from the use of excluded property. Nor will exemption be available for goods on the basis of their use in relation to other property which itself is used in relation to excluded property, or waste products resulting from the use of excluded property. [clause 13]

Reason for change: Under the existing law, there is an increasingly complex and inconsistent approach to denying exemption for goods which are used in relation to expressly excluded property. There are numerous references in the existing law to prevent exemption for goods used in activities carried out in relation to other goods which are expressly excluded from exemption. Under the new approach, a single general rule will operate to achieve the same result.

Note:
This rule applies in relation to excluded property , rather than excluded goods . The concept of property includes fixtures. In many cases, the activities described in the business inputs exemption Items will be carried out by the use of machinery, implements and apparatus etc. that are not goods. The machinery etc. may be attached to land or a building so as to become a fixture. Alternatively, the machinery etc. may have been constructed on-site, and thus never became goods.

5.45 The main principles of the rule concerning the lower level operation of excluded property are shown in Figure 5.4 and Figure 5.5 at the end of this chapter. There are four limbs to the operation of the rule in clause 13:

First limb: Uses of exemption goods directly related to property that is excluded from exemption cannot be relied on to satisfy the relevant use test in the exemption Items.

Example: A manufacturer seeks exemption for an electronic tuning machine to be used 60% in servicing delivery vans. The delivery vans are taxable.
Result: The manufacturer will not be able to count the uses of the electronic tuning machine in relation to the taxable delivery vans, for the purpose of satisfying the main use test. The electronic tuning machine will be taxable, because it will not be mainly used in exempt activities. This is demonstrated by (a)(i) in Figure 5.4.

Second limb: Uses of exemption goods directly related to waste products resulting from the use of excluded property cannot be counted towards satisfying the relevant use test in the exemption Items.

Example: Exemption is sought for an exhaust fan for use in a restaurant kitchen to dispose of fumes that result from the use of an oven to cook meals to be served in the restaurant. The oven is taxable.
Result: The exhaust fan will be taxable because its total use relates to waste products resulting from the use of taxable equipment. See (a)(ii) in Figure 5.4.

Third limb: Uses of other property directly related to excluded property cannot be counted towards satisfying the relevant use test in the exemption Items.

Example: Exemption is sought for a tool box used exclusively to store tools used solely to repair taxable general-purpose road vehicles. The tools are taxable under the operation of the first limb above.
Result: The tool box will be taxable. The person will not be able to rely on the use of the tools in determining whether the toolbox can be exempt as an ancillary activity (i.e. the toolbox is not being used to store goods - the tools - mainly used in exempt activities). This is demonstrated by (b)(i) in Figure 5.4.

Fourth limb: Uses of other property directly related to waste products that result from the use of excluded property cannot be counted towards satisfying the relevant use test in the exemption Items.

Example: Exemption is sought for welding equipment to repair a machine (i.e. other property) which disposes of oil from taxable delivery trucks. The waste disposal machine is taxable under the second limb above.
Result: The welding equipment will be taxable. The person will not be able to rely on the use of the waste disposal machine in determining whether the welding equipment can be exempt as an ancillary activity (i.e. the welding equipment is not being used to repair goods - the waste disposal machine - mainly used in exempt activities). This is demonstrated by (b)(ii) in Figure 5.4.

Note:
References to (a)(i) - (b)(ii) above are references to the relevant subparagraph in subclause 13(1).

5. 46 Own-produced goods: The lower level operation of excluded property rule will not apply where a manufacturer manufactures goods that are excluded property and deals with the goods as own-produced goods, rather than as business inputs in connection with the manufacturing operation. For example, a manufacturer of general-purpose road vehicles (a class of excluded property) would be entitled to exemption for goods for use in the storage of the manufactured vehicles, as long as they are being stored as the manufacturer's products and not as vehicles for use as, for instance, staff cars.

Note:
Several listed exemption Items for goods used in agricultural or related industries will not be affected by the rule concerning the lower level operation of excluded property. This will allow a primary producer to continue to obtain exemption (under new Item 2) for goods used in ancillary activities (such as storage or repair) carried out in relation to certain other goods (such as repairing a 4 wheel drive vehicle which is exempt under Item 3, but which would be excluded from Item 2 because it is not used exclusively within and/or in going between adjacent premises of the primary producer).

7. Defined Terms Used

5.47 Agriculture: Agriculture is one of a group of activities which qualify for exemption under Item 2 as primary production activities. The term will mean "viticulture, horticulture, pasturage, apiculture, poultry farming and dairy farming and other operations connected with the cultivation of the soil, the gathering in of crops and the rearing of livestock". This represents a change from the existing law in that the definition of livestock will change (see below), meaning that a wider range of animal rearing pursuits will now be covered. [clause 3]

5.48 Eligible raw materials and parts: This term will cover materials for use exclusively so as to become an integral part of goods/equipment that is constructed on-site for use mainly by the exemption user in carrying out one or more of the specified activities. It will also cover parts, and materials for use in repairing or maintaining goods/equipment for use mainly by the exemption user in carrying out one or more of the specified activities (see paragraph 5.27). [clause 11]

5.49 Livestock: The existing definition of livestock will be extended to specifically include animals that are being reared or maintained for productive purposes, including animals for use in the farming of land (such as working dogs) and horses. Livestock will also include breeding stock of animals being reared or maintained for productive purposes. People who rear non-traditional farm animals, such as emus and llama, will now be treated as agriculturalists (i.e. because the animals they rear or maintain will now be livestock). These people will now be entitled to the same range of exemptions as a traditional sheep or cattle farmer. The new definition will specifically exclude fish, crustaceans and molluscs. People involved in fish-farming activities will be treated as being in the fishing industry, and not as being in the agricultural industry. Also excluded will be animals kept, or to be kept, as domestic pets. [clause 3]

5.50 Qualifying goods: Qualifying goods will be a defined term in the new law. It will describe goods that can be the subject of transport and storage, handling and dispatch activities, transport by rail, pipeline etc., R&D activities or engineering or technical design activities. Qualifying goods will be the manufactured goods of exemption users, goods derived from primary production activities or mining or prospecting operations carried out by the exemption user, raw materials, work in progress or goods covered by the listed business inputs exemption Items. [clause 3]

5.51 Raw materials: Goods (the materials) to be used in manufacturing other goods, only if the materials are dealt with in such a way that they, or some essential element of them, become an integral part of the manufactured goods. Goods will also be treated as raw materials if they are used in constructing or repairing property so that they become, or an essential element of them becomes, an integral part of the property in its finished condition. [clause 7, Assessment Bill]

5.52 Author/secretary equipment: Exemption will not be available under exemption Items 18, 23 and 35 for equipment used in certain activities undertaken by originators of text or images to be printed. These goods (such as word processors used by authors) are taxable under the existing law. There will be no change in the scope of this exclusion. Goods used in certain activities actually carried out by a person performing the functions of a secretary will be taxable. An activity will be actually carried out by a person where the person performs the activity themself. [subclause 3(2)]

Note:
Where, in other situations, it is required that goods be for use by the exemption user in carrying out an activity, it will not be necessary that the exemption users personally use the goods themselves. For example, where the exemption user is a company, goods purchased by the company for use by its employees mainly in the exempt activities will be exempt.

Structure of Business Inputes Exemption Items:  Figure 5.1

How does the definition of 'ancillary activity' work?  Figure 5.2

How ancillary activies can be applied:  Figure 5.3

How does the rule about 'Lower level operation of excluded property' work?  Figure 5.4

How to apply the rule about 'Lower level operation of excluded property'  Figure 5.5

Chapter 6 SCHEDULE 1

Introduction

The following chapters contain details of the goods included in the Schedules to the Exemptions and Classifications Bill. While the goods listed will generally match descriptions of goods contained in the existing law, there will be some key differences.

The major difference will be that the order of the Items will be changed, particularly in Schedule 1.

In some instances there will not be a direct translation of the goods listed from the existing law to the new law. Some specific descriptions of goods will disappear because the goods described will be covered by new Items that are expressed in more general terms.

Many Items in the existing Division I (Agricultural Machinery, Implements, Equipment and Materials), and the whole of existing Division IV (Fishing and Pearling Machinery and Equipment), will not appear in the new law because the goods covered by these provisions will be covered by the new business inputs exemption Item relating to primary production activities.

The link between existing and new Items can be seen by reference to the Exemptions & Classifications Bill Comparison Tables.

Another key difference will be in the treatment of parts, fittings and accessories for goods covered by the new Items. Parts will not appear in the Items or subitems of Schedule 1, but a reference will be placed at the foot of an Item stating "Parts" or "Parts and fittings" etc. This reference will mean that exemption for parts, fittings etc. is available for the goods covered by the new Item. In the description of Schedule 1 Items in this Chapter, an exemption for parts is indicated by a statement following the general description of the Item that "parts will be available". The treatment of parts etc. is explained in more detail in Chapter 4 (see paragraph 4.13).

In the taxing Schedules, where parts, fittings, accessories etc. are covered they will appear in the Item, generally as a subitem.

Chapter 1: Goods for use in business or industry

Sub-chapter 1.1: Mining and Primary Production

Item 1 - Mining Activities [R]

Overview

General description: Goods for use mainly in carrying out one or more mining or prospecting operations in the course of a business of carrying out such operations. Restoring or rehabilitating a site on which an exemption user has carried out such operations. Rehabilitating or restoring an airport site on a mining lease.

The Item will be marked [R]. Only registered persons will be permitted to acquire goods tax-free under this Item (see paragraph 5.14).

Coverage: This Item will cover goods for use in carrying out mining operations (such as digging mine shafts, drilling into and blasting mineral deposits and removing overburden and mineral deposits); petroleum mining operations (such as operating off-shore drilling rigs and tapping petroleum reserves); quarrying operations (such as removing deposits of sand, stone, aggregate etc.) and rehabilitation-related activities (such as revegetation, soil and water purification and mine packing).

The Item will cover ancillary activities (see paragraph 5.24) and eligible raw materials and parts (see paragraph 5.27). [subitems (1), (2)]

Existing law: Clause 5, Items 155, 156, 157.

Links with other Items: 36, 38.

Exclusions

The Item will not cover the following goods (which will therefore be taxable, unless covered by another exemption Item):

(a)
Generally-excluded property (see paragraph 5.29).
(b)
General-purpose road vehicles which are not for use exclusively within and/or in going between certain adjacent premises controlled by the exemption user. General-purpose road vehicles for use, to any extent , in connection with any part of premises used or for use mainly in connection with a township or accommodation complex (see paragraph 5.37).
(c)
Goods for use mainly in connection with administrative activities, other than administrative activities which are ancillary activities. This will mean that, for example, goods used mainly to undertake marketing, sales or personnel related activities will not be covered. [subitem (3)]

Note:
Some goods may be excluded if for use in connection with other property that is excluded from this Item (see paragraph 5.44). For example, exemption will not be available for equipment used mainly to repair recreational equipment located on mining leases. [clause 13]

Changes from existing law

Definitions to be omitted: Eligible mineral production goods, minerals producer or explorer, rehabilitation-related activity, restoration of a site, pre-mining condition of a site, site and extractive activities. These omissions are a simplification measure which will not change the scope of the Item.

Definition of mining: Mining will be defined in the new law to include mining for petroleum and natural gas. This will confirm the existing interpretation. [subclause 3(2)]

Definition of mining or prospecting operations: Mining or prospecting operations will be defined in the new law to mean mining operations, quarrying operations and exploring or prospecting for deposits that are to be recovered by mining or quarrying operations. This will be a simpler approach. It will not alter the range of activities covered by the existing provisions. [subitem (4)]

Removal of petroleum mining operations: The existing reference to petroleum mining operations will be omitted. Mining , in the new law, will cover petroleum mining, making a separate category of activities relating to petroleum mining unnecessary.

Rehabilitation of airports: The existing exclusion for rehabilitation-related activities in connection with airports will be omitted. This is a policy change to allow rehabilitation of areas previously occupied by airports within mining leases. Equipment used to rehabilitate mining sites is only likely to be used to a minimal extent in connection with rehabilitating airport sites.

Rehabilitation of domestic or staff amenities: The existing exclusion relating to rehabilitation in connection with domestic or staff amenities will be omitted. Domestic or staff amenities, such as an accommodation complex, will be generally-excluded property (see paragraph 5.29). The rule in clause 13 concerning the lower level operation of excluded property will prevent the exemption user relying on uses of rehabilitation equipment in connection with any site previously occupied by such a complex (see paragraph 5.44).

General-purpose road vehicles at airports: The existing exclusion for general-purpose road vehicles for use mainly in connection with airports will be omitted. This change recognises that it is unlikely that there are any vehicles dedicated to use at airports on mining leases and that, therefore, the exclusion is unnecessary.

Rehabilitation: The simplified drafting approach relating to restoring and rehabilitation activities will not alter the scope of the existing exemption.

Items 14 and 14A: Items 14 and 14A in the existing First Schedule to the Exemptions and Classifications Act will continue to apply indefinitely after the first taxing day. These Items will not be included in Schedule 1 to the Exemptions and Classifications Bill. The effect of the Items will be retained through the Sales Tax Amendment (Transitional) Bill. This will mean that the new Schedule 1 will have effect as if existing Items 14 and 14A were included in it.

This approach will be necessary because the structure of these existing Items is not consistent with the structure of the new Items. These Items will be retained because they afford exemption for goods which may not be covered by new Item 1. For example, equipment for use in mine-shaft construction is currently exempt under Item 14(1). However, the equipment would be excluded from exemption under new Item 1 as generally-excluded property (see paragraph 5.29). [clause 11 Sales Tax Amendment (Transitional) Bill]

Item 2 - Primary Production Activities [R]

Overview

General Description: Goods for use mainly in carrying out one or more primary production activities in the course of a primary production business.

The Item will be marked [R]. Only registered persons will be permitted to acquire goods tax-free under this Item (see paragraph 5.14).

Coverage: Primary production activities will mean agriculture , which will include those activities commonly undertaken in the course of a business of horticulture, dairy farming, and operations connected with the cultivation of the soil, the gathering in of crops, or the rearing of livestock etc. (see discussion below); forestry activities (such as the planting and tending of trees and the felling, lopping and trimming of trees); fishing activities (such as the taking and catching of fish, the farming of fish, oysters and crustaceans and the processing of fish on non-recreational vessels); and pearling activities (such as the taking of pearl shell or oysters for culturing purposes).

Primary production business will mean a business of carrying on primary production activities.

The Item will cover ancillary activities (see paragraph 5.24) and eligible raw materials and parts (see paragraph 5.27). [subitems (1) ,(2)]

Existing law: Clause 4, Items 155, 156, 157.

Links with other Items: 36, 38.

Exclusions

The Item will exclude the following goods:

(a)
Generally-excluded property (see paragraph 5.29).
(b)
General-purpose road vehicles which are not for use exclusively within and/or in going between certain adjacent premises controlled by the exemption user (see paragraph 5.37).
(c)
Goods for use mainly in connection with administrative activities, other than administrative activities which are ancillary activities. This will exclude, for example, goods used mainly to undertake marketing, sales or personnel related activities at a capital city head office of a pastoral company.

Note:
Some goods may be excluded if for use in connection with other property that is excluded from this Item (see paragraph 5.44). For example, exemption will not be available for lubricants used to maintain a farmer's two-wheel drive luxury motor vehicle. [subitem (3)]

Changes from existing law

Definitions to be omitted: Eligible primary production goods, primary producer and primary production operations.

These deletions are a simplification measure which will not change the scope of the Item.

Definition of primary production activity: The existing definition of primary production operations will be replaced by a definition of primary production activity. This reflects the approach of the new law, which is activities based. It will not change the scope of the exemption.

Definition of agriculture: The existing definition of agriculture will not be changed. It will continue to include "...the rearing of livestock". However, because of the altered meaning of livestock (see below), a wider range of animal rearing pursuits will now be included in agricultural industry for sales tax purposes e.g. rearing emus, llama and other non-traditional farm animals which area reared or maintained for the production of food, fibres etc.

Definition of livestock: To provide greater certainty, livestock will now expressly cover animals that are being reared or maintained for productive purposes, including animals for use in the farming of land (such as working dogs) and horses. Livestock will also include breeding stock for these productive animals i.e. stock being reared or maintained for use for breeding (i.e. natural increase) purposes.

Livestock will not include fish, crustaceans, molluscs, or animals that are kept, or are to be kept, as domestic pets. People involved in fish and oyster farming will be treated as being in the fishing industry, and not as being in the agricultural industry.

In the course of a primary production business: The existing law requires primary production operations to be of a particular kind carried out in the course of a business of carrying out that kind of primary production operation. This approach will not apply in the new law, under which it will only be necessary that primary production activities be carried out in the course of a primary production business. For example, the growing of lucerne (i.e. a crop growing activity) by a dairy farmer to feed his stock will be covered by this Item.

Item 3: Vehicles for use in agricultural industry

General description: Certain motor vehicles and motor cycles for use mainly in carrying out activities in agricultural industry. Trailers and similar vehicles (not including motor vehicles or semi-trailers) and livestock carriers designed for use with vehicles.

Note:
Parts, accessories and attachments will also be available.

Change: Exemption is currently available for goods, which are for use in agricultural industry, where they are of a kind considered by the Commissioner of Taxation to be used exclusively, or primarily and principally, in that industry. The Commissioner has ruled that certain four-wheel drive vehicles are exempt under this Item. With one exception, these vehicles will be covered by the new Item.

(a)
The new Item will cover "vehicles known as four-wheel drive vehicles". This expression is consistent with other provisions in the new law relating to such vehicles (e.g. Item 1, new Schedule 5). This expression will cover vehicles known as '4x4'. These vehicles commonly have both front and rear axles driven. The new Item will require that the motor vehicles have a jeep, platform, pick-up or utility body type, and that they are for use mainly in carrying out activities in agricultural industry. The Item will not cover tandem or bogey drive trucks or similar vehicles. These trucks have 2 rear axles both being driven, but without the front axle being driven. They are not commonly known as "four-wheel drive vehicles".
A necessary feature of the body descriptions in the new Item will be that the vehicles have an open goods carrying compartment of a reasonable size. Vehicles of the body types described in the new Item but with an optional, detachable soft or hard top will generally meet the description. Permanently enclosed vehicles such as station-wagons will not.
Note:
The Item will also cover four-wheel drive vehicles with, or for use with, certain specialised bodies designed exclusively for agricultural use. For example, vehicles with, or for use with, specialised agricultural superphosphate bins or "5-in-1" bins for use in seeding, fertilising etc. will be covered. The mounting brackets and sub-structure necessary to permanently affix these bins on to a cab chassis will generally comprise a platform-like body which will be covered by the Item.
(b)
Motor cycles that have a heavy duty rear carrier, a front mudguard position that allows high clearance, and do not have passenger footrests or a seat strap will qualify for exemption under this Item. These motor cycles are covered by the existing Item.
(c)(d)
Trailers (and similar vehicles) and livestock carriers designed for use with vehicles will also be covered under this Item. These goods are covered by the existing law.

Note 1:
References to (a) - (d) above are references to paragraphs in Item 3.

Existing Items: 1(28A), 1(49) and 13(1).

Links to other Items: None.

Note 2: The rule in clause 13 preventing a user of exemption Item 2 from counting uses relating to excluded property will not apply in relation to goods covered by Item 3, even though the goods are likely to be excluded from Item 2. For example, equipment used mainly to repair a motor cycle covered by this Item will be covered by Item 2.

Item 4: Heavy motor vehicles for transporting livestock in remote areas

General description: Certain motor vehicles and prime movers for use by a person exclusively in remote areas mainly in transporting livestock. Chassis for use in the construction of the listed motor vehicles. Trailers, stock crates or livestock carriers designed for use with vehicles for use in the same areas and for the same purposes.

Change: The existing Item requires that goods are primarily and principally for use in transporting livestock exclusively in remote areas. The new Item will require that the goods are for use mainly for transporting livestock exclusively in remote areas. This will not change the scope of the exemption (although a wider range of animals may be carried, due to the broadened definition of livestock).

Existing Item: 119D.

Links to other Items: None.

Note:
The rule in clause 13 preventing a user of exemption Item 2 from counting uses relating to excluded property will not apply in relation to goods covered by Item 4, even though the goods are likely to be excluded from Item 2. For example, equipment used mainly to repair a prime mover or stock crate covered by this Item will be covered by Item 2.

Item 5: Tanks for bulk-milk tankers

General description: Tanks (for use by a person exclusively for collecting milk from farms) for bulk milk tankers; pumping equipment and other fittings for use with such tanks.

Note:
Parts, accessories and attachments will also be available.

Change: The existing item provides exemption for tanks for bulk-milk tankers for use by producers, carriers, manufacturers or distributors of milk or other dairy produce. The new Item will provide exemption only for tanks for bulk milk tankers, pumping equipment and other fittings for such tanks for use in the distribution of milk. The other activities covered by existing Item 7 will be covered by new Item 2.

The existing exclusion for road vehicles etc. will not be required because the new Item ensures that exemption is only available for tanks , and road vehicles etc. are not tanks .

Note 1:
People who are not in a primary production business, but who have a role in the distribution of dairy products, will be able to obtain exemption for goods covered by the new Item.
Note 2:
The rule in clause 13 preventing a user of exemption Item 2 from counting uses relating to excluded property will not apply in relation to goods covered by Item 5, (even though those goods are likely to be excluded from Item 2). For example, equipment used mainly to repair a tank for a bulk milk tanker will be covered by Item 2

Existing Item: 7(11).

Links to other Items: None.

Item 6: Fencing, dam-building equipment for use in agricultural industry

General description: Fencing tools, road ploughs and road scarifiers, earthmoving scoops, soil packers and soil pulverisers, for use mainly in carrying out activities in agricultural industry.

Note:
Parts, accessories and attachments will also be available.

Change: The existing Item provides exemption for a wide range of specific goods for use in agricultural industry. The new law will only list the specific categories of goods which will not be covered by new Item 2. The construction equipment covered by this Item will be excluded from Item 2 as generally-excluded property (i.e. as construction equipment, see paragraph 5.29)

Note:
The rule in clause 13 preventing a user of exemption Item 2 from counting uses relating to excluded property will not apply in relation to goods covered by Item 6, even though the goods are likely to be excluded from Item 2. For example, equipment used mainly to store a road plough covered by this Item will be covered by Item 2 (even though the road plough would not be covered under Item 2).

Existing Item: 1(15), (15A), (34), (40), and (44).

Links to other Items: None.

Item 7: Agricultural fencing, gates etc.

General description: Agricultural field wire fencing and gates; fencing droppers and posts for wire fencing.

Note:
Parts, accessories and attachments will also be available.

Change: The existing subitem, which provides exemption for certain fencing equipment and materials, will be reproduced in two subitems in the new law. The coverage and effect of the exemption will not change.

Existing Item: 2(9).

Links to other Items: None.

Item 8: Machinery etc. for constructing drains or ditches in agricultural industry

General description: Machinery, implements or apparatus for use mainly in constructing drains or ditches in agricultural industry.

Note:
Parts, accessories, attachments and fittings will also be available.

Change: The new Item will provide exemption for goods for use mainly in constructing drains or ditches in agricultural industry. This exemption will be available for goods used in the agricultural industry, whether used by primary producers or by subcontractors to them.

This Item will be retained in the new law because the goods covered will be excluded from Item 2 as generally-excluded property (i.e. construction equipment, see paragraph 5.29). The other goods covered by the existing provision will be covered by new Item 2 and will not need to be specifically listed in the new law.

Note:
The rule in clause 13 preventing a user of exemption Item 2 from counting uses relating to excluded property will not apply in relation to goods covered by Item 8, even though those goods are likely to be excluded from Item 2. For example, goods used mainly to repair drain construction equipment will be covered by Item 2.

Existing Item: 19(6).

Links to other Items: None.

Item 9: Wool packs

General description: Wool packs

Change: No change.

Existing Item: 99.

Links to other Items: None.

Note:
Equipment used in ancillary activities, such as storage in relation to wool packs, may be covered by Item 2.

Item 10: Dairying equipment

General description: Cream and milk bottles, and wads, caps and stoppers for those bottles; cream cans, milk cans and dairy utensils. Equipment and materials for use by a person mainly in testing, pasteurising or cooling milk or cream in the dairying industry.

Note:
Parts, accessories and attachments will also be available.

Change: The existing law provides exemption for several classes of goods for use in the dairying industry. The new Item will retain only three of these. Subitem (1) will exempt a list of specific goods. Subitem (2) will provide exemption for goods for use mainly in testing, pasteurising or cooling milk or cream in the dairying industry.

These goods might be used by persons who do not carry on primary production activities in the course of primary production businesses, in which case the goods would not be covered by new Item 2. The remaining goods covered by the existing exemption (with the exception of Item 11 discussed below) will be covered by new Item 2.

Existing Items: 7(3), (4) and (7).

Links to other Items: None.

Item 11: Equipment for distributing milk or cream

General description: Goods (other than general-purpose road vehicles or parts for those vehicles) for use mainly in the distribution of milk or cream in the dairying industry.

Note:
Parts, accessories and attachments will also be available.

Change: The existing subitem provides exemption for goods for use in a variety of activities in the dairying industry. This Item will provide exemption for goods for use in distributing milk or cream. This activity will be retained because it might be undertaken by people who do not carry on primary production activities in the course of carrying on a primary production business. Goods used by such persons would not be covered by new Item 2.

This Item will refer to the "dairying industry", which will cover the existing expression "dairy-farmers or dairymen". The Commissioner's discretion will be removed as unnecessary.

Existing Item: 7(10).

Links to other Items: None.

Item 12: Bulk grain handling equipment

General description: Goods (other than general-purpose road vehicles or parts) for use mainly for the handling of grain in bulk.

Note:
Parts, accessories and attachments will also be available.

Change: Exemption will be extended to cover machinery, implements or apparatus for use in handling grain in bulk; the existing exemption is for machinery and plant only. This Item will be retained because these goods might be used by persons who do not carry on a primary production business, therefore the goods would not be covered by new Item 2.

Existing Item: 112.

Links to other Items: None.

Item 13: Equipment for handling or treating fruit

General description: Certain machinery, implements or apparatus for use mainly in the handling or treatment of fruit, or for use mainly for regulating atmospheric conditions for preserving, ripening or storing fruit in the fruit-growing industry.

Note:
Parts, accessories and attachments will also be available.

Change: This Item will be retained because these goods might be used by persons who do not carry on a primary production business, therefore the goods would not be covered by new Item 2. The new Item will be subject to a mainly used test. This will be consistent with the approach in the new law. The scope of the existing exemption will not be changed.

Existing Item: 10.

Links to other Items: None.

Item 14: Equipment for grading, sorting or cleansing vegetables

General description: Equipment for grading, sorting or cleansing vegetables.

Note:
Parts, accessories and attachments will also be available.

Change: This Item will be retained because these goods might be used by persons who do not carry on a primary production business, therefore the goods would not be covered by new Item 2.

Existing Item: 10A.

Links to other Items: None.

Item 15: Refrigerators etc. for use by egg marketing body

General description: Refrigeration equipment and refrigerating agents for use by an egg marketing body mainly for preserving eggs.

Note:
Parts, accessories and attachments will also be available.

Change: This Item will be retained because these goods might be used by persons who do not carry on a primary production business, therefore the goods would not be covered by new Item 2. The existing Item covers these goods when for use by a poultry farmer. This will be deleted in the new Item because such goods for use by poultry farmers will be covered by new Item 2. The new Item will include a definition of egg marketing body that will maintain the scope of the existing exemption.

Existing Item: 11(5).

Links to other Items: None.

Item 16: Refrigerators etc. for use by fish marketing body or co-operative

General description: Refrigeration equipment and refrigerating agents for use by a state authority mainly in preserving fish or other marine animals, or for use in similar activities mainly by a co-operative company or society whose members are engaged in the fishing industry, and who produce and supply the fish or other marine animals to the company or society.

Note:
Parts, accessories and attachments will also be available.

Change: This Item will be retained because these goods might be used by persons who do not carry on a primary production business, therefore the goods would not be covered by new Item 2. The existing law covers these goods when for use by a person engaged in the fishing industry. This will be deleted in the new Item because such goods for use by persons engaged in the fishing industry will be covered by new Item 2. The scope of the existing exemption will not be changed.

Existing Item: 20A(1)(f).

Links to other Items: None.

Item 17 - Cranes and winches for hauling log timber

General description: Cranes and winches, for attachment to motor vehicles, for use mainly for hauling log timber in the timber-getting industry.

Note:
Parts, accessories and attachments will also be available.

Change: This exemption will be retained because these goods would be excluded from new Item 2 by the proposed rule in clause 13 which will prevent the exemption user counting uses relating to excluded property. These cranes and winches may be attached to excluded general-purpose road vehicles, i.e. vehicles which are not used exclusively within and/or in going between adjacent premises controlled by the timber-getters concerned.

Note:
The rule in clause 13 preventing a user of exemption Item 2 from counting uses relating to excluded property will not apply in relation to goods covered by Item 17, even though those goods are likely to be excluded from Item 2. For example, goods used mainly to repair the cranes and winches covered by Item 17, will be covered by Item 2.

Existing Item: 148.

Links with other Items: None.

Sub-Chapter 1.2: Manufacturing and industrial etc

Item 18 - Manufacture-related activities [R]

Overview

General description: Goods for use in processing or treating goods to be manufactured, and other related activities which are involved in the manufacture of goods.

The Item will be marked [R]. Only registered persons will be permitted to acquire goods tax-free under this Item (see paragraph 5.14).

Coverage: Goods for use mainly in carrying out manufacture-related activities. Manufacture-related activities will be broadly similar to the range of activities described in the following definitions or exemption Items in the existing law:

·
eligible manufacturing goods;
·
aids to manufacture (ATM);
·
auxiliaries to aids to manufacture; and
·
Items 113D and 113E.

The Item will cover ancillary activities (see paragraph 5.24) and eligible raw materials and parts (see paragraph 5.27).

Existing law: Items 113A-113E, 155, 156 and 157.

Links with other Items: 1, 2, 19, 23, 28, 29, 30, 33, 35, 36 and 38.

Exclusions

The Item will not cover the following goods, which will therefore be taxable, unless covered by another exemption Item. These goods will be broadly equivalent to the current exclusions from eligible manufacturing goods and aids to manufacture :

(a)
Generally-excluded property (see paragraph 5.29).
(b)
General-purpose road vehicles which are not for use exclusively within and/or in going between certain adjacent premises controlled by the exemption user. General-purpose road vehicles for use, to any extent , in connection with a township or accommodation complex located within the premises (see paragraph 5.37).
(c)
Vending machines and similar appliances.
(d)
Certain power generation equipment.
(e)
Property for use in duplicating tax-advantaged computer programs (see discussion below).
(f)
Author/secretary equipment (see paragraph 5.52). [subitem (3)]

Note 1:
Some goods may be excluded if for use in connection with other property that is excluded from this Item (see paragraph 5.44). For example, goods for use exclusively in the maintenance of taxable general-purpose road vehicles used in carrying out activities covered by this Item will not qualify for exemption. [clause 13]
Note 2:
These exclusions will not apply to goods for use in carrying out scientific research in relation to manufacture-related activities of the exemption user. This is equivalent to the position under the existing law. For example, an own-produced motor vehicle for use by a car manufacturer in test-driving on public roads will not be excluded from exemption by the exclusion for general-purpose road vehicles.

Changes to existing law

Definitions to be omitted: Eligible manufacturing goods , aids to manufacture and auxiliaries to aids to manufacture . The omission of these definitions will not cause any significant change in the nature or scope of the exemptions.

Manufacture-related activities: Exempt activities covered by the existing ATM provisions will be omitted (where covered elsewhere in new exemption Items) or varied as follows: [subitem (5)]

·
Processing or treatment of raw materials: Under the existing law, the processing or treating of raw materials is described as the actual processing or treatment. In the new law, this activity will be described as applying a process or treatment . The omission of actual will not cause any significant change in the scope or nature of the activities covered. [paragraph (5)(a)]
·
Packaging or labelling: Packaging or labelling of goods on behalf of the manufacturer of the goods will be covered by new exemption Item 36 (which covers goods for use by subcontractors). [paragraph (5)(d)]
·
Testing or checking raw materials: Testing or checking the quality or specifications of raw materials before processing commences will be covered by this Item. Goods for use in this activity do not qualify for exemption under the existing law. [paragraph (5)(e)]
·
Transporting or storing: Transporting or storing certain goods will be covered separately by new exemption Item 28.

Note:
Some manufacture-related activities may also be covered by other business inputs exemption Items , e.g. scientific research activities covered by paragraph 18(5)(i) would in some cases also be covered by new exemption Item 33 as research and development. Other manufacture-related activities may also be covered as ancillary activities , e.g. waste disposal activities covered by paragraph 18(5)(f). This overlapping will be necessary to retain the exemptions available under the existing law.

Consumables: The new Item will refer to goods for use mainly in carrying out manufacture-related activities. This will replace the existing ATM approach, which deals separately with machinery, implements and apparatus , and goods (i.e. consumables) which are used and consumed in the manufacturing process, but which are not raw materials (i.e. because no essential element of the goods will become an integral part of the finished goods e.g. chemical solvents and drying agents).

Print-related activities: Goods for use in certain print-related activities, which are covered as eligible manufacturing goods in the existing law, will be covered separately by new exemption Item 23.

Omitted or varied exclusions: Several of the existing exclusions to the ATM definition in the existing law will be omitted or varied:

·
Road transport and delivery vehicles (ATM paragraph (h)): This exclusion will be omitted, consistent with the new rules exempting general-purpose road vehicles used exclusively within and/or in going between certain adjacent premises controlled by the exemption user. [paragraph(3)(b)]
·
Goods for use in the preparation or preservation of food or drink in restaurants, etc. (ATM paragraph (f)): This exclusion will be omitted as these goods will be excluded as generally-excluded property (see paragraph 5.32).
·
Containers, etc. for the storage or delivery of processed or finished goods (ATM paragraph (j)): This exclusion will be omitted as unnecessary. Storage will no longer be treated as a manufacture-related activity. All storage equipment which will qualify for exemption will be covered by new Item 28, and containers will be covered by new Item 27.
·
Goods for use in the manufacture of other goods to be sold to the purchaser of the manufactured goods (ATM paragraph (k)): The new law will not contain an equivalent exclusion. These goods will generally be taxable because of the operation of the statutory period rule.
Note 1:
The statutory period rule will require that, for goods to qualify for exemption, the goods must be for use so as to satisfy the relevant exemption Item for 2 years from the time the goods are first applied to own use, or until the end of their useful working life (see paragraph 8.10 of the explanatory memorandum to the Sales Tax Assessment Bill 1992). Accordingly, goods for use in the manufacture of goods and subsequent resale with the manufactured goods before the expiry of the statutory period will generally not qualify for exemption under new Item 18.
Note 2:
Two classes of goods will continue to be exempt under the new law because the statutory period will not apply to such goods. These two classes of goods will be: (i) manufactured goods which are always exempt goods , and (ii) manufactured goods to be sold to a registered person who quotes for the manufactured goods and does not intend to resell the exemption goods. The evidence of the purchaser's intention not to resell the exemption goods to a later purchaser of the manufactured goods will be in a form to be approved by the Commissioner. [subitem (4)]
·
Goods for use in embodying a computer program in goods other than a microchip (ATM paragraph o) : These goods will be excluded as property for use in duplicating computer programs where the duplication produces tax-advantaged computer programs. Tax-advantaged computer program will be defined in clause 14 in Sales Tax Assessment Bill 1992 (see paragraph 22.10 of the explanatory memorandum to that Bill). [paragraph (3)(e)]

Item 19 - Raw materials for manufacturing goods [R]

Overview

General description: Goods for use by a person exclusively as raw materials for goods to be manufactured by the person in Australia in the course of any business carried on by that person.

The Item will be marked [R]. Only registered persons will be permitted to acquire goods tax-free under this Item (see paragraph 5.14).

Coverage: Raw materials for use in the manufacturing of other goods will be defined to be materials to be dealt with in such a way that the materials, or some essential element of the materials, will become an integral part of the manufactured goods in their finished condition. For example, metal which is used in the casting of new products, or wool which is used in the making of clothing. [subclause 7(1) of Sales Tax Assessment Bill 1992]

Exclusions

The Item will not cover the following goods (which will therefore be taxable, unless covered by another exemption Item):

Materials or mixes for use in manufacturing thick-shakes or similar goods, biscuit goods and ice-cream goods in retail premises or vehicles in which the business of manufacturing those goods is carried on mainly for the purpose of retail sale directly from those premises or vehicles. [subitem (2)]

Existing law: Sales Tax Regulations 12(1)(b) and 13(2) and Item 113.

Changes to existing law

Raw materials for use by persons covered by the small business exemption : There will be no specific exclusion for raw materials for use by persons covered by the small business exemption, as any person who obtains raw materials under quote will not be able to obtain the benefit of the small business exemption on the outputs concerned (see paragraph 8.33 of the explanatory memorandum to the Sales Tax Assessment Bill 1992).

Raw materials for thick-shakes, biscuit goods and ice-cream goods manufactured on retail premises: As discussed above, all materials or mixes for use in manufacturing certain thick-shakes, biscuit goods or ice-cream goods will be taxable.

This will correct an existing anomaly under which mixes are taxable, but other materials to be used in the manufacture of biscuit goods and ice-cream goods are exempt.

The new law will also correct the anomaly under which registered persons (but not unregistered persons) may quote for mixes to be used in the manufacture of thick-shakes and similar goods at retail outlets.

Thick-shakes and similar goods manufactured at retail outlets will be exempt under the new law (see Item 68), but all inputs to their manufacture, including raw materials, will be taxed.

Item 20 - Industrial safety equipment

General description: Equipment of a kind ordinarily used in the course of industrial operations to protect persons engaged in those operations.

Note: Parts will also be available.

Change: No substantive change. The existing Item covers equipment of a kind used exclusively, or primarily and principally to protect people. Wherever these words appear they will be replaced in the new law with of a kind ordinarily used.

Existing Item: 113G.

Links to other Items: None.

Item 21 - Industrial time-recording apparatus etc.

General description: Time-recording apparatus, and clock systems of a kind ordinarily used for business or industrial purposes. The Item will exclude goods covered by Items 6 or 7 of the new Fifth Schedule (i.e. watches and clocks).

Note:
Parts will also be available.

Change: No substantive change. The existing exemption covers time-recording apparatus and clock systems of the kinds used for business or industrial purposes. The words will be changed to of a kind ordinarily used. This is a form of words that will be used consistently throughout the new law.

Existing Item: 113H.

Links to other Items: None.

Item 22 - Pest killers

General description: Preparations, materials and appliances for use by a person exclusively in destroying insect pests or other invertebrate pests in the course of business or industrial operations.

Note:
Parts will also be available.

Change: The existing exemption will be re-worked, but there will be no change in its coverage. The specific reference to fly papers and fly traps in the existing exemption will be removed since these are covered by the words preparations, materials and appliances.

Existing Item: 139.

Links to other Items: None.

Item 23 - Activities relating to printing [R]

Overview

General Description: Goods for use mainly in carrying out certain print finalisation activities relating to the production of printed matter.

The Item will be marked [R] . Only registered persons will be permitted to acquire goods tax-free under this Item (see paragraph 5.14 ).

Coverage: This Item will cover certain goods for use in the printing industry i.e. goods for use in preparing bromides or printing plates; in recording advertisements to be included in a newspaper, periodical or magazine manufactured by the person; or in preparing text for inclusion in technical manuals or documentation for use in the carrying out of activities covered by the listed business inputs exemption Items.

The Item will cover ancillary activities (see paragraph 5.24) and eligible raw materials and parts (see paragraph 5.27). [subitems (1), (2)]

Existing law: Clauses 2(4)(b) and 6(b)(iii), Items 155, 156 and 157.

Links to other Items: Items 1, 2, 18, 28, 29, 30, 33, 34, 35, 36 and 38.

Exclusions

The Item will not cover the following goods (which will therefore be taxable, unless covered by another exemption Item):

(a)
Generally-excluded property (see paragraph 5.29).
(b)
General-purpose road vehicles which are not for use exclusively within and/or in going between certain adjacent premises controlled by the exemption user (see paragraph 5.37).
(c)
Author/secretary equipment (see paragraph 5.52).

Note:
Some goods may be excluded if for use in connection with other property that is excluded from this Item (see paragraph 5.44). For example, goods used mainly to repair author/secretary equipment would not be exempt under this Item. [clause 13]

Changes to existing law

Definitions to be omitted: Eligible print finalisation activities, eligible original literary, dramatic, musical or artistic work, finalisation, general journalist and item of computer equipment.

These definitions will be incorporated into the text of the Item or become unnecessary under the new law. The exemption Item will be substantially re-worked, but there will be no change in its scope, except as discussed below.

Goods for use in print-related activities for technical manuals: The existing exemption will be extended to cover goods for use in the preparation of text, etc. for inclusion in technical manuals relating to all activities covered by listed business inputs Items, i.e. including non-manufacturing activities such as cargo-handling. [paragraph (1)(c)]

Note:
Under the existing law, exemption is available for equipment for use in connection with the preparation of text for inclusion in technical manuals and documentation (such as work schedules) used by workers only in connection with actual manufacturing activities.

Item 24 - Printing plates etc.

General description: Certain goods for use mainly in, or in connection with, the production of always exempt printed matter. Other types of goods for use mainly in connection with the production of those first types of goods.

Change: No substantive change. The existing exemption covers goods for use in, or in connection with, the production of printed matter. Under the new law the degree of use required for exemption to apply will be for use mainly in, or in connection with, the goods.

Existing Item: 52.

Links to other Items: None.

Item 25 - Cinematograph film for business use

General description: Cinematograph film for use mainly in the production of motion picture films in the course of carrying on a business. The Item will not cover goods (with or without further processing) that are for use as exhibition copies of motion picture films. Motion picture film excludes film that is for the private, domestic or personal use of the person by whom, or for whom, the film is produced.

Change: Lubricants used in film developing or sound recording activities undertaken in connection with the production of motion picture films will be exempt. Lubricants used in these activities are currently taxable. This change is consistent with the removal of similar exclusions for lubricants in aircraft and ship repair (Items 59 and 61). The existing exemption covers goods for use in the production of motion picture films. Under the new law the degree of use required for exemption to apply will be for use by a person mainly in the production of motion picture films.

Existing Item: 107.

Links to other Items: None.

Item 26 - Cinematograph cameras etc. for business use

General description: Cinematograph cameras and certain other goods (not including general-purpose road vehicles and parts) for use mainly in the production of motion picture films in the course of carrying on a business.

Note:
Parts and accessories will also be available.

Change: No substantive change. The existing exemption covers goods for use exclusively or primarily and principally in the production of motion picture films. Under the new law the degree of use required for exemption to apply will be for use by a person mainly in the production of motion picture films.

Existing Item: 107A.

Links to other Items: None.

Sub-Chapter 1.3: Containers, transport, storage etc.

Item 27 - Containers for assessable goods

Overview

General description: Goods for use as a container exclusively for contents consisting wholly of assessable goods (or of assessable goods and containers for those goods).

Note 1:
Goods will become a container at the time contents are packed into them. Container will be defined to mean packaging in which, or with which, contents are packed or secured for the purpose of marketing or delivery of the contents (see clause 5 in Sales Tax Assessment Bill 1992).
Note 2:
The exemption user must intend (or expect) that the goods will be used as a container in relation to the contents at the time of an assessable dealing that consists of a sale, a delivery of customer's materials goods or a lease AOU. For more information regarding these assessable dealings, see Chapter 7 of the explanatory memorandum to the Sales Tax Assessment Bill 1992.

The exemption user must also intend (or expect) that possession or control of the container will pass to the purchaser, the customer or the lessee, as the case requires.

Note 3:
This exemption will be an essential element of the changed treatment of containers under the new law (see Chapter 20 of the explanatory memorandum to the Sales Tax Assessment Bill 1992).

Existing law: Items 91, 92, 93, 94, 94A and 95 in the First Schedule, Item 63 in the Second Schedule, and Items 17 and 18 in the Third Schedule.

Note:
The exemption for certain gas cylinders under existing Item 99A will be retained in the new law under exemption Item 32. The exemption for shipping containers under existing Item 154 will be retained in the new law under exemption Item 60.

Exclusions

The Item will not cover the following goods (which will therefore be taxable, unless covered by another exemption Item):

(a)
Goods for use in marketing ice-cream goods or biscuit goods manufactured in certain retail premises or vehicles.
(b)
Goods for use in marketing take-away beverages or foodstuffs.

Changes to existing law

Containers for ice-cream goods or biscuit goods manufactured in retail premises: Exemption will not be available for goods for use as containers in marketing ice-cream goods or biscuit goods manufactured in premises or vehicles in which the exemption user carries on a business of manufacturing such goods mainly for the purpose of retail sale directly from those premises or vehicles. Nor will exemption be available for goods for use as containers for take-away beverages or foodstuffs.

These goods will be taxed at the general rate (presently 20%). Under the existing law, these goods are covered by Item 18 in the Third Schedule and are taxable at 10%. This change is consistent with the continued exemption for ice-cream goods and biscuit goods (and the new exemption for thick-shakes) manufactured at retail outlets (i.e. all inputs to the manufacture of these goods, including containers, will be taxed). [subitem (3)]

Item 28 - Storage, transport, etc. [R]

Overview

General description: Goods for use mainly in carrying out storing, handling, transporting or dispatching of: qualifying goods, i.e. goods manufactured or produced by the exemption user; goods which have been, are being, or will be, processed or treated by the exemption user; or goods that are used or for use by the exemption user in such a way that they would be covered by a business inputs exemption Item.

The Item will be marked [R] . Only registered persons will be permitted to acquire goods tax-free under this Item (see paragraph 5.14).

Coverage: This Item will cover goods used in storage functions, such as shelving, storage containers and bulk storage vats, etc. Handling and transporting equipment, such as forklifts, conveyors, cranes, winches, etc. will also be covered. Equipment located on the exemption user's premises for use in dispatching or sending off own-produced goods to external destinations will also be covered.

The Item will cover ancillary activities (see paragraph 5.24 ) and eligible raw materials and parts (see paragraph 5.27 ). [subitems (1), (2)]

Existing law: Clause 9, Items 113A, 113B, 113C, 155, 156 and 157.

Links with other Items: 1, 2, 18, 23, 28, 29, 30, 34, 35, 36 and 38.

Exclusions

The Item will not cover the following goods (which will therefore be taxable, unless covered by another exemption Item):

(a)
Generally-excluded property (see paragraph 5.29).
(b)
General-purpose road vehicles which are not for use exclusively within and/or in going between certain adjacent premises controlled by the exemption user (see paragraph 5.37). [subitem (3)]

Note 1:
As under the existing law, exemption will not be available for any goods used in storing or handling where those activities take place on any premises, or parts of premises, used mainly in connection with the retail sale of goods at those premises to the general public. This will generally exclude the storage of finished goods at retail outlets, which is consistent with the policy of providing exemptions for goods producers and certain other persons (and bona fide contractors), and not for retail or wholesale businesses. [paragraph (1)(a)]
Note 2:
Some goods may be excluded if for use in connection with other property that is excluded from this Item (see paragraph 5.44). For example, exemption would not be available for equipment for use mainly in the storage of parts for general-purpose road vehicles which were regularly used off-site. [clause 13]

Changes to existing law

Storing and related activities carried out by subcontractors: The existing condition relating to premises where storing and related activities may be carried out by a contractor on behalf of a principal will be removed from this Item, and will be, for consistency, located in the new exemption Item covering goods for use by contractors (Item 36).

Qualifying goods: This Item will cover storing and related activities in relation to qualifying goods . The new law will contain a common definition of qualifying goods that will apply for all business inputs exemption Items (see paragraph 5.50).

Note:
The new definition of qualifying goods will include goods covered by all business inputs exemption Items, including this Item. Accordingly, this Item will cover storing, etc. of goods covered by this Item. Under the existing law, goods for use in storing etc goods which themselves are used in storing etc activities, such as shelving, do not qualify for exemption. This exclusion will be removed for consistency.

Operation of this Item

Distinction between dispatch and delivery

To qualify for exemption, goods must be for use mainly in carrying out a dispatching activity on premises controlled by the exemption user. Goods for use in delivering activities will not be exempt. Similarly, goods for use in dispatching activities away from the exemption user's premises will not be covered.

Example: A manufacturer wishes to purchase a shrink-wrapping machine and rolls of shrink-wrap to prepare manufactured products for dispatch, as well as a trolley for use on a delivery truck.

Result: The machine will be used in a dispatching activity on the manufacturer's premises and will qualify for exemption. The shrink-wrap will be exempt as a container (see Item 27). The trolley will be used in the delivery of the goods, not dispatching them, and will be taxable.

Item 29 - Transport by rail, pipeline etc. [R]

Overview

General description: Goods for use mainly in operating, repairing or maintaining a railway, pipeline or conveyor for use mainly to transport qualifying goods.

The Item will be marked [R]. Only registered persons will be permitted to acquire goods tax-free under this Item (see paragraph 5.14 ).

Coverage: This Item will cover goods for use mainly in operating a railway, pipeline or conveyor (including installing and monitoring safety equipment, signalling and communication activities and monitoring and controlling the operation and performance of this equipment); repairing a railway, pipeline or conveyor (including repairing broken down engines or replacing worn parts) and maintaining a railway, pipeline or conveyor (including servicing and cleaning as well as diagnostic activities to test equipment while it is in use).

This Item will also cover ancillary activities (see paragraph 5.24 ) and eligible raw materials and parts (see paragraph 5.27 ). [subitems (1), (2)]

Links with other Items: 1, 2, 18, 23, 28, 29, 30, 33, 34, 35, 36, and 38.

Existing law: Clause 7, Items 155, 156 and 157.

Exclusions

The Item will not cover the following goods (which will therefore be taxable, unless covered by another exemption Item):

(a)
Generally-excluded property (see paragraph 5.29).
(b)
General-purpose road vehicles which are not for use exclusively within and/or in going between certain adjacent premises controlled by the exemption user (see paragraph 5.37). [subitem (3)]

Note:
Some goods may be excluded if for use in connection with other property that is excluded from this Item (see paragraph 5.44). For example, exemption will not be available for equipment for use mainly to repair a taxable general-purpose road vehicle.

Changes to existing law

Definitions to be omitted: Eligible transport goods, goods producer, eligible premises, eligible products and qualifying goods.

These deletions will primarily be of a simplification nature and will not extend the scope of the exemption.

Definitions: 'controlled': The existing requirement that premises must be owned, leased or controlled by the person seeking exemption will not be changed. Controlled will be defined to include "owned or leased". [subclause(2)]

Definition of 'qualifying goods': The definitions of eligible products and qualifying goods in the existing law will be combined in the new law as qualifying goods. This is a simplification measure that will not change the scope of the exemption. [subclause(2)]

Reference to 'goods producer': The existing requirement that goods must be for use by a goods producer will be omitted. The new exemption will be available to any person who carries on the listed activities in the course of carrying on a business. This will be consistent with the other business inputs Items.

Premises requirement: manufacturing, etc.: The existing premises test will be changed to delete the requirement that the premises must be used, or for use, mainly for the production, manufacturing, processing, treatment, storage or distribution of qualifying goods. In the course of day to day business an exemption user is unlikely to use his premises mainly for any other purpose. This renders the requirement unnecessary.

Item 30 - Handling etc. ship's cargo or international air cargo

Overview

General Description: Goods for use mainly in carrying out handling, storing, protecting, preserving, or de-contaminating qualifying cargo (i.e. ship's cargo or international air cargo), or receptacles for repeated use for storing or handling such cargo.

The Item will not be marked [R], because the activities concerned will not, in themselves, involve the production of assessable goods. Unregistered persons will be able to acquire goods tax-free under this Item, by quoting an exemption declaration (see paragraph 5.18).

Coverage: This Item will cover goods for use mainly in storing cargo, (either before or after it is handled); handling cargo (including loading, unloading, packing and unpacking); transporting cargo around ports, airports and other places used mainly for cargo handling (this will not include transport on public roads); protecting cargo (i.e. protecting cargo from the elements, and securing them from theft and vandalism); preserving cargo (including refrigerating cargo to prevent its deterioration); de-contaminating cargo (to minimise the risk of importing pests or diseases into Australia).

This Item will cover ancillary activities (see paragraph 5.24 ) and eligible raw materials (see paragraphs 5.27 ). [subitems (1), (2)]

Exclusions

The Item will not cover the following goods (which will therefore be taxable, unless covered by another exemption Item):

(a)
Generally-excluded property (see paragraph 5.29).
(b)
General-purpose road vehicles which are not for use exclusively within and/or in going between certain adjacent premises controlled by the exemption user (see paragraph 5.37).
(c)
Goods for use mainly in connection with qualifying cargo that has been, or is to be, sold by the person carrying out the handling etc. activities (except where that cargo is qualifying goods of the exemption user). This will exclude any goods used mainly in connection with the handling of cargo which is sold by retail or wholesale, and which has not been produced, manufactured, processed or treated by the exemption user (see the discussion of qualifying goods at paragraph 5.50). This is consistent with the existing law. [subitem (3)]

Note:
Some goods may be excluded if for use in connection with other property that is excluded from this Item (see paragraph 5.44). For example, exemption will not be available for equipment used mainly to repair construction equipment (such as a crane used exclusively in building cargo loading facilities).

Links with other Items: 36 and 38.

Existing law: Clauses 11, 12 and Items 155, 156, 157.

Changes to existing law

Definitions to be omitted: Eligible sea cargo handling goods, eligible international air cargo handling goods, eligible sea cargo handling activity, eligible international air cargo handling activity, sea cargo, international air cargo, and container.

These deletions will generally be of a simplification nature, although some deletions will be necessary to extend the scope of the exemption.

Eligible activities: The existing Items for sea cargo and international air cargo handling activities will be combined. The scope of the new Item will be extended as discussed below.

Definition of 'qualifying cargo': The existing definitions of sea cargo and international air cargo will be replaced by a single definition of qualifying cargo. This is a simplification measure that will not change the scope of the exemption. Subject to the retention of some existing exclusions, cargo will be given its ordinary meaning. The definition will no longer refer to cargo which has been, or is to be, carried on a ship etc. It will be a question of ordinary usage as to the time at which, for example, goods that are to be shipped, become cargo, or goods that have been shipped, cease to be cargo. [subitem (4)]

Exclusion omitted: The new law will omit, as superfluous, the existing exclusion for goods to be sold at retail outlets located at cargo handling areas. These goods will have ceased to be cargo before they are stored at the retail outlet.

Bulk commodities: The existing reference to bulk commodities, such as oil or wheat, will also be removed. These commodities, when shipped, are clearly cargo.

Cargo handling area: The existing law requires that exemption will only be available for goods mainly for use in handling cargo where those goods are located at particular places used mainly in carrying out eligible cargo handling activities. This requirement will be deleted in the new law. The practical effect of the existing place requirement is that it excludes equipment, such as computers used to monitor and schedule cargo handling activities, which is not located in areas used mainly for undertaking eligible cargo handling activities. This is an unintended effect that will be overcome by the removal of the requirement in the new law. Where the equipment is used mainly in ancillary activities, such as scheduling cargo loading or training crane operators, exemption will be available, even where that scheduling or training equipment is located at head office premises where no actual cargo handling takes place.

International air cargo: The existing requirement that air cargo must be consigned on a bill of lading to or from an airport outside Australia will be removed. Bills of lading generally refer to consignments of sea cargo. This change will allow air cargo to be consigned on whatever documents are applicable from time to time.

Cargo receptacles: The existing Items include definitions of container for both sea or air cargo handling purposes. These definitions will be removed to avoid unintended overlap with the new specialised definition of container in the Sales Tax Assessment Bill (see clause 5 of the Sales Tax Assessment Bill). The new law will allow exemption for receptacles for repeated use on ships, where those receptacles have a capacity of less than 14 cubic metres (the minimum requirement in existing Item 154 and in new Item 60). Cardboard boxes that are not for repeated use will not be covered.

Item 31 - Pallets

General description: Storage or transportation pallets that are designed to be lifted by a forklift truck.

Change: This Item will provide a new exemption. Under the existing law, manufacturers can obtain exemption for pallets for use in certain activities carried out on manufacturing premises. Pallets used by manufacturers are usually leased on a short-term basis. Under the new law, exemption for short-term leased goods will not be available in any circumstances. Since the majority of pallets are used either by manufacturers, or in transport associated with manufacturing, the new law will extend unconditional exemption to pallets.

Existing Item: None.

Links to other Items: None.

Item 32 - Cylinders for marketing or delivering gases

General description: Cylinders which are of a kind ordinarily used in marketing gases for industrial, medical or domestic use if the cylinders are portable cylinders in which gases are delivered to consumers. The Item will also cover goods for use exclusively as materials which are placed in these cylinders to facilitate their use as containers of acetylene gas.

Note:
Parts and accessories will also be available.

Change: No significant change. The existing exemption covers cylinders of a kind used in the marketing of gases. Under the new law this will be changed to of a kind ordinarily used in the marketing of gases.

Existing Item: 99A.

Links to other Items: None.

Sub-chapter 1.4: Research and development, design etc

Item 33 - Research and development by manufacturer etc. [R]

Overview

General description: Goods for use by certain exemption users mainly in carrying out research and development (R&D) activities in relation to new or improved goods to be manufactured by, or new or improved processes to be used by, those exemption users.

The Item will be marked [R]. Only registered persons will be permitted to acquire goods tax-free under this Item (see paragraph 5.14).

Coverage: This Item will cover goods for use in R&D activities by a person who carries out an activity covered by a listed business inputs exemption Item. The R&D activities must be carried out in relation to new or improved qualifying goods (i.e. goods to be manufactured or processed by the exemption user; raw materials for use by the exemption user; or goods that are used by the exemption user in such a way that they will be covered by a listed business inputs exemption Item).

The Item will also cover R&D activities in relation to a new or improved activity likely to be carried out by the exemption user that would be covered by a listed business inputs exemption Item.

This Item will cover ancillary activities (see paragraph 5.24) and eligible raw materials and parts (see paragraph 5.27). [subitems (1), (2)]

Existing law: Clause 10, Items 155, 156 and 157.

Links to other Items: Items 1, 2, 18, 23, 28, 29, 30, 34, 35, 36 and 38.

Exclusions

The Item will not cover the following goods (which will therefore be taxable, unless covered by another exemption Item):

(a)
Generally-excluded property (see paragraph 5.29).
(b)
General-purpose road vehicles which are not for use exclusively within and/or in going between certain adjacent premises controlled by the exemption user (see paragraph 5.37).
(c)
Goods for use mainly in the development or duplication of certain tax-advantaged computer programs (see discussion below). [subitem (3)]

Note:
Some goods may be excluded if for use in connection with property that is excluded from this Item (see paragraph 5.44). [clause 13]

Changes to existing law

R&D activities covered by 2 Items: Goods covered as eligible R&D goods in the existing law will be covered by 2 Items:

·
This Item will cover goods for use in R&D activities carried out by a person in relation to goods to be manufactured by that person, or to be used in an activity covered by a listed business inputs Item, or in relation to processes to be carried out by that person which are covered by any of the listed business inputs exemption Items.
·
Item 34 will cover goods for use in R&D activities carried out by certain approved R&D bodies.

Definition of eligible R&D activity : Although some changes will be made to the definition of eligible R&D activity , there will be no significant change in the nature or scope of the research or development activities covered by the Item. Some parts of the existing definition will be incorporated into the new Item.

Various existing exclusions will be omitted from the Item: prospecting for minerals; making cosmetic modifications; social science research; activities relating to new services; and quality control. These exclusions will be omitted because they are either unnecessary, or the relevant activities will be covered by other business inputs exemption Items.

R&D in relation to qualifying goods: The description of the classes of goods in relation to which R&D activities may be carried out by a manufacturer will be altered. Under the existing law, only R&D activities in relation to goods that are to be, or are likely to be, produced, manufactured, processed or treated in Australia are covered. The new Item will cover R&D activities in relation to new or improved qualifying goods . This will not cause a significant change in the scope of the Item.

Note:
The new definition of qualifying goods will include goods covered by listed business inputs exemption Items, including this Item (see paragraph 5.50). Accordingly, this Item will cover R&D activities in relation to goods that are used, or are likely to be used, in such a way that the goods would be covered by a listed business inputs exemption Item, including this Item.

R&D in relation to activities covered by business inputs exemption Items: This Item will cover R&D into new or improved activities covered by listed business inputs exemption Items.

Tax-advantaged computer programs: Goods excluded from exemption under the existing law as software-creation goods will be excluded from exemption as goods for use in the development or duplication of tax-advantaged computer programs , except for programs for use in an activity covered by a business inputs exemption Item. Tax-advantaged computer programs will be defined in clause 14 of Sales Tax Assessment Bill 1992 (see paragraph 22.10 of the explanatory memorandum to that Bill.). [paragraph (3)(c)]

Item 34 - Research and development by approved R&D body

Overview

General description: Goods for use mainly in carrying out research and development (R&D) by an approved R&D body in relation to new or improved goods likely to be manufactured or processed in Australia, or new or improved production processes likely to be carried out in Australia.

Coverage: This Item will cover goods for use in R&D activities by bodies that are registered with the Industry Research and Development Board (IR&D Board) or bodies that have received grants from the Board. Approved R&D bodies will generally be companies that undertake R&D activities and are registered under section 39J of the Industry, Research and Development Act 1986 (IR&D Act).

Syndicates (comprising two or more companies) registered under section 39P of the IR&D Act will also be covered, as will organisations which undertake approved R&D activities, and which have received grants from the IR&D Board under section 28 (Discretionary Grants) or section 31 (Generic Technology Grants) of the IR&D Act. Research agencies registered under section 39F of the IR&D Act will also be covered.

This Item will cover ancillary activities (see paragraph 5.24) and eligible raw materials and parts (see paragraph 5.27). [subitems (1), (2)]

Existing law: Clause 10, Items 155, 156 and 157.

Links to other Items: Items 1, 2, 18, 23, 28, 29, 30, 35, 36 and 38.

Exclusions

This Item will not cover the following goods (which will therefore be taxable, unless covered by another exemption Item):

(a)
Generally-excluded property (see paragraph 5.29).
(b)
General-purpose road vehicles which are not for use exclusively within and/or in going between certain adjacent premises controlled by the exemption user (see paragraph 5.37).
(c)
Goods for use mainly in the development or duplication of certain tax-advantaged computer programs (see discussion below). [subitem (3)]

Note:
Some goods may be excluded if for use in connection with other property that is excluded from this Item (see paragraph 5.44). For example, service equipment for use in maintaining a car used by an approved R&D body for R&D activities outside the premises would be taxable. The car would be excluded from exemption by the exclusion for general-purpose road vehicles. [clause 13]

Changes to the existing law

Approved R&D body: The new term approved R&D body will replace eligible R&D entity . This change will not alter the scope of this exemption.

Definition of eligible R&D activity : Some changes to the definition of "eligible R&D activity" in this Item will be made on a similar basis to the changes made in Item 33. These changes will not alter the scope of this exemption.

Tax-advantaged computer programs: Goods excluded from exemption under the existing law as software-creation goods will be excluded as goods for use in the development or duplication of tax-advantaged computer programs , except for programs for use in an activity covered by a listed business inputs exemption Item. Tax-advantaged computer programs will be defined in clause 14 of Sales Tax Assessment Bill 1992 (see paragraph 22.10 of the explanatory memorandum to that Bill). [paragraph (3)(c)]

Item 35 - Engineering, technical design, etc. [R]

Overview

General description: Goods for use mainly in carrying out the engineering, or technical design, of certain goods or activities.

The Item will be marked [R]. Only registered persons will be permitted to acquire goods tax-free under this Item (see paragraph 5.14).

Coverage: This Item will cover goods for use in engineering, or technical design, activities in relation to qualifying goods (i.e. goods to be manufactured or processed by the exemption user; raw materials for use by the exemption user; or goods that are used by the exemption user in such a way that they will be covered by a listed business inputs exemption Item).

The Item will also cover engineering, or technical design, of an activity that is likely to be carried out by the exemption user and would be covered by a listed business inputs exemption Item, or a computer program for use with computer-controlled equipment that is likely to be used in an activity covered by a listed business inputs exemption Item.

This Item will cover ancillary activities (see paragraph 5.24) and eligible raw materials and parts (see paragraph 5.27). [subitems (1), (2)]

Existing law: Clause 8, Items 155, 156 and 157.

Links to other Items: Items 1, 2, 18, 23, 28, 29, 30, 33, 34, 36 and 38.

Exclusions

The Item will not cover the following goods (which will therefore be taxable, unless covered by another exemption Item):

(a)
Generally-excluded property (see paragraph 5.29).
(b)
General-purpose road vehicles which are not for use exclusively within and/or in going between certain adjacent premises controlled by the exemption user (see paragraph 5.37).
(c)
Author/secretary equipment (see paragraph 5.52).
(d)
Goods for use mainly in the development or duplication of certain tax-advantaged computer programs (see discussion below).

Note:
Some goods may be excluded if for use in connection with property that is excluded from this Item (see paragraph 5.44). For example, goods used mainly to store author/secretary equipment will not be exempt. [clause 13]

Changes to existing law

Qualifying goods: This Item will extend the scope of the existing exemption to cover goods for use in the engineering, or technical design, of goods likely to be qualifying goods of the exemption user. In addition to raw materials and finished goods, qualifying goods include goods for use in any activity covered by a listed business inputs exemption Item (see discussion of qualifying goods at paragraph 5.50).

The Item will also cover the engineering, or technical design, of activities likely to be carried out by the exemption user and that would be covered by any of the listed business input exemption Items.

This extension of the range of the existing Item is a policy change to reflect the wider range of production-related equipment and processes which may be the subject of engineering, or technical design, by a manufacturer. For example, this Item will now cover goods for use in the engineering, or technical design, of activities that would be covered by new Item 23 (print-related activities), Item 28 (storage, transport, etc.), Item 30 (handling, etc., ship's cargo or international air cargo), Item 33 (R&D by a manufacturer etc.) or ancillary activities in relation to these activities. These goods would not qualify for exemption under the existing law.

Tax-advantaged computer programs: Goods excluded from exemption under the existing law as software-creation goods will be excluded from exemption as goods for use in the development or duplication of tax-advantaged computer programs, except for programs for use in an activity covered by a business inputs exemption Item. Tax-advantaged computer program will be defined in clause 14 in Sales Tax Assessment Bill 1992 (see paragraph 22.10 of the explanatory memorandum to that Bill). [paragraph (3)(d)]

Omitted exclusions: The new Item will not contain exclusions for audio-visual production equipment , architectural/structural equipment or print-related equipment . Goods of the particular kinds covered by the omitted definitions will not qualify for exemption under this Item. There will be no change to the scope of this exemption.

The existing exclusions are unnecessary because the outputs of the equipment concerned are not qualifying goods. These outputs are original recordings of visual images or sounds, original architectural or structural plans (or printed plans) or original text or images.

Sub-Chapter 1.5: Miscellaneous

Item 36 - Subcontractors

Overview

General Description: Goods for use by subcontractors mainly in carrying out activities on behalf of one or more principals.

Coverage: This Item will cover goods for use by a subcontractor mainly in carrying out an activity on behalf of one or more principals, where the goods would have been covered by a business inputs exemption Item if the goods had been for use mainly by each of the principals.

Note:
The Item will not be marked [R]. Subcontractors will not be required to be registered to obtain goods tax-exempt. Nor will it be necessary for the principals on whose behalf a subcontractor carries out activities to be registered in order for the subcontractor to be entitled to purchase goods tax-exempt (see paragraph 5.14). [subitem (4)]

This Item will not cover ancillary activities (see discussion below).

Raw materials and parts will be covered (see paragraph 5.27). [subitem (5)]

Existing law: Items 113F, 158 and 159.

Links to other Items: Items 1, 2, 18, 23, 28, 29, 30, 33, 34, 35 and 38.

Exclusions

No property will be expressly excluded from this Item. However, a subcontractor will not be entitled to exemption for goods which would be excluded property if for use by a principal. Goods for use by a subcontractor will only be exempt where the goods would have qualified for exemption if they had been for use by the principal.

Example: A contract shearer would not be entitled to exemption for a 2 wheel drive utility for use in travelling interstate between the properties of a farmer for whom he shears sheep. The utility will be taxable, even though Item 36 does not expressly exclude such a general-purpose road vehicle. The reason is that the farmer would not be entitled to exemption for the utility for use in the same activities. The vehicle would be specifically excluded from exemption under Item 2, because it is a general-purpose road vehicle which is not used exclusively within and/or in going between adjacent premises of the farmer.

Changes to existing law

Countable activities: The concept of countable activities will replace the concept of contracted activities contained in the existing law.

For an activity to be a countable activity , it must satisfy either of two conditions:

(i)
The first condition is that goods for use in the activity would be covered by a business inputs exemption Item if they were for use by the principal mainly at the place where the subcontractor uses the goods. This is equivalent to the requirements of the existing law. [subitem (2)]
(ii)
The second condition relates to goods for use by subcontractors in carrying out activities covered by new Item 28, i.e. the storage, transport, handling or dispatch of certain goods (see discussion below).

Note:
The operation of this Item is illustrated at Figure 6.1 at the end of this Chapter.

Storing, etc. activities carried out by subcontractors: An activity will not be a countable activity if the goods for use in the activity are for use mainly in connection with any business of the subcontractor that involves selling goods (other than qualifying goods of the subcontractor). This condition is equivalent to the existing law. [subitem (3)]

Operation of this Item

More than one principal: Where goods are for use by a subcontractor in carrying out activities for a number of principals, the goods will not be precluded from exemption simply because one or more of the principals would not be entitled to purchase the goods tax-exempt. Exemption will be available where the goods are for use mainly in carrying out activities for a number of principals, where each of those principals would have been entitled to purchase the goods tax-exempt if they had used the goods mainly to carry out those activities.

Example: A subcontractor wishes to purchase cleaning equipment for use equally in cleaning for three principals, two of whom are manufacturers, the other a retailer. The cleaning would be an ancillary activity under new Item 18(1)(b) if the goods were used mainly by either of the manufacturers to perform the cleaning activities.

Result: The equipment in this situation would be exempt because it is for use mainly (67%) for activities (i.e. countable activities ) which would be covered by an exemption Item if performed by the two principals concerned (i.e. assuming that each principal used the goods mainly to carry out the contracted activities). The subcontractor's goods will pass the main use test without having to rely on the use of the goods in cleaning carried out on behalf of the retailer (which is not a countable activity for these purposes).

Ancillary activities: The Item will not cover ancillary activities, except where the activities are carried out on behalf of the principal. This would include an ancillary activity specifically carried out for the principal in relation to another activity carried out by the principal . For example, goods for use by a subcontractor mainly in repairing a principal's machinery would qualify for exemption (provided the repair equipment would have been exempt if used by the principal).

On the other hand, goods for use by the subcontractor in carrying out an uncontracted activity that is an ancillary activity in relation to an activity carried out on behalf of a principal would not qualify for exemption. For example, goods for use by a subcontractor in ordering or monitoring equipment that will be used in performing activities on behalf of various principals would not qualify for exemption. The ordering or monitoring of the subcontractor's equipment is not an activity being carried out on behalf of the principal.

Note:
An activity would not necessarily be carried out on behalf of a principal merely because the activity was specified in the contract between the principal and the subcontractor. It is a separate question, to be determined on the facts of each case, as to whether activities specified in a contract will actually be carried out on behalf of the principal.

Lubricants for use by subcontractors: All business inputs exemption Items cover goods for use in carrying out certain activities. Lubricants for use in maintaining machinery, equipment or vehicles used in carrying out an activity will be goods for use in carrying out that activity. Accordingly, a subcontractor will be entitled to exemption for lubricants for use in machinery, equipment or vehicles for use in carrying out activities on behalf of a principal, provided that the machinery, etc. qualifies for exemption.

Item 37 - Earthmoving contractors

General description: Machinery, implements or apparatus for use mainly in the excavation or movement of earth, rock or natural deposits in the soil in the course of carrying out contracts for a body, such as a local government body, whose own use of the machinery etc. would be covered by Items 64, 126 or 127. The Item will exclude general-purpose road vehicles (or parts).

Note:
Parts, accessories and attachments will also be available.

Change: No significant change.

Existing Item: 78B.

Links to other Items: None.

Item 38 - Mixed Activities [R]

Overview

General Description: Goods for use mainly in carrying out a combination of 2 or more of the activities covered by any of the listed business inputs exemption Items.

The Item will be marked [R]. In most cases only registered persons will be able to purchase goods tax-free under this Item (see paragraph 5.14). However, if none of the activities in question is marked [R], unregistered persons will be able to purchase goods tax-free under this Item. [subitem (4)]

Coverage: This Item will cover goods for use in 2 or more activities covered by listed business inputs exemption Items. It will permit the use of the goods in each activity to be added together in order to satisfy the main use test. This Item will also cover general-purpose road vehicles used for a mixture of uses.

For example, a manufacturer might require a computer for use in the following activities: manufacture-related activities (15%), storing and dispatching activities (30%) and engineering and technical design activities (10%). The computer would not qualify for exemption under any of the relevant exemption Items because it will not be used mainly (i.e. more than 50%) for an activity covered by any single Item. However, the computer would be covered by Item 38 because it will be used mainly (55%) in carrying out the combined activities, each of which would have been covered by those business inputs exemption Items (i.e. assuming that the goods were used mainly to carry out those activities). [subitem (1)]

This Item will not have a separate subitem for ancillary activities (see paragraph 5.24). However, ancillary activities covered by other business inputs exemption Items will be countable activities for the purposes of this Item (see discussion below).

This Item will cover eligible raw materials and parts (see paragraph 5.27). [subitem (5)]

Existing law: Clauses 13 and 14, Items 155, 156 and 157.

Links to other Items: Items 1, 2, 18, 23, 28, 29, 30, 33, 34 and 35.

Exclusions

No property will be expressly excluded from this Item. However, goods for use in mixed activities will not be exempt under this Item where the goods would be excluded property if they were for use in any one of the activities being added together.

Goods for use in mixed activities will only qualify for exemption if the goods would have been covered by the exemption Item in which the countable activity is referred to, if the goods were for use mainly by the exemption user in carrying out that activity. If the goods would have been excluded under the relevant Item (i.e. either because the goods are expressly excluded, or because of the rule in clause 13) then that activity cannot be counted for the purpose of passing the main use test in Item 38.

Example: A piece of construction equipment (such as a crane) is for use 30% in constructing mining plant and 40% in constructing manufacturing plant. Construction equipment for use in connection with the construction of buildings or other structures is generally-excluded property. The crane will be taxable, even though Item 38 does not contain an express exclusion for construction equipment. The equipment would not be exempt under Item 1 if used mainly for the mining construction activity, and would not be exempt under Item 18 if used mainly for the manufacturing construction activity. The reason is that generally-excluded property (i.e. construction equipment) is excluded under each of these Items. [clause 13]

Changes to existing law

Single Item for mixed activities: All goods for use in mixed activities will be covered by this Item. Under the existing law, there are 2 categories of goods used for mixed activities: mixed-use eligible business goods (Clause 13) and mixed-use eligible road vehicles (Clause 14). The combining of these 2 existing Items into one Item will not alter the scope of the exemptions available.

Countable activities: The concept of countable activities will replace the existing concept of eligible activities .

An activity will be a countable activity where the goods for use in the activity would qualify for exemption under a listed business inputs exemption Item if they were used mainly for that activity. This test is equivalent to the requirements in the existing law.

In the case of general-purpose road vehicles, the first requirement will still be that the vehicles will be taxable unless exclusively used within and/or in going between certain premises. Secondly, the vehicle must be used mainly in exempt activities. This Item will allow different activities to be added together to pass the main use test. [subitem (2)]

Premises: Where an exemption Item requires that goods be used at premises which are used mainly for carrying out activities covered by that Item, it will be sufficient if the premises are used mainly in carrying out one or more of the countable activities. An activity will not be precluded from qualifying as a countable activity simply because the premises on which the activity will be carried out are not used mainly for that activity.

Under the existing law, such activities could not be counted in determining whether goods for use in mixed activities will qualify for exemption if the premises on which the mixed activities were carried out were not used mainly for carrying out these activities. [subitem (3)]

Example: A mining company wishes to purchase a general-purpose road vehicle which will be used 45% in mining activities covered by new Item 1 and 15% in manufacturing activities covered by new Item 18. The remaining use of the vehicle will be for non-exempt activities. The vehicle will be used exclusively within premises which are owned by the mining company and are used 40% for mining activities and 20% for manufacturing activities. The mining company is registered.

Result: The mining activity is a countable activity for the purpose of determining whether the vehicle will be exempt under new Item 38. For the mining activity to be a countable activity, the vehicle would have to qualify for exemption under new Item 1 if it were for use mainly for that activity. A general-purpose road vehicle must be for use on premises used mainly in carrying out mining activities to be covered by Item 1. As the premises in question are not used mainly in carrying out mining activities, the vehicle would not be covered by Item 1. If not for the operation of subitem 38(4), the mining activity would not be a countable activity.

The premises are used mainly for carrying out a combination of mining and manufacturing activities. Because of the operation of subitem 38(4), the vehicle would be covered by new Item 1 for the purpose of subitem 38(3). Accordingly, the mining activity is a countable activity. On the same basis, the vehicle would be covered by new Item 18 for the purposes of subitem 38(3). The manufacturing activity is thus also a countable activity. The vehicle will qualify for exemption because the two countable activities will, when combined together, pass the main use test under this Item.

Subcontractors:  Figure 6.1

Chapter 7 Schedule 1 - Other exemptions

Chapter 2: Building materials

Item 39: Materials for repair or construction of buildings etc

General description: A range of goods of a kind ordinarily used as raw materials in the repair or construction of buildings, fixtures, structures or other works attached to land.

Change: This exemption has been completely restructured. The changes are as follows:

·
Division XII of the existing law which exempts a range of building materials is lengthy and difficult to interpret. The volume of the law will be reduced by eliminating overlapping exemption provisions and the Division will be significantly simplified. To achieve this the items listed below will be incorporated into one new exemption.
·
There are 17 items covering building materials in the existing law and most of them contain a long list of exclusions to exemption. The exclusions will be merged into one simplified list which will apply to all goods in this exemption.
·
Wherever exemptions are complicated by lists of goods or materials, these lists will be replaced with a general term or omitted if the wording of the exemption shows them to be an unnecessary addition.
·
In the existing law there are exemptions for bonding, setting and sealing agents for use with specific goods. The new exemption will apply to bonding, setting or sealing agents for use with any exempt building materials. This will widen the exemption slightly.
·
The existing exemption for manholes and inspection shafts applies where they are used in connection with the construction or repair of piping or tubing. Under the new law the manholes and inspection shafts must be for use by a person exclusively for that purpose. This will ensure that the goods will only be exempt where they are used for the specified purpose.
·
The existing exemption covers plaster products and goods with similar structural uses to plaster products. The new exemption will not refer to goods with similar structural uses, although most of those goods would be covered under the exemption for boards, sheets and linings.
·
The existing law exempts glass. This exemption will be extended to also cover glass substitutes since these are used in buildings and other structures for the same purposes as glass.

Note:
To check where existing items are covered in the new law, refer to the separate explanatory memorandum entitled "Comparison Tables".

Existing item: 82(1), 82(3), 82A(1), 82A(2), 82A(4), 83, 84, 85, 87, 88, 89B and 90A

Links with other items: None

Item 40: Stone, gravel etc

General description: Stone, gravel, seashell, sand, clay, soil, crushed metals and bricks, furnace slag, clinker, ashes, screenings, toppings and dust

Change: No change

Existing item: 82(2)

Links with other items: None

Item 41: Concrete, cement etc

General description: Concrete, cement and lime and goods marketed principally as ingredients for concrete, cement, mortar or plaster mixes

Change: No change

Existing item: 89

Links with other items: None

Item 42: Timber

General description: Timber including flooring, linings, mouldings, weatherboards, parquet blocks, plywood, veneers, sawdust and joinery and turnery of a kind used in the construction or repair of buildings

Change: No change

Existing item: 90

Links with other items: None

Item 43: Electrical fittings etc

General description: Electrical fittings, accessories and materials of a kind used as part of fixed electrical installations in consumers' premises but not including electrical appliances, lighting, engines, alternators, transformers, condensers, converters, generating equipment and light boxes; adaptors, plugs and electrical safety devices for the protection of persons

Change: The intention of the existing law is to provide exemption for electrical fittings that are installed in consumers' premises to control the flow of electricity. Some fittings, such as thermostats and sensors, operate to control the flow of electricity to appliances and are used in conjunction with those appliances rather than for general electrical purposes. To remove any doubt that sensors, thermostats and similar goods are not covered by this exemption, they will be specifically excluded from the item.

Exemption is provided under the existing law for switch lampholders. These goods are ordinarily used as parts of table and standard lamps and as switching devices for other portable goods. They are not installed as part of the fixed electrical installations. Exemption will be withdrawn.

Existing item: 90C and 82A(3)

Links with other items: None

Item 44: Paint, putties, wallpaper etc

General description: Paints and other coatings in liquid, paste or powder form that are of the kind marketed principally for application to buildings or fixtures; pigments, thinners or driers for those paints and other coatings; putties and fillers of a kind marketed principally for application to buildings; wallpaper

Change: The exemption has been reworked, but there will be no significant changes in its coverage. Specific changes include:

·
The exemption for paints and other coatings gives a list of goods which are included in the exemption. The words "paints and other coatings" are wide enough to cover all the goods listed, so the list will be omitted.
·
This exemption contains a detailed list of goods used as pigments and thinners for paint. To simplify the exemption, the list will be replaced with general terms which are wide enough to cover the goods.

Existing item: 83A and 85A

Links with other items: None

Item 45: Wire netting and barbed wire

General description: Wire netting and barbed wire

Change: The existing exemption also covers iron or steel wire of gauge 6 or lighter. These goods will be omitted because they are covered by new item 49 which exempts metal materials including wire.

Existing item: 122

Links with other items: None

Item 46: Concrete fencing posts

General description: Concrete fencing posts

Change: No change

Existing item: 82(1A)

Links with other items: None

Item 47: Bitumen etc

General description: Bitumen, bituminous emulsions and tar; asphalt and other mixtures of a kind ordinarily used in a plastic or fluid condition in the construction of roads, paths, buildings or fixtures

Change: The existing item is limited to mixtures of asphalt, tar and bitumen or compositions of those mixtures. The exemption has been widened to include all mixtures that are used in a plastic or fluid condition in the construction or repair of roads etc. This will place more modern mixtures on the same tax footing as asphalt and bituminous mixtures

Existing item: 89A

Links with other items: None

Item 48: Welding rods, solder etc

General description: Welding and brazing electrodes, rods and wires; solder consisting principally of lead and tin

Change: No change

Existing items: 86(2), 84A

Links with other items: None

Item 49: Metal materials

General description: Metal materials that are ingots, blooms, slabs, bars, rods, sheet, strip, circle, angles, channel, wire, mesh and rolled or extruded sections but not including metal materials made of precious metal.

Change: No change

Existing item: 86(1)

Links with other Items: Overlap with item 39(1)(h) which exempts metal building materials and item 45 which exempts wire netting and barbed wire.

Chapter 3: Irrigation, water supply etc

Item 50: Piping or tubing etc for irrigation, water supply etc

General description: Piping or tubing and channelling or guttering for use mainly for irrigation, water supply, drainage or sewerage purposes. Fittings and parts for those fittings and goods for use exclusively as raw materials in the construction or on-site repair of piping or tubing or channelling or guttering. Manholes or inspection shafts for use exclusively in connection with piping or tubing or channelling or guttering.

Change: The existing law lists the materials from which the piping or tubing may be constructed. To allow for changes in technology, the list will be omitted and exemption will be available for piping or tubing made of any materials

·
The existing law exempts channelling or guttering where it is for use for irrigation, water supply, drainage or sewerage purposes. Since channelling and guttering could be used for many other purposes, exemption will only apply where the goods are for use mainly for the specified purposes.
·
The existing law contains a long list of fittings that are included in the exemption. The list will be omitted, since any goods which perform the function of a fitting for piping or tubing will qualify for exemption. This will be the same as under the existing law.

Existing item: 18(1)

Links with other items: New exemption item 39 will exempt piping or tubing used as raw materials in the construction or repair of buildings.

Item 51: Pumping equipment

General description: Pumping equipment for use mainly for water supply or sewerage purposes

Note:
Parts are available

Change: The existing exemption covers pumping equipment for water supply or sewerage purposes. Since pumping equipment can be used for other purposes besides water supply or sewerage, the new exemption will have a requirement that the goods be for use by a person mainly for that purpose.

Existing item: 18(5)

Links with other items: New item 5 in Schedule 2 will tax pumping equipment of a kind used in chemical sanitary systems which are of a kind installed as fixtures in houses or other buildings at 10%.

Item 52: Water boring equipment etc

General description: Water bore casings, water boring plant and equipment and tools for use by a person mainly in connection with water boring plant or equipment.

Note:
Parts and fittings are available for water bore casings and water boring plant and equipment.

Change: The exemption for parts for water boring plant and equipment will be extended to also cover fittings for water boring plant and equipment.

Since the item does not specify the kinds of tools which can qualify for exemption, other than that they be for use with water boring plant and equipment, the degree of use required for the exemption to apply will be changed to for use by a person mainly for the specified purpose.

Existing item: 20

Links with other items: None

Item 53: Water tanks and stands for water tanks

General Description: Water tanks and stands, parts and fittings for those tanks.

Note:
Parts are available

Change: Hot water storage tanks installed as fixtures in domestic premises, water storage tanks for sewerage systems and water tanks of a kind ordinarily attached to motor vehicles will be excluded from this exemption. It is not the intention that these types of tanks be exempted. Hot water tanks and water storage tanks for sewerage systems will be taxable at 10%, while water tanks attached to motor vehicles will generally be taxable at 20%.

Existing item: 18(4)

Links with other items: New item 5 and 6 in Schedule 2 will tax water storage tanks for sewerage systems and hot water storage tanks installed as fixtures in domestic premises at 10%.

Item 54: Preparations and equipment to reduce water evaporation

General description: Preparations or materials marketed principally for reducing evaporation of water; equipment for applying those preparations and goods for use exclusively as parts for that equipment.

Note:
Parts for equipment for applying preparations will be exempt.

Change: The existing exemption covers Hexadecanol and other preparations or materials. The word "Hexadecanol" will be removed, to more easily allow for technological changes in this area. Hexadecanol will continue to be exempt where it is marketed principally for use in reducing evaporation of water in reservoirs, dams, channels or streams.

The existing exemption applies to equipment for use in the application of the exempt goods. Since the equipment could be used for other purposes, under the new law, it must now be for use by a person mainly for applying preparations for reducing water evaporation.

Existing item: 19A

Links with other items: None

Chapter 4: Fuel, power etc.

Item 55: Kerosene, petrol and other fuels

General description: Crude oil, fuel oil and fuel tar, kerosene, methylated spirits and petrol, power alcohol produced in Australia, and mixtures produced in Australia of petrol and power alcohol. Also included in this exemption are goods for use by a person exclusively as fuel for internal combustion engines.

Change: The existing exemption does not specify that these goods must be for use principally as fuel, although this is the intention of the law. Under the new law, a provision will be added that this item does not cover goods that are marketed principally for a use other than as fuel.

Existing item: 48

Links with other items: None

Item 56: Hydraulic power and electric current

General description: Hydraulic power and electric current

Change: The existing exemption applies only to Australian goods. The new exemption will also apply to imported goods.

Existing item: 49(2) and 50(1)

Links with other items: None

Item 57: Coal, charcoal, firewood etc

General description: Briquettes consisting principally of coal dust, charcoal, coal, coke and firewood

Change: The existing exemption for briquettes includes a requirement that the briquettes must be designed for use as a fuel. This requirement is not included in the exemptions for charcoal, coal, coke and firewood, although the exemptions are for goods which are fuels. In the new law, the requirement that the goods not be marketed principally for a use other than as fuel will apply to all goods covered by the exemption.

The existing exemption does not apply to imported goods. The new exemption will also apply to imported goods.

Existing item: 47(1), (2), (2A), (3) and (4)

Links with other items: Other fuels will be exempt under new item 55

Item 58: Goods for generating or storing gas or electricity in residential premises

General description: Machinery, implements or apparatus for use in the generation or storage of electricity or gas in residential premises.

Change: No substantive change. Some wording has been replaced with standard terms for consistency throughout the law.

Existing item: 50(4)

Links with other items: None

Chapter 5: Transport

Item 59: Ships

General description: Ships but not including those used mainly for purposes of pleasure, sport or recreation, private transport or accommodation. Also exempt are ships for use mainly in providing commuter transport and ships for use in regular and scheduled sight-seeing tours which are licensed to carry twelve adult passengers.

Note:
Parts for these goods will be exempt.

Change: No substantive change but the item has been restructured to make it easier to follow.

Existing item: 119

Links with other items: None

Item 60: Shipping containers

General description: Shipping containers for repeated use on ships that have a minimum capacity of 14 cubic metres

Change: No substantive change.

Existing item: 154

Links with other items: None

Item 61: Aircraft

General description: Aircraft, goods for use in aircraft and materials for use in the construction or repair of aircraft, but not including gliders and hang gliders

Note:
Parts are available

Change: No change to the exemption for aircraft. With regard to the exemption for machinery, implements and apparatus for use in aircraft, the existing law states that these goods will be exempt if they are "for use" in aircraft. Since these goods could be used for many other purposes, exemption will only apply if they are "for use by a person mainly" in aircraft.

Existing item: 119A

Links with other items: None

Item 62: Public railways

General description: Goods for use by a person exclusively in, or in connection with, the establishment, operation or maintenance of a public railway

Change: The existing exemption has a restriction on the goods being not for sale. This will be removed because under the new law to satisfy an exemption item the goods must be used for the statutory period (2 years). A person who intends to sell the goods cannot satisfy the requirement that the goods will be used for the statutory period.

The words whether as goods or in some other form will also be deleted because under the new law, exemption will continue to apply to the goods after they have ceased to be goods.

Note:
For further details see Use after goods cease to be goods in Chapter 3.5

Existing item: 119B

Links with other items: New item 64 will exempt goods for use by a public transport authority.

Item 63: Passenger buses

General description: Buses for use in the transport of passengers for reward and which provide seating for twelve adult passengers

Change: No change

Existing item: 119C

Links with other items: None

Item 64: Public transport authorities

General description: Goods for use by a public transport authority.

Change: There will be no significant changes. The words whether as goods or in some other form will be deleted because under the new law, exemption will continue to apply to the goods after they have ceased to be goods.

Note:
For further details see Use after goods cease to be goods in Chapter 3.8.

Existing item: 77

Links with other items: New item 62 will exempt goods for use by a person exclusively in, or in connection with, the establishment, operation or maintenance of a public railway.

Chapter 6: Primary products

Item 65: Primary products

General description: Primary products that are derived from operations carried on in Australia. The item will exclude goods marketed principally as food for birds; and salt marketed principally for non-culinary purposes.

Change: No change.

Note:
The existing exemption for flora and fauna manufactured in Australia will be deleted, as it is unnecessary. To the extent that flora and fauna occur naturally, they will not be taxable in the first instance. To the extent that these goods may be manufactured, they will be exempt under paragraph (1)(b) or (1)(c) of this item.

Existing item: 21

Links with other items: None

Item 66: Unprocessed precious stones

General description: Unprocessed precious or semi-precious stones derived from mining operations carried on outside Australia.

Change: No change

Existing item: 21A

Links with other items: Item 65 exempts goods derived from mining operations in Australia.

Item 67: Unprocessed metals

General description: Metals as recovered from ores derived from mining operations carried on in Australia.

Existing item: 22

Changes: There will be no substantive change to the exemption for metals recovered from ores. The words "if the ores are derived directly from mining operations carried on in Australia" will be added to preserve the requirement that the metals, to be exempt, must be recovered from ores in Australia. The existing exemption only applies to metals recovered from ores if they are the subject of a dealing covered by Sales Tax Assessment Acts (Nos. 1 to 4) or (9), i.e. a dealing with goods produced in Australia. These act will be replaced by a single Assessment Bill covering all dealings with goods.

Links with other items: None

Chapter 7: Food and drink for human consumption
Note:
Division 3 of Part 3 of the Bill will list the exclusions from the exemptions in this Chapter. [EC clause 14]

Item 68: Food for human consumption

General description: Goods marketed principally as food for human consumption or as ingredients for food for human consumption.

Change: The exemption has been reworked, but there will be no change in its coverage. Specific changes include:

·
The exemption will be simplified by removing the list of exclusions attached to it and providing a standard list of exclusions in clause 14 which will apply to all items in Chapter 7 of Schedule 1.
·
Thickshakes or similar goods will be specifically exempted from tax if they are manufactured in retail premises or vehicles, for the purpose of retail sale from those premises or vehicles. The specific exemption will be necessary because of a change to the exemption for raw materials for manufacturing goods, whereby raw materials for use in the manufacturing of these goods will be excluded from exemption (see further chapter 6 - Item 19, Schedule 1).
·
The existing law exempts goods of a kind sold exclusively or principally; or put up for sale as food for human consumption. The new exemption will cover goods marketed principally as food for human consumption. This will simplify the item without changing the meaning.

Existing item: 23

Links with other items: New item 11 in Schedule 2 will tax at 10% goods which will be excluded from exemption under new item 68

Item 69: Tea, coffee, cocoa etc

General description: Tea, coffee and coffee essence, chicory and chicory essence, cocoa and cocoa essence, malt and malt extract and chocolate for drinking . The exemption also covers preparations of those goods marketed for drinking purposes and substitutes for drinking chocolate or for any of those preparations.

Note:
"Tea" includes herbal tea, and other similar beverage preparations. The new item specifically excludes beverages marketed in a ready-to-drink form.

Change: The exemption has been substantially reworked and the effect of it has been widened a little. Specific changes include:

·
The existing exemption lists the ingredients of which the drink preparations must consist principally. Under the new law, the exemption will be available if a preparation is marketed principally as a preparation for drinking purposes. The references to ingredients will be omitted.
·
The existing exemption includes raw or roasted coffee beans. As these are simply coffee marketed in different forms, the new exemption will refer just to coffee and coffee essence.
·
The existing exemption includes chicory. Except where it is an ingredient of other drink preparations, chicory is most frequently marketed in the form of chicory essence and this has been added to the exemption.
·
The existing exemption covers malt preparations. As it is uncertain what is meant by this, the words will be changed in the new exemption to malted beverages . This better describes the kind of beverage preparation intended to be exempted by this item.
·
The existing exemption covers coffee substitutes which consist principally of cereals or cereal products. Exemption will be extended to cover preparations marketed principally as substitutes for any preparation covered by this item.

Note:
The standard list of exclusions in clause 14 will apply to this item.

Existing item: 35A

Links with other items: None

Item 70: Milk products

General description: Milk products, goods that consist of milk products to the extent of at least 95% and lactose. This item does not cover flavoured beverages that are covered by new item 12 in Schedule 2.

Change: The exemption will not be changed in effect, but will be simplified by making the following changes to the wording:

·
To simplify the exemption, a defined term milk products will be substituted in place of a lengthy list of goods.
·
The exemption will also be simplified by removing the list of exclusions attached to it and providing a standard list of exclusions in clause 14which will apply to all items in the Chapter covering food drink for human consumption.

Existing item: 26

Links with other items: New item 12 in Schedule 2 will tax at 10% flavoured beverages which contain 90% or more of milk or milk products

Item 71: Soy milk

General description: Beverages that consist principally of soy milk

Change: No change

Existing item: 26AA

Links with other items: New item 12 in Schedule 2 will tax flavoured soy milk at 10%

Item 72: Cooking oil etc

General description: Fats and oils marketed principally for culinary purposes

Change: The existing exemption covers vegetable fats and oils and animal fats and oils and mixtures of those goods. The words vegetable, animal and mixtures of those goods will be omitted from the new item to make the item less restrictive and allow for changes in technology..

Existing item: 26A

Links with other items: None

Item 73: Meat extracts

General description: Beefine, Bonox, Bonvil and similar meat extracts.

Change: No change

Existing item: 24(4)

Links with other Items: None

Item 74: Emergency rations for lifeboats

General description: Food marketed principally as emergency rations for lifeboats or rafts.

Change: No substantive change. Some expressions have been changed to simplify the item and to make the wording consistent with that used in other items.

Note:
The standard list of exclusions in clause 14 will not apply to this item because emergency rations may contain taxable foods such as biscuits and confectionery.

Existing item: 35B

Links with other items: None

Chapter 8: Clothing and footwear for human wear

Item 75: Clothes

General description: Clothes for human wear made of any material and goods ordinarily used as parts for such clothes

Change: The existing exemption contains a long list of clothing which is included in the exemption. The list is unnecessary as clothes is a wide enough term to cover virtually all the goods mentioned. The list will be removed to simplify the exemption.

Note:
To remove any doubt that sanitary pads and similar goods are exempt, these will be covered in a separate exemption (see new item 92).

Existing items : 120(1)

Links with other items: Item 2, Schedule 5, which taxes fur clothes at the rate of 30%

Item 76: Fasteners for clothing and footwear

General description: Fasteners of a kind ordinarily used as part of exempt clothing and footwear

Change: No substantive change. The words describing specific fasteners, e.g., buttons, press studs, slide fasteners etc will be replaced by the general term fasteners.

Existing item: 120(11)

Links with other items: Items 75 and 77 which exempt clothing and footwear

Item 77: Footwear, materials for repairing footwear etc

General description: Footwear, goods and materials for use in repairing footwear and fittings for footwear such as heel grips and inner soles

Change: The existing law exempts materials marketed for use in repairing footwear. The marketing test will be changed to marketed exclusively for use but as these kind of materials are usually marketed in this way the change will have little effect on the exemption.

Existing items: 120(2), 120(3), 120(3A)

Chapter 9: Human health and hygiene

Item 78: Drugs and medicines

General description: Goods marketed principally as drugs or medicines for human use

Change: The existing exemption covers drugs and medicines used in the prevention, cure or treatment of human sickness. In view of the strict Government regulations about the marketing of goods as drugs and medicines for human use, it is more appropriate for exemption to be based on how the goods are marketed.

The existing item excludes from exemption (amongst other goods), drugs and preparations put up and sold for the purposes of photography; dyes; and a list of acids and chemical preparations. The exclusions are goods which are not likely to be marketed principally as drugs or medicines for human use and, because of the adoption of a marketed test, these can be removed.

Existing item: 38

Links with other items: Rectified spirits for making drugs and medicines will be exempt under new item 79 in Schedule 1.

Item 79: Rectified spirits

General description: Rectified spirits for use exclusively in making drugs and medicines

Change: The existing exemption refers to medicines and essences. This exemption is linked with the exemption for drugs and medicines so for consistency the words in this exemption will be changed to drugs and medicines .

The existing law exempts rectified spirits if they are for use in making medicines and essences. To make the effect of the exemption more certain, the degree of use required will be changed to for use exclusively .

Existing item: 40

Links with other items: Drugs and medicines for human use will be exempt under new item 78 in Schedule 1

Item 80: Medical and surgical goods

General description: Goods of a kind ordinarily used by people suffering from a medical condition, to treat or alleviate that condition or its effects.

Note:
Parts are available

Change: The existing exemption covers self-help goods that people use to treat or alleviate their sickness or disease etc. The existing exemption is, however, restrictive since it uses the words medical or surgical appliances of a kind used exclusively or principally by persons suffering from sickness etc The exemption will be made less restrictive by changing those words to goods of a kind ordinarily used by a person suffering etc. The term goods will be a standard expression to be used wherever possible. The use of standard terms throughout the law will make exemptions easier to understand.

Existing item: 42B(1)

Links with other items: Goods marketed principally as surgical instruments or appliances of a kind ordinarily used by hospitals or by doctors, optometrists or physiotherapists will be exempt under new item 81, Schedule 1. Goods designed and manufactured expressly for use by people suffering from sickness, disease or disablement will be exempt under new item 93, Schedule 1.

Item 81: Surgical instruments and appliances

General description: Goods marketed principally as surgical instruments, appliances or materials for use with humans and parts for those goods. The item also covers microscopes and parts for microscopes.

Note:
Parts are available

Change: The exemption has been reworked, but there will be no substantial changes in its coverage. Specific changes include:

·
The existing exemption is intended to cover surgical instruments and appliances for use with humans. This will be made clear in the new exemption by the addition of the words "with humans".
·
The existing exemption requires that the goods must be sold exclusively or principally by manufacturers or distributors of such goods. This adds an unnecessary restriction to the item and does not take into account businesses selling surgical instruments and appliances which diversified into other areas. The requirement will be removed under the new exemption and will be replaced with a requirement that the goods be marketed principally as surgical instruments and appliances.
·
The existing exemption contains a long list of goods which are excluded from exemption. The addition of the marketed principally test will remove the need to list goods which are presently excluded from exemption since those goods would not be marketed principally as surgical instruments and appliances.
·
The existing item excludes microscopes which are not for use in hospitals or by doctors or medical students. It follows then that microscopes which are for use in hospitals etc are covered by this exemption. The new exemption will clarify this by adding a subitem to specifically exempt those microscopes.

Existing item: 41

Links with other items: Medical or surgical goods of a kind ordinarily used by people suffering from a medical condition to treat or alleviate that condition will be exempt under new item 80 in Schedule 1. Goods designed and manufactured expressly for use by people suffering from sickness, disease or disablement will be exempt under new item 93 in Schedule 1.

Item 82: X-ray apparatus

General description: Surgical x-ray apparatus and accessories

Note:
Parts are available

Change: There will be no significant changes to this item, although some wording will be changed to clarify its meaning.

Note:
Existing subitem 43(2) (Diathermy apparatus and appliances) will be omitted since these goods are already covered by existing item 41, First Schedule. They will continue to be covered by new item 81, Schedule 1.

Existing item: 43(1)

Links with other items: None

Item 83: Gases for medical use

General description: Gases for use exclusively for medical or dental purposes by a hospital, medical practitioner or dentist.

Change: The existing exemption covers a list of gases and any other medical gases and mixture of such gases. Exemption under the new item will cover any gas for use exclusively for medical or dental purposes. The change will make very little difference to the effect of the exemption.

Existing item: 44

Links with other items: New item 176, Schedule 1 will exempt all gases except carbon dioxide, refrigerant gases and gases marketed principally for inflating balloons. Should any of those excluded gases be used for medical purposes, they will be exempt under new item 83, Schedule 1.

Item 84: Dental instruments and appliances

General description: Goods marketed principally as dental instruments, appliances or materials, for use with humans, dentures, braces, bridges, crowns and similar articles, gold, alloys, amalgams, porcelain and other goods for similar dental use.

Note:
Parts for dental instruments, appliances will be exempt.

Change: The existing exemption requires that the goods must be sold exclusively or principally by manufacturers or distributors of such goods. This adds an unnecessary restriction to the item and does not take into account businesses selling dental instruments and appliances which diversified into other areas. The requirement will be removed under the new exemption and will be replaced with a requirement that the goods be marketed principally as dental instruments and appliances.

The existing exemption is intended to cover dental instruments and appliances for use with humans. This will be made clear in the new item by the addition of the words "for use with humans".

Note:
The existing exemption contains a mixture of goods that are unconditionally exempt and goods that are conditionally exempt, ie some goods have a use requirement attached to the exemption and some do not. This makes the exemption difficult to understand. The new exemption will be split into three subitems so that the goods with a use requirement are separated from those without a use requirement.

Existing item: 45

Links with other items: Goods for dental care will be exempt under new item 89, Schedule 1

Item 85: Spectacles etc

General description: Spectacles and eye glasses and cases and wipers for those goods.

Change: No change

Existing item: 42(11)

Links with other Items: None.

Item 86: Wigs etc for medical purposes

General description: Wigs and hair-pieces for use by a person who holds a medical certificate certifying that the wig or hair-piece is medically necessary.

Change: No change

Existing item: 42(17)

Links with other Items: None.

Item 87: Bath seats

General description: Bath seats of a kind ordinarily used by invalids or aged persons

Change: No substantive change.

Existing item: 42(7A)

Links with other items: None

Item 88: Cotton wool, bandages, first-aid kits etc

General description: Goods marketed principally for surgical or medical purposes.

Change: This exemption has been reworked because it contains substantial overlaps with other exemption items. All goods that will be covered elsewhere will be omitted from this exemption.

The opening words to the new exemption will be changed from surgical appliances to The following goods marketed principally for surgical or medical purposes because the goods covered by this exemption could not be properly described as surgical appliances.

Note:
See "Omitted Items" in Chapter 9

Existing item: 42(1) to 42(17)

Links with other items: None

Item 89: Toothbrushes etc

General description: Toothbrushes and other goods for cleaning human teeth and dentures.

Change: The existing exemption is intended to cover dental care goods for use with humans. This will be made clear in the new item by the addition of the words "for humans".

The existing exemption covers goods of a kind used exclusively or principally in the cleaning of teeth etc. The new exemption will cover goods of a kind ordinarily used for that purpose. This is a standard form of words which will be used throughout the law and will not change the effect of the exemption.

Goods for whitening teeth will be excluded from the exemption since these goods are in the same category as goods for removing stains from teeth which are already excluded from exemption.

Existing item: 45A

Links with other items: Dental instruments and appliances will be exempt under new item 84.

Item 90: Contraceptives

General description: Contraceptives

Change: No change

Existing item: 150

Links with other items: None

Item 91: Sunscreen preparations

General description: Goods marketed principally as sunscreen preparations for human use

Change: The exemption has been substantially reworked, but there will be no changes in its coverage. Specific changes include:

·
The existing item exempts preparations that are put and sold for use as substances to be applied to the skin to screen out solar ultra-violet rays. The item will be simplified by substituting marketed principally for use as sunscreen preparations for those words.
·
Where goods are marketed principally for use as sunscreen preparations, they cannot also be marketed principally for use as cosmetics, therefore, the exclusions for cosmetics which appear in the existing exemption will not be necessary and will be removed.
·
To obtain exemption under the existing law, a certificate must be obtained from the Department of Health stating that the sunscreen product provides an acceptable level of protection from solar ultra-violet rays. This requirement will be removed and replaced with a reference to the Australian Register of Therapeutic Goods. Manufacturers will only need to provide the documentary evidence, given to them by the Therapeutic Goods Administration, that their sunscreen products have been included in the Register.

Note:
To be included in the Australian Register of Therapeutic Goods, sunscreen preparations must have a sun protection factor of 4 or more. Inclusion of a sunscreen preparation in the Register will satisfy the protection level for exemption to apply under the new item.

Existing item: 38A

Links with other items: None

Item 92: Sanitary pads, baby nappies etc

General description: Sanitary pads, tampons and other like goods; baby nappies and liners for baby nappies

Change: Exemption under the existing law for these goods is provided in a list of inclusions to the exemption for clothing. To remove any doubt that these goods are exempt, they will be placed in a separate exemption.

Existing item: 120(1)

Links with other items: Item 75 which exempts clothes

Item 93: Goods for disabled persons

General description: Goods designed and manufactured for use by disabled persons but not goods of a kind ordinarily used by able-bodied persons

Note:
Parts available

Change: No substantive change. Some general words of description about the nature of sickness, disease or disablement will be omitted because they add little or nothing to the meaning of the exemption.

Existing item: 123

Links with other items: This item overlaps to some extent with item 80 which exempts medical or surgical goods of a kind ordinarily used by persons suffering from sickness, disease, injury or physical impairment

Item 94: Wheelchairs etc for disabled people

General description: Wheelchairs , tricycles, wheeled lounges and other similar goods for disabled persons. Wheeled beds and battery chargers for use mainly in recharging the batteries of goods covered by this item.

Change: The item has been simplified, but the coverage of the exemption has not been altered.

Existing item: 42(10) and 42A

Links with other items: None

Item 95: Videotex systems for deaf persons

General description: Videotex systems, teletext decoding devices, closed-caption decoding devices and other systems and devices for use by a person who has impaired hearing to such an extent that the person is taken to be profoundly deaf.

Change: The existing exemption has a restriction on the goods being not for sale. This will be removed because under the new law to satisfy an exemption item the goods must be used for the statutory period (2 years). A person who intends to sell the goods cannot satisfy the requirement that the goods will be used for the statutory period.

The exemption will also be restructured to make it easier to follow.

Existing item: 123A

Links with other items: None

Item 96: Motor vehicles for disabled veterans

General description: Motor vehicles for use in the personal transportation of a person who has served in the Defence Force and has lost a leg or both arms, or had a leg or both arms rendered useless, or who is a veteran to whom section 24 of the Veteran's Entitlements Act 1986 applies and receives a pension under Part II of that Act. The exemption does not apply to motor vehicles covered by Item 1, Schedule 5.

Note:
Parts are available

Change: The existing exemption has a restriction on the goods being not for sale. This will be removed because under the new law to satisfy an exemption item the goods must be used for the statutory period (2 years). A person who intends to sell the goods cannot satisfy the requirement that the goods will be used for the statutory period.

The exemption will also be restructured to make it easier to read.

Existing item: 135

Links with other items: None

Item 97: Motor vehicles for eligible disabled persons

General description: Motor vehicles for use by a person who has lost the use of one or both legs to the extent that the person cannot use public transport and who requires the vehicle to travel to and from gainful employment. The exemption does not apply to vehicles covered by Item 1, Schedule 5.

Note:
Parts are available.

Change: The existing exemption has a restriction on the goods being not for sale. This will be removed because under the new law to satisfy an exemption item the goods must be used for the statutory period (2 years). A person who intends to sell the goods cannot satisfy the requirement that the goods will be used for the statutory period.

The exemption will also be restructured to make it easier to read.

Existing item: 135A

Links with other items: None

Item 98: Modifying motor vehicles for disabled persons

General description: Goods for use mainly in modifying a motor vehicle for the use of a disabled person.

Change: The existing exemption covers goods to be used in the modification of a motor vehicle for disabled persons. However, the goods could be used for that purpose and still be used mainly for some other purpose. To make the exemption more certain it will now apply to goods for use mainly for that purpose.

Existing item: 42C

Links with other items: New item 97 in Schedule 1 will exempt motor vehicles for use by eligible disabled people. New item 96 in Schedule 1 will exempt motor vehicles for use by disabled veterans.

Item 99: Life saving equipment

General description: Machinery, implements and apparatus for use by a life saving club, mines rescue service or ambulance society for preserving human life or transporting persons for medical or surgical treatment. This item will also cover ambulances for use by a hospital.

Note:
Exemption for parts for these goods will be available.

Change: There will be no significant change to the exemption. The existing exemption covers machinery or equipment . These words will be changed to machinery, implements or apparatus which will be a standard term used throughout the new law.

Existing item: 46

Links with other items: Item 140, Schedule 1 which covers public and non-profit hospitals.

Chapter 10: Books, printed matter, paper etc

Item 100: Books, magazines etc

General description: Books, pamphlets, periodicals, magazines or printed music

Change: The existing exemption carries a restriction that "periodicals" means any publication issued at regular intervals not exceeding three months. A periodical is a magazine, journal etc issued at regularly recurring intervals. There is no need for requiring that those regular intervals do not exceed three months. The restriction will be removed.

Existing item: 51(1)

Links with other items: None

Item 101: Newspapers

General description: Newspapers

Change: No change

Existing item: 54

Links with other items: None.

Item 102: Manuscripts

General description: Manuscripts

Change: The existing exemption applies only to imported manuscripts. Most manuscripts produced in Australia will either be exempt under new item 100 (which exempts books, pamphlets etc) or will not attract tax because they are not manufactured goods. It will simplify the item to exempt all manuscripts without being concerned about their source.

Existing item: 51A

Links with other items: This Item overlaps with Items 100 (Books, magazines etc.) and 113 (imported exchange publications).

Item 103: Tourist pamphlets etc

General description: Books, pamphlets, leaflets, periodicals or magazines published by a non-profit body for the purposes of advertising tourism.

Change: There will be no substantive changes to this item. It will be simplified by the substitution of the term non-profit body for lengthy descriptive words, which appear in the existing exemption. Non-profit body will be defined to mean those words.

Existing item: 51(2)

Links with other items: None

Item 104: Printed matter for use by agricultural society

General description: Printed matter for use by a non-profit body maintained principally for the advancement of agriculture.

Change: There will be no substantive changes to this item. It will be simplified by the substitution of the term non-profit body for lengthy descriptive words, which appear in the existing exemption.

Existing item: 60A

Links with other items: None

Item 105: Imported trade catalogues

General description: Imported trade catalogues, not imported for sale or distribution

Note:
Exemption applies only at the point of local entry

Change: No change.

Existing item: 59(1)

Links with other items: None

Item 106: Printed matter of insubstantial value

General description: Printed matter covered by paragraph (d) of item 32 in Schedule 4 to the Customs Tariff.

Note:
Exemption applies only at the point of local entry

Change: The existing exemption lists the goods covered by this item and those excluded from it. The words have been repeated from the Customs Tariff and they will be removed to simplify the exemption. Keeping the wording of the exemption to simple terms will more easily allow for changes to the Customs Tariff to flow through to the Act.

Existing item: 59(2)

Links with other items: None

Item 107: Postage stamps

General description: Postage stamps

Existing item: 57

Change: No change

Links with other Items: None.

Item 108: Goods made from recycled paper

General description: Paper goods covered by subitems (2) to (7) if all the paper in the goods is recycled paper.

Change: The existing exemption has a for use requirement in one part of it, whilst the rest is unconditionally exempt. This can cause difficulty in administering the item and the words paper for use in accounting ledgers will be changed to paper of a kind ordinarily used in accounting ledgers . Other than that, there is no change to the exemption.

Existing item: 60(1)

Links with other items: None

Chapter 11: Scientific and educational goods

Item 109: Non-profit university or school

General description: Goods for use by a university or school conducted by a non-profit body

Change: There will be no substantive change to this exemption. Some unnecessary words will be omitted and the defined term non-profit body will be used in line with other items in the new law.

Existing item: 63A

Links with other items: None

Item 110: School and university promotion bodies

General description: Goods for use by a body established and maintained for the promotion of a non-profit university or school

Change: There will be no substantive changes to this exemption. Some unnecessary words will be omitted and the defined terms non-profit body and body will be used in line with other items in the law.

Existing item: 63B(1)

Links with other items: None.

Item 111: School or university sport promotion bodies

General description: Goods for use by a body established and maintained for the promotion of competitive sport among students

Change: There will be no substantive changes to this exemption. Some unnecessary words will be omitted and the defined terms non-profit body and body will be used in line with other items in the law.

Existing item: 63B(2)

Links with other items: None

Item 112: Anthropological specimens

General description: Imported anthropological specimens for use in anthropological research

Note:
Exemption applies only at the point of local entry

Change: The existing item implies that the specimens may be used for any research. The words for use by research workers will be replaced with for use by a person in anthropological research to ensure that the specimens can only be imported free of tax if they are specifically for anthropological research.

Existing item: 61

Links with other items: None

Item 113: Imported exchange publications etc

General description: Imported exchange publications consigned to an international exchange centre in Australia and imported publications which have been donated to the Commonwealth, State or a Territory or to an institution or society.

Note:
Exemption applies only at the point of local entry

Change: The existing item is intended to exempt goods known as exchange publications but includes goods which are not commonly considered to be exchange publications as long as the Commissioner is satisfied as to their historical value. It is not practical from an administrative point of view to require the Commissioner to determine the historical value of goods. The list of inclusions and the Commissioner's discretion will be removed. This may result in some goods ( imported typescripts, pictures, maps and plans) which previously qualified for exemption under this item no longer being exempt.

Existing item: 64

Links with other items: None

Item 114: Imported printed matter

General description: Imported printed matter covered by paragraph (c) of item 23 in Schedule 4 to the Customs Tariff, and pictorial illustrations covered by item 26 in Schedule 4 to the Customs Tariff

Note:
Exemption applies only at the point of local entry

Change: The description of the goods in the existing exemption, which is repeated in the Customs Tariff, will be removed. Where exemption is linked to the Customs Tariff, changes to the Customs Tariff will affect the exemption item. Limiting such items to a reference to the relevant part of the Customs Tariff and only the briefest description of the subject of the exemption will minimise changes caused by amendments to the Customs Tariff.

Existing item: 69

Links with other items: None.

Chapter 12: Works of art, collectors' pieces, antiques etc

Item 115: Works of art

General description: Works of art

Change: The existing exemption covers works of art intended for continuous public exhibition free of charge and works of art produced in Australia or produced by Australian artists abroad. This means that, unless covered by another exemption, the work of foreign artists not intended for continuous public exhibition free of charge is taxable.

In fact, only a small range of works of art produced overseas is taxable since many qualify for exemption on importation because they are imported by exempt bodies such as public art galleries. Imported works of art are important to the culture of Australia and the new exemption will cover all works of art.

Existing item: 68(1) and 68(2)

Links with other items: 116

Item 116: Museum exhibits etc

General description: Goods for use by a public body mainly for use as exhibits in a museum or art gallery

Change: The existing exemption requires that the goods be acquired by the public body by means of purchase, importation, donation or bequest. This requirement will be removed. As long as the goods are for use mainly as exhibits in a museum or art gallery, it is not important how they are acquired.

Existing item: 67

Links with other items: 115

Item 117: Imported paintings, sculptures etc

General description: Imported artworks which are free from Customs duties under headings 9701 to 9703 in Schedule 3 to the Customs Tariff.

Change: No change

Existing item: 68(3)

Links with other Items: Overlaps with Item 115.

Item 118: Imported collectors' pieces

General description: Imported goods being collections and collectors pieces covered by heading 9705 in Schedule 3 to the Customs Tariff.

Note:
Exemption applies only at the point of local entry

Change: The description of the goods in the existing exemption, which is repeated in the Customs Tariff, will be removed. Where exemption is linked to the Customs Tariff, changes to the Customs Tariff will affect the exemption item. Limiting such items to a reference to the relevant part of the Customs Tariff will minimise changes caused by amendments to the Customs Tariff.

Existing item: 69B

Links with other items: None

Item 119: Imported antiques

General description: Imported goods being antiques that are, or were, covered by heading 9706 in Schedule 3 to the Customs Tariff at the time of their entry for home consumption.

Change: No change

Existing item: 70A

Links with other Items: None.

Chapter 13: Monuments, memorials, trophies etc

Item 120: Defence service honour boards

General description: Honour boards or rolls that contain or will contain the names of people who have served in a defence force

Change: Under the existing item boards containing names and those that will contain names in the future are always exempt. This does not provide a means for vendors to determine if the boards that do not contain names at the time of purchase, will be used for that purpose. This will be achieved in the new exemption by splitting it into two subitems. Subitem (2) covering boards that do not contain names at the time of purchase, will require that the goods be for use by a person as boards or rolls that will contain names etc.

Existing item: 66A(3)

Links with other items: None

Item 121: Public monuments

General description: Monuments erected in a public place in commemoration of an historical event and goods for use exclusively as raw materials in the construction or repair of such monuments

Change: There will be no significant changes to this exemption, but the wording will be standardised by using the defined term raw materials instead of integral parts and the degree of use required for those raw materials to be exempt will be changed from for use to for use by a person exclusively .

Existing item: 66A(1) and 66A(2).

Links with other items: None

Item 122: Imported trophies, medallions, prizes etc

General description: Imported goods being trophies, decorations, medallions, certificates or prizes covered by item 25 in Schedule 4 to the Customs Tariff.

Note:
Exemption applies only at the point of local entry

Changes: The existing exemption states that to be exempt the goods must be won,awarded or sent from outside Australia. These words have been repeated in full from the Customs Tariff and will be omitted from the exemption. Where exemption is linked to the Customs Tariff, changes to the Customs Tariff will affect the exemption item. Limiting such items to a reference to the relevant part of the Customs Tariff and only the briefest description of the subject of the item will minimise the changes caused by amendments to the Customs Tariff.

Existing item: 70

Links with other items: None

Item 123: Tombstones, memorial boards etc

General description: Memorial boards, memorial tablets, statues and stained glass windows in memory of deceased persons and tombstones and goods to be erected on a grave or tomb.

Change: No substantive changes

Existing item: 66

Links with other items: None

Item 124: Miniatures of awards

General description: Miniatures of awards that are awarded by the authority of the Queen or approved by the Queen

Change: No change

Existing item: 142

Links with other items: None

Chapter 14: Goods for use by governments, hospitals etc

Sub-Chapter 14.1: Australian governments and government representatives

Item 125: Governor-General and State Governors

General description: Imported goods for use for official purposes by the Governor-General, the Governor of a State or by a member of their family and Australian goods that are free from duties of excise because they are for the official use of the Governor-General, the Governor of a State or a member of their family

Change: The existing exemption does not specify the degree of use required for exemption to apply. The intention of the law is that the main use of the exempted goods should be for official purposes. The new exemption will require that the goods be for use mainly for official purposes .

The existing exemption refers to articles cleared from bond. These words are unnecessary and will be omitted since all goods imported into Australia must be entered for home consumption.

Existing item: 73 and 73A

Links with other items: None

Item 126: Commonwealth and States

General description: Goods for use by the Commonwealth, a Commonwealth authority, a State or a State authority.

Change: The exemption has been substantially re-worked to make it easier to read.

There is a requirement under the existing exemption that an arrangement must be made between the Governor-General and the Governor-in-Council of the State (or the equivalent person in the Territories), that sales tax will be paid on goods sold by such Governments or Government Authorities in the conduct of a trading enterprise.

Under the new law, State and Territory Governments and Government Authorities will be bound by the Sales Tax law. They will have a sales tax liability for goods sold in the conduct of a trading enterprise and, therefore, there will be no need for arrangements to be entered into to ensure the payment of sales tax. The requirement for an arrangement to be in force will be omitted.

The existing exemption has a restriction on the goods being not for sale. This will be removed because under the new law to satisfy an exemption item the goods must be used for the statutory period (2 years). A person who intends to sell the goods cannot satisfy the requirement that the goods will be used for the statutory period.

The words whether as goods or in some other form will also be deleted because under the new law, exemption will continue to apply after the goods have ceased to be goods.

Note:
For further details see Use after goods cease to be goods at paragraph 3.8

The new Item will state specifically that goods for use by a joint Commonwealth-State body will be exempt. This clause will be inserted to put the matter beyond doubt.

Existing item: 74

Links with other items: None

Item 127: Local government bodies

General description: Goods for use by local government and other specified bodies constituted by a law of the Commonwealth or of a State or Territory.

Change: There will be no significant changes. The existing exemption has a restriction on the goods being not for sale. This will be removed because under the new law to satisfy an exemption item the goods must be used for the statutory period (2 years). A person who intends to sell the goods cannot satisfy the requirement that the goods will be used for the statutory period.

The words whether as goods or in some other form will also be deleted because under the new law, exemption will continue to apply to the goods after they have ceased to be goods.

Note:
For further details see Use after goods cease to be goods in Chapter 3.5

Existing item: 78

Links with other items: None

Item 128: State libraries etc

General description: Goods for use by a State public library, museum or art gallery.

Change: No change

Existing item: 74A

Links to other items: None

Item 129: Grain storage authorities

General description: Goods for use by a grain-storage authority as raw materials in the construction or repair of bulk grain storage structures. Machinery, implements or apparatus for use by a grain-storage authority mainly for the handling or storage of grain in bulk.

Machinery, implements or apparatus for use by a grain storage authority mainly for the installation or maintenance of goods will be covered by subitem (2).

Note:
Exemption for parts will be available for subitems (2) and (3)

Change: There will be no specific changes in the coverage of the exemption. The groups of lengthy descriptive words will be replaced with defined terms to simplify the item.

Existing item: 78A

Links with other items: New item 12 will exempt machinery, implements or apparatus for use mainly for the handling of grain in bulk.

Item 130: Goods for use by particular bodies

General description: Goods for use by any of the following bodies: Aboriginal and Torres Strait Islander Commission; Anglo-Australian Telescope Board; Australian-American Educational Foundation; Australian Institute of Aboriginal and Torres Strait Islander Studies; Commonwealth War Graves Commission

Change: There will be no significant changes. The existing exemption has a restriction on the goods being not for sale. This will be removed because under the new law to satisfy an exemption item the goods must be used for the statutory period (2 years). A person who intends to sell the goods cannot satisfy the requirement that the goods will be used for the statutory period.

The words whether as goods or in some other form will also be deleted because under the new law, exemption will continue to apply to the goods after they have ceased to be goods.

Note:
For further details see Use after goods cease to be goods in Chapter 3.5

Existing item: 74G, 74P, 74Q, 75, 75A, and 76

Links with other items: None

Sub-chapter 14.2: Foreign governments and government representatives

Item 131: Foreign governments

General description: Goods for use by the government of a foreign country

Change: There will be no substantive changes. The existing exemption has a restriction on the goods being not for sale. This will be removed because under the new law to satisfy an exemption item the goods must be used for the statutory period (2 years). A person who intends to sell the goods cannot satisfy the requirement that the goods will be used for the statutory period.

Existing item: 72A

Links with other items: None

Item 132: Trade Commissioners

General description: This item will exempt imported goods that are for the official use of a Trade Commissioner of a foreign country and Australian goods that are free from duties of excise because they are intended for the official use of a Trade Commissioner of a foreign country

Change: The explanation of which goods the existing exemption is intended to cover is difficult to understand. Since the words of the exemption have been repeated in full from the Customs Tariff, the words will be omitted and the item will be linked to the relevant items in the Customs Tariff. This will significantly simplify the item.

Existing item: 71 and 72

Links with other items: None

Item 133: Foreign tourist promotion agencies

General description: Printed matter distributed free of charge by a tourist-promotion agency of a foreign country and goods for use by a tourist-promotion agency of a foreign country mainly for the purpose of promoting visits to the foreign country

Change: There will be no changes to the coverage of this exemption. The existing exemption covers timetables for transport services other than within Australia . Since printed matter will have to satisfy the criterion that it is distributed for the purpose of promoting visits to a foreign country, the reference to timetables for services within Australia will be omitted.

The existing exemption has a restriction on the goods for use by the foreign tourist promotion agency being not for sale or distribution This will be removed because under the new law to satisfy an exemption item the goods must be used for the statutory period (2 years). A person who intends to sell the goods cannot satisfy the requirement that the goods will be used for the statutory period.

Existing items: 72B

Links with other items: None

Item 134: United Kingdom armed forces

General description: Motor vehicles for use by a member of the United Kingdom armed forces in Australia

Change: No change

Existing item: 115

Links with other items: None

Item 135: United States Forces

General description: Imported personal effects and household goods of a member (and dependants) of the United States Forces or a civilian member and imported motor vehicles for use by a member of the United States Force or civilian member; motor vehicles manufactured in Australia for use by members of the United States Forces;goods as prescribed for use or sale in a United States military facility; imported goods as prescribed for use by a member of the United States Force, a member of the civilian component or a dependant of such members

Note:
In subitems (3) and (4) exemption will apply only at the point of local entry

Change: No change

Existing item: 114B

Link with other items: None

Item 136: Canadian armed forces

General description: Motor vehicles for use by a member of the Canadian armed forces in Australia

Change: No change

Existing item: 115A

Links with other items: None

Item 137: New Zealand armed forces

General description: Motor vehicles for use by a member of the New Zealand armed forces in Australia

Change: No change

Existing item: 115B

Links with other items: None

Item 138: Singapore forces

General description: Imported personal effects, household goods and motor vehicles of a member (and dependants) of the Singapore armed forces or the same goods imported by a civilian member

Note:
Exemption will apply only at the point of local entry

Change: No change

Existing item: 114D

Links with other items: None

Item 139: Papua New Guinea Visiting Force

General description: Imported personal effects and household goods of a member (and dependants) of the Papua New Guinea Visiting Force or a civilian member and imported motor vehicles for use by a Visiting Force or civilian member

Note:
Exemption will apply only at the point of local entry

Change: No change

Existing item: 114C

Links with other items: None

Sub-chapter 14.3: Miscellaneous bodies

Item 140: Public hospitals and benevolent institutions

General description : Goods for use by a public hospital, a non-profit hospital, a public benevolent institution or a public body established and maintained for the relief of unemployed persons.

Change: There will be no change in the coverage of this exemption. Specific changes include:

·
The existing exemption has a restriction on the goods being not for sale. This will be removed because under the new law to satisfy an exemption Item the goods must be used for the statutory period (usually 2 years). A person who intends to sell the goods cannot satisfy the requirement that the goods will be used for the statutory period.
·
The existing exemption also covers goods whether as goods or in some other form . These words will be deleted because under the new law, exemption will continue to apply to the goods after they have ceased to be goods.
·
The existing law covers a public body which the Commissioner is satisfied is established and maintained for the relief of unemployed people. The Commissioner's discretion will be removed to give more certainty to the law. However, since some charitable organisations could be established and maintained for more than one purpose, the new exemption will require that such a body must be established and maintained principally for that purpose.

Existing item: 81(1)

Links with other items: None.

Item 141: Charitable fund-raising bodies

General description : Goods for use by a body established and maintained for raising money for donation to a public hospital, non-profit hospital or a public benevolent institution.

Change: There will be no significant changes. However, the existing exemption has a restriction on the goods being not for sale. This will be removed because under the new law to satisfy an exemption Item the goods must be used for the statutory period (usually 2 years). A person who intends to sell the goods cannot satisfy the requirement that the goods will be used for the statutory period.

The existing exemption also covers goods whether as goods or in some other form . These words will be deleted because under the new law, exemption will continue to apply to the goods after they have ceased to be goods.

Since some charitable organisations could be established and maintained for more than one purpose, the new exemption will require that organisations be established and maintained principally for the purpose of raising money etc.

Existing item: 81(3)

Links with other items: None.

Item 142: Medical research bodies

General description : Goods for use by a non-profit body established and maintained principally for engaging in research into the causes, prevention or cure of diseases in humans.

Change: There will be no significant changes. The existing exemption has a restriction on the goods being not for sale. This will be removed because under the new law to satisfy an exemption Item the goods must be used for the statutory period (usually 2 years). A person who intends to sell the goods cannot satisfy the requirement that the goods will be used for the statutory period.

The existing exemption also covers goods whether as goods or in some other form . These words will be deleted because under the new law, exemption will continue to apply to the goods after they have ceased to be goods.

Existing item: 74K

Links with other items: None.

Item 143: Accident prevention bodies

General description : Goods for use by a non-profit body established and maintained for the promotion of measures designed to prevent or minimise the results of accidents.

Change: There will be no significant changes. The existing exemption has a restriction on the goods being not for sale. This will be removed because under the new law to satisfy an exemption Item the goods must be used for the statutory period (usually 2 years). A person who intends to sell the goods cannot satisfy the requirement that the goods will be used for the statutory period.

The existing exemption also covers goods whether as goods or in some other form . These words will be deleted because under the new law, exemption will continue to apply to the goods after they have ceased to be goods.

Existing item: 74L

Links with other items: None.

Item 144: Infant welfare bodies

General description : Goods for use by an infant welfare centre or clinic or by a body established and maintained principally for conducting, or promoting the interests of those centres or clinics.

Change: The existing exemption has a restriction on the goods being not for sale. This will be removed because under the new law to satisfy an exemption item the goods must be used for the statutory period (usually 2 years). A person who intends to sell the goods cannot satisfy the requirement that the goods will be used for the statutory period.

The existing exemption also covers goods whether as goods or in some other form . These words will be deleted because under the new law, exemption will continue to apply to the goods after they have ceased to be goods.

Existing item: 81C

Links with other items: None.

Item 145: Imported goods donated or bequeathed to scientific, literary etc bodies

General description : Imported goods donated or bequeathed to bodies established for public purposes or for religious, philosophical, educational, scientific or literary purposes or for the encouragement or advancement of the fine arts.

Note:
Exemption will apply only at the point of local entry

Change: There will be no significant changes to this exemption.

Existing item: 80

Links with other items: None.

Item 146: Armed forces support bodies

General description : Goods for use by a non-profit body for donation to the armed forces or for providing comfort or recreation to the armed forces and goods for use by a non-profit body exclusively as raw materials in the manufacture of goods covered by subitem (1).

Change: The exemption has been substantially re-worked, but there will be no significant change in its coverage. Specific changes include:

·
The existing exemption requires that the goods be purchased, imported or manufactured by the organisation. Under the new law, exemption will depend only on how the goods are used and not on how they are obtained and those words will be omitted.
·
To make the Item easier to read, defined terms will be used in place of lengthy descriptions.

Existing item: 81A

Links with other items: None.

Item 147: Public zoos

General description : Goods for use by a non-profit body established and maintained principally for the conduct and maintenance of public zoos.

Change: The existing exemption has a restriction on the goods being not for sale. This will be removed because under the new law to satisfy an exemption Item the goods must be used for the statutory period (usually 2 years). A person who intends to sell the goods cannot satisfy the requirement that the goods will be used for the statutory period.

The existing exemption also covers goods whether as goods or in some other form . These words will be deleted because under the new law, exemption will continue to apply to the goods after they have ceased to be goods.

Existing item: 81B

Links with other items: None.

Chapter 15: Miscellaneous

Item 148: Wedding rings

General description : Wedding rings but not including rings set with gems or with imitation, reconstructed or synthetic gems.

Change: No change.

Existing item: 138

Links with other items: None.

Item 149: Prams, bassinets etc

General description : Prams, strollers and other goods for conveying infants; bassinets, sleeping baskets, cradles and cots; baby capsules and safety seats for infants; restraining harness for infants; goods designed for use with the goods specified.

Note:
Parts for these goods will be exempt.

Change: No substantive change.

The existing exemption covers booster seats, safety seats and similar articles designed for use in carrying infants. Exemption will only apply under the new law if those goods are designed for use exclusively for carrying infants.

Baby capsules will be added to that list of goods to make their exemption more certain.

The references to go-carts and motor vehicles have been removed because they do not affect the interpretation of the Item.

Existing item: 124

Links with other items: None.

Item 150: Cloth on the roll

General description : Cloth on the roll including cloth made wholly or partly of glass fibre, rubber or synthetic or plastic material.

Change: The existing exemption covers "piece goods....including plastic and rubber sheeting". The exemption for plastic and rubber sheeting will be removed. Plastic sheeting was originally included in the item because it was used at that time to a significant extent in the manufacture of clothes, particularly plastic raincoats. Plastic and rubber sheeting is now used for a wide variety of purposes, many of which compete directly with taxable products such as paper. Where plastic or rubber sheeting is used in the manufacture of clothes or other goods it will be able to be acquired by the manufacturer tax-free as a business input.

Existing item: 120(5)

Links with other items: None.

Item 151: Yarns and threads for knitting, sewing etc

General description : Goods marketed principally as yarns or threads for knitting, weaving, crocheting, embroidery, sewing or mending, rug-making or tapestry work.

Change: The restriction that certain yarns had to be marketed for household purposes will be removed. It made the item more complex and in practice served little purpose. This will enable the Item to be considerably simplified.

Existing item: 120(8)

Links with other items: None.

Item 152: Leather

General description : Leather, but not including tanned and processed skins with fur, hair or wool attached.

Change: No change.

Existing item: 143

Links with other items: None.

Item 153: Raffia

General description : Raffia.

Change: No change.

Existing item: 128

Links with other items: None.

Item 154: Sewing twine

General description : Sewing twine.

Change: No change.

Existing item: 97

Links with other items: None.

Item 155: Goods for religious use

General description : Goods for use by a person mainly for the purposes of Church services and goods for use by a person mainly in religious devotion.

Change: The existing exemption covers "equipment for use in churches and church services ... viz ... ". The word viz means that only the goods mentioned in the following subitems qualify for exemption. However, since the following subitems cover a list of goods and other articles, those opening words are not consistent with the words in the subitems. In the new law those opening words will be removed and the list of goods and other articles will be replaced with goods . This will simplify the Item without changing its scope.

Existing item: 65

Links with other items: None.

Item 156: Coffins

General description : Coffins, cremation casks and urns and fittings and trimmings for those goods.

Change: No change.

Existing item: 106

Links with other items: None.

Item 157: Wreaths

General description : Wreaths and floral tributes (including bouquets, posies, floral baskets and sheaves) containing natural flowers.

Change: No change.

Existing item: 137

Links with other items: None.

Item 158: Plants, trees, seeds etc for horticultural purposes.

General description : Plants and trees, bulbs, seeds, parts of plants and similar goods marketed principally for propagation or other horticultural purposes.

Change: The existing exemption excludes food for human consumption, savoury snacks and goods sold as food for birds. The new exemption will cover goods marketed principally for propagation or other horticultural purposes and, therefore, the exclusions will not be necessary and will be removed.

Existing item: 4(1)

Links with other items: None.

Item 159: Fertilisers etc

General description : Fertilisers and other materials ordinarily used to stimulate or improve the setting of fruit, or the growth or productivity of plants.

Change: The existing exemption covers raw materials for use in the manufacture of fertilisers. These goods qualify for exemption as business inputs when purchased by fertiliser manufacturers and have been omitted from this exemption.

Existing item: 4(2)

Links with other items: None.

Item 160: Tobacco products

General description : Tobacco, cigarettes and cigars.

Change: No change.

Existing item: 37

Links to other Items: None.

Item 161: Poultry food

General description : Poultry food.

Change: The exemption has been extended to cover imported poultry food.

Existing item: 11(2)

Links with other items: None.

Item 162: Food for non-domestic birds

General description : Food for birds that are not kept as domestic pets.

Change: No change.

Existing item: 108

Links with other items: None.

Item 163: Food for guide dogs, animals in shelters etc

General description : Goods for use exclusively as food for guide dogs, or animals being given refuge in animal shelters etc.

Change: These goods are treated as being covered by an existing exemption for foods for livestock which will not appear in the new law. This new exemption will cover food for guide dogs and for animals being given refuge or medical treatment in animal shelters, animal hospitals or veterinary clinics.

Existing item: 6(4)

Links with other items: None.

Item 164: Imported horses

General description : Imported horses.

Change: No change.

Existing item: 117A

Links with other items: None.

Item 165: Horseshoes and horseshoe nails

General description : Horseshoes and horseshoe nails.

Change: No change.

Existing item: 117(2)

Links with other items: None.

Item 166: Veterinary instruments, appliances and materials

General description : Veterinary instruments, appliances and materials of a kind ordinarily used by veterinary surgeons; preparations of a kind ordinarily prescribed by veterinary surgeons.

Note:
Parts, accessories and attachments will be exempt.

Change: These goods appear in an exemption item in the present law which relates to goods for use in the maintenance of livestock. As the present law is drafted, it is not clear to what extent exemption for veterinary goods is restricted to goods for use in treating livestock. The original intention of the exemption was to exempt all veterinary goods that were of a kind ordinarily used by veterinary surgeons, including medication for animals. Placing these goods in a separate exemption item will achieve this.

Existing item: 6(13)

Links with other items: None.

Item 167: Tallow

General description : Tallow.

Change: No change.

Existing item: 129

Links with other items: None.

Item 168: Scoured wool

General description : Scoured wool, slipe wool, fellmongered wool, carbonised wool, wool tops, wool noils and wool waste.

Change: No change.

Existing item: 130

Links with other items: None.

Item 169: Wireless transceivers for use with flying doctor service

General description : Wireless transceivers for use with a radio service conducted by the Royal Flying Doctor Service or a similar service.

Note:
Parts for these goods will be exempt.

Change: There will be no significant change in the coverage of the exemption but specific changes include:

·
The existing law exempts wireless transceivers for use with the Royal Flying Doctor Service or similar service by a licence holder under the Radiocommunications Act. However, wireless transceivers could satisfy that test and still be used mainly for another purpose. To more clearly focus the exemption, it will now apply to wireless transceivers when they are for use mainly with those services.
·
The Commissioner's discretion will be removed in line with other exemptions in the law.

Existing item: 81(2)

Links with other items: None.

Item 170: Satellite receiving equipment

General description : Satellite earth stations for use mainly for receiving the Homestead and Community Broadcasting Service.

Note:
Parts and accessories for these goods will be exempt. This will not include batteries. While the existing item specifically excludes batteries, they are not regarded as parts or accessories under the new law so no mention of them will be included in the Item.

Change: The exemption has been substantially re-worked, but there will be no significant change in its coverage. Specific changes include:

·
the existing law exempts an earth station designed to receive the H&CB Service. However, stations could satisfy that test and still be used exclusively or mainly for another purpose. To more clearly focus the exemption, it will now apply to stations when they are for use mainly to receive that service;
·
the existing law also exempts stations designed to receive a service prescribed by regulations under the Sales Tax (Exemptions and Classifications) Act 1935. The new law will omit this part of the exemption because no regulations have ever been made. If regulations should be needed, they can be made under the general regulation making power in the Sales Tax (Exemptions and Classifications) Bill 1992.
·
the existing law excludes satellites used exclusively for business purposes. This exclusion is maintained in the new law but the terminology has been significantly simplified.

Existing item: 152

Links with other items: None.

Item 171: Solar energy equipment

General description : Goods of a kind ordinarily used for collecting, absorbing or concentrating solar rays to use them as a source of heat.

Note:
Parts for these goods will be exempt.

Change: No substantive change. The existing exemption covers goods of a kind used exclusively, or primarily and principally in connection with solar rays. For consistency of wording, wherever this expression occurs in the law, it will be changed to of a kind ordinarily used.

Existing item: 153

Links with other items: None.

Item 172: LPG conversion equipment

General description : Goods for use in the conversion of an internal combustion engine so that it can operate on natural or liquefied petroleum gas. The goods must form an integral part of the engine.

Change: This Item has been re-expressed to make it simpler to read. There is no substantive change.

Existing item: 151

Links with other items: None.

Item 173: Fire fighting and prevention equipment

General description : Equipment and apparatus of a kind ordinarily used in preventing or combating fire and chemicals and other preparations for use exclusively in fire-fighting appliances.

Note:
Parts and accessories for these goods will be exempt.

Change: No substantive change. The existing exemption covers goods of a kind used exclusively, or primarily and principally in preventing or combating fire. For consistency of wording, wherever this expression occurs in the law, it will be changed to of a kind ordinarily used .

The existing law covers chemicals and other preparations for use in fire fighting appliances. These goods will now be required to be for use by a person exclusively for that purpose.

Existing item: 146

Links with other items: None.

Item 174: Water

General description : Water including distilled and purified water but not including manufactured beverages or toilet water.

Change: The existing exemption excludes goods marketed as mineral waters. This exclusion will be removed. Some mineral water products are no more than water recovered from a spring or bore which contains naturally occurring minerals. It is not the intention to tax natural water. A mineral water will only be taxable where it is a manufactured product, e.g, minerals and carbonation added.

Existing item: 104

Links with other items: None.

Item 175: Ice

General description : Plain ice and dry ice.

Change: The existing exemption excludes ice-cream goods and flavoured frozen goods. The new exemption will refer to plain ice which means frozen water and could not be said to include ice-cream goods or flavoured frozen goods. The exclusions will, therefore, be omitted.

The existing exemption also covers frozen carbon dioxide . This term will be replaced with dry ice as a term more likely to be recognised and understood.

Existing item: 34A

Links with other items: None.

Item 176: Gases

General description : All gases except carbon dioxide, refrigerant gases and gases marketed principally for inflating balloons.

Change: Under the existing law there are several exemptions covering different gases. The new law will gather those exemptions into one exemption covering all gases, except those listed. A separate exemption for medical gases will be retained to ensure that if the gases excluded from this Item were to be used for medical purposes, they would still be exempt.

Existing items: 49(1), 49(3), 50(2), 50(3), 50(3A),

Links with other Items Gases for medical use will be exempt under new Item 83, Schedule 1. Cylinders of a kind ordinarily used in the marketing of gases for industrial, medical or domestic use will be exempt under new Item 32, Schedule 1.

Item 177: Acetylene, liquid oxygen etc

General description : Dissolved acetylene, liquid oxygen, liquid nitrogen and calcium carbide.

Change: No change.

Existing item: 50(3B)

Links with other items: None.

Item 178: Ammonia

General description : Aqua (liquid) ammonia and anhydrous ammonia.

Change: No change.

Existing item: 132

Links with other items: None.

Item 179: Toluol

General description : Toluol.

Change: No change.

Existing item: 136

Links with other items: None.

Item 180: Explosives

General description : Explosives and raw materials for use in producing explosives but not including fireworks, rockets, coloured fires, sporting powder, safety cartridges, percussion caps or ammunition.

Change: The existing item is not clear as to whether raw materials for use in producing explosives applies to any explosives or is limited to explosives covered by the item. The new law will make it clear that the exemption for raw materials is limited to those for use in producing explosives covered by the Item.

Existing item: 125

Links with other items: None.

Item 181: Currency

General description : Coins or notes that are lawfully current in Australia or in any other part of the world.

Change: The existing exemption covers foreign coin that is legal currency. The exemption will be extended to include foreign notes and Australian coins and notes. While coins and notes circulating in currency are not generally regarded as goods, the position of legal tender coins and notes sold for investment purposes is not clear. To clarify the position all legal tender coins and notes will be included in the exemption. Whether the coins and notes will be used as currency or for investment purposes will not matter because in all situations they will be exempt

Existing item: 108B

Links with other items: None.

Item 182: Bullion

General description : Bullion.

Change: No change.

Existing item: 109A

Links with other items: None.

Item 183: Gold etc imported for approved mint

General description : Gold coin or gold imported for treatment by a mint approved by the Treasurer.

Note:
Exemption will apply only at the point of local entry.

Change: The existing exemption requires that to be exempt the gold must be recovered by crushing, washing, dollying or sweeping. The method of recovering the gold will be omitted from the Item because if the gold is imported for treatment by a mint, it is not relevant how it was recovered. The separate reference to Royal Australian Mint is not required because it is a mint.

Existing item: 109

Links with other items: None.

Item 184: Goods produced in New Zealand, Fiji etc

General description : Goods that came into existence in New Zealand, Fiji, Norfolk Island, Papua New Guinea, Christmas and Cocos (Keeling) Islands and which would not be subject to sales tax had they come into existence in Australia.

Change: The existing exemption covers goods produced or manufactured in the named territories. The exemption will be slightly widened to include all goods that came into existence in the named territories. This is to cover the possibility that goods may come from those territories without being manufactured or produced, e.g. collecting of fauna, which, in Australia, would be a non-taxable activity.

Existing item: 111(1)

Links with other items: None.

Item 185: Goods imported for repair, processing etc

General description : Goods imported for repair, alteration or industrial processing, being goods covered by item 21 in Schedule 4 to the Customs Tariff.

Note:
Exemption will apply only at the point of local entry.

Change: No change.

Existing item: 111A

Links with other items: None.

Item 186: Goods imported or purchased by overseas travellers

General description : Goods imported by overseas travellers or by crews of ships or aircraft on overseas service and goods purchased from an inwards duty free shop by a relevant traveller.

Change: No change.

Existing item: 114(1)

Link with other items Item 190, Schedule 1 which exempts goods sold to a relevant traveller from an inwards duty free shop.

Item 187:Imported goods of negligible value

General description : Imported goods of negligible or insubstantial value, including samples, that are covered by paragraph (a), (b) or (c) of item 32 in Schedule 4 to the Customs Tariff.

Note:
Exemption will apply only at the point of local entry.

Change: No change other than simplifying the wording of the item.

Existing item: 145

Links with other items: None.

Item 188: Inherited goods

General description : Imported goods inherited by a person or body that was resident or established in Australia at the time of becoming the owner of the goods.

Note:
Exemption will apply only at the point of local entry.

Change: The existing exemption requires that the goods not be for sale. The restriction will be removed because under the new law it is not necessary. Also, the situations where a person had, at the time of importation, an intention to sell inherited goods would be rare. The Item has also been expressed in simpler terms.

Existing item: 131

Links with other items: None.

Item 189: Ship's stores and aircraft's stores

General description : Ship's stores and aircraft's stores that are exempt from customs duty under section 130 of the Customs Act and stores for a ship or aircraft engaged in overseas services where the stores are not liable to customs duty.

Change: There will be no change to the coverage of this exemption. The wording will be changed to simplify it.

The existing exemption item 134B covers stores, for ships or aircraft engaged in overseas service, purchased in Australia for consumption in Australian waters. Goods which are to be exported from Australia are exempt under another existing exemption.

Existing exemption item 134B ensures that stores that do not qualify for exemption as exported goods, because they will be used before leaving Australian waters, will be exempt. To simplify the exemption, the reference to where the goods are purchased and consumed will be omitted. This will mean that all goods for use as stores on ships or aircraft travelling overseas will be covered by this exemption (other than goods liable to Customs duty).

Existing items: 134, 134B

Links with other items: None.

Item 190: Airport shop goods

General description : Airport shop goods sold to a relevant traveller from an inwards duty free shop.

Change: No change.

Existing item: 114(3)

Links with other Items: Item 186, Schedule 1 which exempts goods imported by an overseas traveller.

Item 191: National flags

General description : Flags made of cloth, paper or plastic sheeting and are emblems of nations, states or territories or of the United Nations.

Change: The exemption for the official flag of the XII Commonwealth Games has been removed because it is no longer required.

Existing item: 141

Links with other items: None.

Chapter 8 Rating Schedules

Introduction

This chapter contains details of the goods which will be included in the Rating Schedules to the Exemptions and Classifications Bill. These Schedules will cover goods on which sales tax will be payable. As previously noted, the rate at which tax will be paid will depend on the Schedule in which the goods fall. The rates for Schedules 2, 3, 4 and 5 will be 10%, 15%, 20% and 30% respectively. Generally, the scope of the Items in the Rating Schedules will not change; however, there will be some key differences in expression.

The major differences between the existing Schedules covering taxable goods and the new Rating Schedules will be that the new Rating Schedules will be in a different order (with the Rating Schedule for the lowest rate of tax appearing first). Also, the order of the Items within those Schedules will be altered.

In some instances there will not be a direct translation of the goods listed from the existing law to the new law. Some specific descriptions of goods will disappear because those goods will be covered by new Items that are expressed in more general terms. The new Items will be wide enough to cover those goods. The link between old and new items can be checked by reference to a separate explanatory memorandum entitled "Comparison Tables".

The "marketed principally" test for parts, fittings, accessories or materials for goods covered by Rating Schedule items.

Another key change will be that the new law will apply a marketed principally test to parts, fittings, etc. (associated goods) and materials for goods covered by items in the Rating Schedules. The existing law taxes parts and fittings etc. for goods at the same rate as the goods but does not distinguish between goods which are marketed as parts etc. and those which may be used as parts etc. but are not necessarily marketed as such. An example of the latter would be a metal thread screw for a washing machine.

To clarify the position, it is proposed that under the new law, only goods marketed principally as parts, fittings etc will be taxed at the same rate as the goods to which they relate, e.g. a washing machine bowl for a washing machine. General purpose goods which are not marketed principally as parts for any particular goods will be taxable or exempt according to their own identity.

Schedule 2

Goods taxed at the rate of 10%

(Schedule 2 will cover goods presently covered by the Third Schedule to the Sales Tax (Exemptions and Classifications) Act 1935 )

Item 1: Goods of a kind ordinarily used for household purposes

General description : A range of goods of a kind ordinarily used for household purposes e.g. furniture (but not ornaments), electric fans, brooms, sewing machines, floor coverings, blinds and awnings, incinerators and kitchen utensils, and other listed goods. This also covers goods marketed principally as parts, fittings or accessories for goods covered by the item.

Note:
The Item will not cover goods of a kind ordinarily used in sport or games, or goods designed for use principally in, or in connection with, swimming pools or spa baths or goods covered by an Item in Schedule 5.

Change: This Item has been reworked. Specific changes include:

·
The existing law taxes at 10% crockery and articles of a material other than earthenware used for similar purposes and also glassware and articles of a material other than glass used for similar purposes. This wording has made the coverage of the item uncertain and the new law will only cover goods of a kind ordinarily used in connection with preparing, serving, consuming, cooking, preserving or storing food or beverages.
·
Some specific goods have been added to the Item to remove any doubt that those goods are taxable at 10% e.g. dishwashers, linen baskets and clothes lines.

Existing items: 1 and 2, Third Schedule

Links to other items: Item 1, Schedule 2 will not cover goods that will be covered by Items in Schedule 5.

Item 2: Household drapery, soft furnishings etc

General description : A range of household drapery, soft furnishings etc including bed sheets, bed spreads, towels, table cloths, curtains, handkerchiefs and mosquito nets. A range of textile cords of a kind ordinarily used on clothing, drapery or soft furnishings, including braid, cloth tape, elastic, wadding and lacing cord.

Change:

·
The existing item taxes at 10% household drapery and soft furnishings, namely ... and lists the goods covered by the item. The word namely will not be used in the new law and the opening words to the item will be changed to the following goods .
·
There is some overlapping in the list of goods covered by the existing item. The list will be simplified by removing overlaps eg "counterpanes" will continue to be covered as "bedspreads".
·
Goods that are no longer in common use e.g., meat bags will be removed from the item.

Note:
Laundry bags will be covered by new Item 1(t) and cleaning and polishing cloths will be covered by new Item 3.

Existing item: 8, Third Schedule

Links to other items: None.

Item 3: Sponges etc marketed for cleaning purposes

General description : A range of cleaning and polishing cloths if they are marketed principally for cleaning purposes.

Change: The new Item will combine separate provisions in the existing law which deal with cleaning goods. In the new law all cleaning cloths, sponges etc marketed principally for cleaning purposes will be taxed at 10%. The existing law treats some of these goods in different ways e.g. cleaning cloths which consist of metal or plastic abrasive substances, are taxable at the rate of 20%.

The existing Item uses the expression "Goods of the following kinds ... namely". The word namely will not be used in the new law and the item will be changed to read "The following goods ..." .

The marketed principally requirement will be added to make the language of the new provision consistent with other provisions, a measure intended to generally improve clarity and certainty of the law.

Existing items: 9 and 8(2), Third Schedule

Links to other items: Item 150, Schedule 1 covers cloth on the roll but does not cover goods covered by Item 3, Schedule 2.

Item 4: Matches, firelighters etc

General description : Safety matches, book matches and wax matches, but not including fusees, Bengal lights or Bengal matches; firelighters, firestarters and similar goods.

Change: No substantive change.

Note:
The existing item contains a proviso stating that this item does not apply to fuels exempted by item 47 in the First Schedule. The proviso will no longer be necessary because under the new law goods covered by Schedule 1 are exempt from tax.

Existing item: 10, Third Schedule

Links to other items: None.

Item 5: Baths, sinks, toilets etc

General description : A range of household fittings and sanitary ware if they are of a kind ordinarily installed as fixtures in houses or other buildings and goods marketed principally as parts for these goods.

Change: No substantive change. The provision will be rewritten to make it easier to understand and some of its wording will be changed as part of an overall measure to increase certainty.

Existing item: 14, Third Schedule

Links to other items: Overlaps to some extent with Item 7, Schedule 3.

Item 6: Water heaters, storage tanks, filters etc

General description : Water heating and hot water storage equipment of a kind ordinarily installed as fixtures in domestic premises. Appliances for softening, filtering, de-salting or sterilising water, if they are of a kind ordinarily installed as fixtures. Goods marketed principally as parts, materials, stands and drip trays for the above goods. The Item will not apply to goods of a kind ordinarily installed in connection with swimming pools or spa baths.

Change: The Item has been substantially reworked but its coverage will not be altered.

Note:
The existing law contains a proviso stating that it does not apply to certain solar ray collectors and concentrators. These goods are exempt from sales tax and under the new law an exemption provision takes precedence over a taxing provision.

Existing item: 12, Third Schedule

Links to other items: Item 6, Schedule 2 will not cover goods covered by Item 171, Schedule 1 (certain solar energy equipment).

Item 7: Bathroom fittings and sanitary ware

General description : Bathroom fittings, and sanitary ware, of a kind ordinarily installed as fixtures in houses or other buildings, but not including spa baths. Chains and plugs and goods marketed principally as parts for the above goods.

Change: No substantive change.

Note:
The existing law contains a proviso stating that it does not apply to goods covered by item 14 (new Item 5) The proviso has no practical effect and will not appear in the new law.

Existing item: 14A, Third Schedule

Links to other items: None.

Item 8: Movable toilets etc

General description : Movable toilet pans, chemical sanitary units, seats and covers for movable toilet pans or chemical sanitary units, goods for sealing movable toilet pans. Movable toilet seats for children. Goods marketed principally as parts for the above goods.

Change: No substantive change. The existing law covers movable toilet seats for use by children in connection with fixed toilet pans. Under the new law all movable toilet seats for children will be covered by this Item.

Existing item: 15, Third Schedule

Links to other items: None.

Item 9: Toilet cleaners, deodorisers etc

General description : Chemicals and other materials or preparations marketed principally for use in, or in the operation of, septic tank installations, chemical sanitary systems or movable toilet pans.

Change: No substantive change. The existing provision contains the expression "goods covered by paragraphs (c) and (d) of item 14 or item 15.". In the new law the expression will be replaced with the names of the goods i.e. "septic tank installations, chemical sanitary units" etc. This will make the new item easier to read.

Existing item: 16, Third Schedule

Links to other items: None.

Item 10: Maps, atlases, globes etc

General description : Maps but not including advertising matter. Geographical, topographical and astronomical globes . Books that consist principally of maps, but not including books marketed principally for use in schools, colleges or universities.

Change: No substantive change. The item will be rewritten to make it easier to understand but its coverage will not be altered.

Existing item: 3, Third Schedule

Links to other items: Item 100, Schedule 1 will exempt a range of books and other printed matter but will not exempt the maps and other goods covered by Item 10, Schedule 2.

Item 11: Confectionery, savoury snacks, biscuits etc

General description : A range of foodstuffs including confectionery, biscuits, cookies, crackers, savoury snacks, ice-cream and frozen confectionery.

Change: No substantive change.

Existing item: 4, Third Schedule

Links to other items: Item 68, Schedule 1 which exempts most foodstuffs and clause 14 which provides that the goods covered by this Item are taxable.

Item 12: Flavoured milk etc

General description : Flavoured beverages if 90% or more of the beverage is milk (including skim milk), milk powder (including skim milk powder), whey, whey powder or whey paste or a combination of these ingredients. Flavoured beverages that consist principally of soy milk.

Change: No change.

Existing items: 4A and 4AA, Third Schedule

Links to other items: Item 68, Schedule 1, will exempt beverages of a kind marketed as food for infants or invalids.

Item 13: Juices etc made from Australian and New Zealand fruits and vegetables

General description : A range of concentrates, cordials, non-alcoholic non-carbonated beverages and non-alcoholic beverages (whether carbonated or not) produced from the juices of fruits grown in Australia or New Zealand.

Change: No substantive change. The provision will be rewritten to make it easier to understand. The new provision is a combination of provisions which deal separately with Australian and New Zealand fruit and vegetable products in the existing law.

Note:
The alcoholic beverages covered by the existing provision will be covered by a new provision dealing only with alcoholic beverages (see Item 15 below).

Existing items: 5 and 6, Third Schedule

Links to other items: None.

Item 14: Juices etc made from Papua New Guinea fruits and vegetables

General description : Goods that would be covered by Item 13 in this Schedule if the reference in that Item to fruits and vegetables grown in Australia or New Zealand was instead a reference to fruits and vegetables grown in Papua New Guinea.

Change: No substantive change. The provision will be rewritten to make it easier to understand.

Existing item: 7, Third Schedule

Links to other items: Item 13.

Item 15: Low alcohol wine, cider etc

General description : A range of low alcoholic beverages including Australian manufactured wine or cider if their alcohol content is less than 1.15%.

Note:
This Item will not cover beer and some other alcoholic beverages.

Change: No substantive change. The provision will be rewritten to make it easier to understand.

Existing item: 5, Third Schedule

Links to other items: None.

Schedule 3

Motor vehicles taxed at the rate of 15%

(Schedule 3 will cover goods presently covered by the Fifth Schedule to the Sales Tax (Exemptions and Classifications) Act 1935 )

Item 1: Passenger motor vehicles

General description : Passenger motor vehicles that are covered by heading 8703 in Schedule 3 to the Customs Tariff (or would be covered by that heading if they were imported). This Item will cover motor vehicles which are passenger motor vehicles for the purposes of heading 8703 in Schedule 3 to the Customs Tariff.

Change: No change.

Existing item: 1, Fifth Schedule

Links to other items: None.

Schedule 4

Goods taxed at the rate of 20%

Item 1: Goods not covered by other Rating Schedule

General description : This item will cover goods not covered by any item in Schedules 2, 3 and 5.

Change: This is a new Item. It is a general Item which will provide that goods not covered by any of the other Rating Schedules will be taxable at 20%.

Note:
Goods covered by Schedule 1 will not be taxable.

Schedule 5

Goods taxed at the rate of 30%

(Schedule 5 will cover goods presently covered by the Second Schedule to the Sales Tax (Exemptions and Classifications) Act 1935 )

Item 1: Luxury motor cars

General description : Certain motor cars will be covered by Schedule 5 if their taxable value is more than 67.1% of the motor vehicle depreciation limit that applies for each year under section 57AF of the Income Tax Assessment Act 1936 .

Change: No substantive change. The Item will be rewritten to make it easier to understand.

Note 1:
The existing formula for calculating the wholesale sale value threshold will be replaced with a formula that prescribes a taxable value threshold of 67.1% of the motor vehicle depreciation limit that applies under section 57AF of the Income Tax Assessment Act 1936 (for the financial year in which the taxable dealing happens). The new formula will simplify the calculation of the threshold taxable value and will enable the omission of some lengthy and complex provisions in the existing law.
Note 2:
Item 1 will not cover motor vehicles that are specially fitted out for transporting disabled persons seated in wheel chairs unless the motor vehicles are covered by Subitems 96(1) or 97(1) in Schedule 1 to the Sales Tax (Exemptions and Classifications) Bill 1992.

Existing item: 61, Second Schedule

Links to other items: 96(1) and 97(1), Schedule 1.

Item 2: Fur skins etc

General description : Clothing for human wear, rugs (other than floor rugs or mats), fur trimmings. Fur skins, or parts of fur skins, that are tanned, dressed or otherwise processed, but not including fur skins or parts that are marketed principally as floor rugs or mats.

Change: No substantive change. The existing law contains a list of articles of clothing which will be omitted from the new law because they all fall within the meaning of the words "clothing for human wear".

Existing item: 18, Second Schedule

Links to other items: Item 75 in Schedule 1 will exempt clothing for human wear but will not exempt clothing covered by this item.

Item 3: Jewellery, precious stones etc.

General description : Jewellery, imitation jewellery, personal adornments and precious stones etc. The item will not include goods of a kind ordinarily used as parts for clothes for human wear.

Change: No substantive change. The provision will be rewritten to make it easier to understand.

Note:
The existing item contains a proviso which ensures that wedding rings are exempt from sales tax even though they would ordinarily be regarded as jewellery. These rings will continue to be exempt under the new law. The proviso will not be necessary because under the new law an exemption provision takes precedence over a taxing provision.

Existing item: 1, Second Schedule

Links to other items: Item 148 in Schedule 1 will exempt wedding rings but not rings set with gems or with imitation, reconstructed or synthetic gems. Items 65 and 66 will exempt precious stones and semi-precious stones derived directly from mining operations and which have not been subjected to a process or treatment resulting in an alteration of their form, nature or condition.

Item 4: Tie pins, cuff links etc

General description : Studs, sleeve links, tie pins, tie chains, tie clips, collar pins, gold or silver safety pins and chains for those pins.

Change: No substantive change.

Existing item: 5, Second Schedule

Links to other items: None.

Item 5: Goods made of precious metals etc

General description : A range of goods made principally of precious metals or precious metal or plated with precious metal.

Change: No substantive change. The provision will be rewritten to make it easier to understand.

Note:
The existing law dealing with goods made of precious metals etc. contains a proviso which states that it does not apply to any goods which are also covered by any item in the First Schedule. Because of the structure of the new law it will not be necessary to specifically exclude from the Rating Schedule goods covered by Schedule 1.

Existing item: 2, Second Schedule

Links to other items: Item 1 in Schedule 2 covers cutlery and cutlery sharpeners.

Item 6: Watches etc

General description : Watches, goods marketed principally as movements or parts for watches, watch chains and watch bands and straps and clasps for watches.

Change: No substantive change.

Note:
The existing provision dealing with watches contains a proviso stating that it does not apply to braille watches. Braille watches are exempt from sales tax. Braille watches will be exempt from sales tax in the new law. However the proviso will not be necessary because other changes to the law will remove the need for it.

Existing items: 13, 14 and 15, Second Schedule

Links to other items: None.

Item 7: Clocks etc

General description : Clocks but not including time-recording apparatus, or clock systems, of a kind ordinarily used for business or industrial purposes. Goods marketed principally as movements, parts or keys for the above clocks.

Change: No substantive change. The new provision will be a combination of separate provisions in the existing law which deal with a range of clocks and movements, parts and keys for clocks.

Note:
The existing provision dealing with clocks contains a proviso stating that it does not apply to braille clocks or to business or industrial time recording systems etc. Braille clocks will be exempt from sales tax as will business or industrial time recording systems. The sales tax treatment of these goods will not change in the new law. However the proviso will not be necessary because other changes to the law will remove the need for it.

Existing items: 16 and 17, Second Schedule

Links to other items: None.

Item 8: Binoculars etc.

General description : Binoculars and opera glasses and cases for those goods.

Change: No substantive change. Under the new law the terms "field glasses" and "marine glasses" will be replaced by the more general term "binoculars".

Existing item: 6, Second Schedule

Links to other items: None.

Item 9: Cameras etc

General description : Cameras, automatic photo booths and other equipment for taking photographs. Goods marketed principally as parts or accessories for the above goods. This item will not cover cameras or equipment of a kind ordinarily used in the reproduction of documents, drawing and plans.

Change: No substantive change. The new Item will be a combination of separate provisions in the existing law which deal with cameras etc and parts and accessories. The provision will be rewritten to make it easier to understand.

Existing items: 36 and 38, Second Schedule

Links to other items: None.

Item 10: Photographic enlargers etc.

General description : Photographic enlarging and reducing apparatus, but not including apparatus of a kind ordinarily used in the reproduction of documents, drawings and plans. Goods marketed principally as parts or accessories for the above goods.

Change: No substantive change. The provision will be rewritten to make it easier to understand.

Existing items: 37 and 38, Second Schedule

Links to other items: None.

Item 11: Projection and viewing equipment

General description : Appliances of a kind ordinarily used for the projection of cinematograph films, film strips or photographic slides. Screens of a kind ordinarily used in connection with the above appliances. Appliances of a kind ordinarily used for viewing film strips or photographic slides. Goods marketed principally as parts or accessories for the above goods.

This Item will not cover appliances or screens of a kind ordinarily used for business or industrial purposes.

Change: No substantive change. The provision will be rewritten to make it easier to understand.

Existing items: 37A and 38, Second Schedule

Links to other items: None.

Item 12 Tape recorders, video recorders, video cameras, radios, televisions etc.

General description : This provision will cover the following goods:-

(a)
Appliances of a kind ordinarily used for one or more sound/vision functions. A sound/vision function will be defined to mean any of the following:-

·
receiving radio programs;
·
receiving television programs
·
recording sound on tapes;
·
reproducing sound from records, tapes or compact discs or other audio discs;
·
recording on video tapes or video discs; and
·
reproducing from video tapes or video discs.

Examples: Radios, televisions, video cassette recorders and players, compact disc players and goods which are combinations of one or more of these devices are examples of goods that will be covered.
The provision will not cover the following goods which will continue to be taxable at the rate of 20%:-

·
office dictation machines, and other appliances of a kind ordinarily used for recording speech, or recording and reproducing speech;
·
radio receivers of a kind ordinarily used in the conduct of public commercial telecommunications services; and
·
appliances of a kind ordinarily used in or in connection with the conduct of television services authorised by or under the Broadcasting Act 1942.

(b)
Goods of a kind marketed principally as components of, or auxiliaries to the above appliances or components of, or auxiliaries to systems of a kind ordinarily used for one or more sound/vision functions.
Examples: Amplifiers, equalisers, radio tuners, turntables and speakers are examples of goods that will be covered by this sub-item.
(c)
Goods that incorporate one or more sound/vision components e.g. a cocktail cabinet which incorporates a record player. This will only apply if the taxable value of the sound/vision components if sold as separate goods would constitute 50% or more of the total taxable value of the goods in which they are incorporated. "Sound/vision component" is defined to mean any component of goods that (either of itself or with the aid of other components) allows the goods to be used for a sound/vision function.
Example: A manufacturer produces a household cocktail cabinet incorporating a record player and sells it by wholesale to a retail merchant for $1000. If the record player had been sold to the retail merchant as separate goods its price would be $600.
Result: The taxable value of the record player is more than 50% of the taxable value of the cocktail cabinet/record player. The cocktail cabinet/record player is therefore taxable at the rate of 30% on the full wholesale selling price of $1000 i.e. the sales tax payable is $300.
(d)
Goods (other than batteries) marketed principally as parts or accessories for goods covered by this Item.
Change: The new provision is a combination of several existing provisions dealing with similar kinds of goods. It will be a more coherent provision which will be more easily understood.
With one limited exception, goods which are taxed at 30% under equivalent provisions in the existing law will be taxed at the same rate under the new law. The exception concerns radio receivers for use in conducting public commercial telecommunications services. This will be altered so that all radio receivers of the kind ordinarily used for such services are taxable at the rate of 20% whoever uses them. Radio receivers of the domestic type will be subject to tax at 30% even when used by public commercial telecommunications services.
Existing items: 44, 45, 45A, 47, 48, 49, 50 and 53, Second Schedule
Links to other items: Item 13, Schedule 5 (Cathode ray tubes of a kind ordinarily used in television receivers).
Item 95, Schedule 1 (Broadcast teletext decoding devices, for use by persons who are profoundly deaf. Some of these devices may be used in connection with appliances for the reception of television programs.)
Item170, Schedule 1 (Satellite earth stations for non business use in receiving satellite transmitted television programs as part of the "Homestead and Community Broadcasting Satellite Service").

Item 13: Picture tubes for televisions

General description : Cathode ray tubes of a kind ordinarily used in television receivers.

Change: No change.

Existing item: 51, Second Schedule

Links to other items: None.

Item 14: Slot machines for gambling and amusement

General description : Goods of a kind ordinarily used for gambling, entertainment or amusement, if the operation of the goods is designed to depend on the insertion of money or tokens in the goods or in other connected or associated goods. Coin or token operated goods of a kind ordinarily used while connected to, or associated with the above goods. Goods marketed principally as parts or accessories for the above goods.

Change: No substantive change. The provision will be rewritten to make it easier to understand.

Existing item: 60, Second Schedule

Links to other items: None.

Chapter 9 Omitted Items

Introduction

Some of the provisions in the Schedules to the Sales Tax (Exemptions and Classifications) Act 1935 will appear in the new law as parts of other provisions. Some other provisions will be completely omitted. This chapter provides explanations in cases where provisions in the existing law will be completely omitted from the new law. The separate explanatory memorandum entitled "Comparison Tables" will show where the amalgamated provisions will appear in the new law.

In some instances the incorporation of existing provisions into other Items in the new law will constitute a major reorganisation e.g. where five or more items in the existing law become one Item in the new law. This chapter contains details of these reorganisations.

Most of the items in existing Division I and the whole of Division IV of the First Schedule of the Sales Tax (Exemptions and Classifications) Act will be omitted. The goods covered by these provisions will fall within the new business inputs exemption Item relating to goods for use in primary production activities.

First Schedule

Existing Item 21(2): Fauna

General description : This item exempts animals other than primary produce (but not imported animals).

Reason for omission: The existing item will be unnecessary because animals which could be the subject of an assessable dealing will be exempted by Item 65, Schedule 1 of the new law. Wild fauna which is not derived from human operations is not manufactured goods and will not be covered by the sales tax law.

Existing Item 21(3): Flora

General description : This item exempts plants including seeds which have not been processed or treated in a manner that alters their form nature or condition. It does not exempt imported plants and seeds, or seed sold as bird seed.

Reason for omission: The existing item will be unnecessary because Item 65, Schedule 1 of the new law will exempt an assessable dealing with the plants or seeds which qualify for exemption under the existing law. Wild flora which is not derived from human operations and is not manufactured goods will not be covered by the sales tax law.

Existing Item 25(1): Fish or marine animals

General description : This item exempts fish and other marine animals whether cooked or otherwise processed (but not including savoury snacks).

Reason for omission: This item will be omitted because most of these goods will be covered by Item 68, Schedule 1, which will exempt food for human consumption. Other fish and marine animals which are derived directly from fishing operations carried on in Australia and which have not been altered by processing will be exempted by Item 65, Schedule 1. Fish and other marine animals which have been processed or treated so that they have been altered in form, nature or condition, and which are marketed as recreational fishing bait, will become taxable as a result of this omission.

Existing Item 27(10): Dried hops

General description : This item exempts dried hops.

Reason for omission: Dried hops will be exempt under Item 19, Schedule 1 of the new law if they are for use exclusively as raw materials for goods to be manufactured e.g. for use by a brewery in manufacturing beer. The existing item will therefore not be required in the new law. Dried hops marketed for use in home brewing of beer will be taxable unless the hops have been dried naturally in which case they will be exempt under new Item 65, Schedule 1.

Existing Item 48(2): Crude tar

General description : This item exempts crude tar sold to a manufacturer for use by him as fuel or applied by the manufacturer thereof as a fuel for use in the manufacture of goods.

Reason for omission: Crude tar for use by manufacturers as fuel in manufacturing goods will qualify for exemption as a business input.

Existing Item 48(3): Ethyl fluid & substances for use in blending of petrol

General description : This item exempts ethyl-fluid and other substances for use in the blending of petrol.

Reason for omission: Ethyl fluid and other substances for use in the blending of petrol will be able to qualify for exemption from sales tax under Item 19 in Schedule 1 of the new law which will exempt raw materials for use in manufacturing goods.

Existing Items 49(1): Compressed Air 49(3): Steam 50(2): Coal Gas 50(3): Butane, Propane and Natural Gas 50(3A): Oxygen, Acetylene, Hydrogen, Nitrogen, Argon and Mixtures of these Gases

General description : In the existing law there are a number of separate provisions, under which the gases specified above are always exempt from sales tax.

Reason for omission: Item 176, Schedule 1 of the new law will contain a general exemption for nearly all gases. The only exceptions will be carbon dioxide, refrigerant gases and gases marketed principally for use in inflating balloons. Item 83, Schedule 1 will exempt any gases for use in medical or dental treatment. The creation of an unconditional exemption for most gases will mean that all of the existing exemptions for gases can be removed.

Existing Item 65A: Wine for church services

General description : This item exempts wine for use in church services.

Reason for omission: Item 155, Schedule 1 of the new law will exempt goods for use mainly for the purposes of church services and this will cover wine used in church services. A separate exemption for wine for use in church services will be unnecessary.

Existing Item 68(1): Works of art for public exhibition

Existing Item 68(2): Works of art produced by Australian artists

General description : These items exempt works of art for continuous public exhibition free of charge and works of art produced by Australian artists in Australia or abroad.

Reason for omission: Item 115, Schedule 1 will exempt all works of art regardless of their origin or use.

Existing Item 74B: Materials for munitions buildings & equipment for manufacture etc of munitions

General description : This item exempts materials for use in the construction, repair or alteration of buildings or other structures used under an agreement with the Commonwealth in connection with the manufacture, processing, treatment or storage of munitions or other defence supplies. The item also exempts goods for use in the manufacture etc. of munitions to the order of the Commonwealth.

Reason for omission: There are no longer any agreements with the Commonwealth of the kind required under the existing item. In any case most building materials will be exempt under Item 39, Schedule 1 in the new law. Plant, machines and apparatus for munitions manufacture will be able to qualify for exemption under Item 18, Schedule 1 in the new law.

Existing Item 74C: Defence force badges, accoutrements etc

General description : This item exempts officially approved badges, accoutrements and kit for sale by the Commonwealth to members of the Defence Force for use as parts of uniforms.

Reason for omission: The existing exemption has limited application. The initial issue of badges, accoutrements and kit is made free of charge to Defence Force personnel and this issue will be exempt from sales tax under Item 126, Schedule 1 of the new law. Later replacements will mostly qualify for exemption under Item 75, Schedule 1 of the new law which will exempt clothing.

Existing Item 74CA: Badges, accoutrements etc of foreign defence force personnel in Australia

General description : This item exempts badges, accoutrements and kit for use in Australia as parts of uniforms by members of armed forces of any part of Her Majesty's dominions (other than Australia) or by members in Australia of any allied or other foreign forces serving in association with the Defence Force.

Reason for omission: This item will be omitted to ensure consistency in the sales tax treatment of badges, accoutrements and kit of foreign defence force personnel serving in Australia and members of the Defence Force.

Existing Item 74D: Air raid precaution goods

General description : This item exempts goods for use by public authorities in air raid precautions services.

Reason for omission: There are no organisations presently involved in providing air raid precautions services.

Existing Item 74E: Navy, Army and Airforce Institutes

General description : This item exempts goods for use and not for sale by the Navy, Army and Air Force Institutes (NAAFI) incorporated in the United Kingdom.

Reason for omission: The NAAFI no longer has any operations in Australia.

Existing Item 74J: Services Canteen Trust Fund

General description : This item exempts goods for use and not for sale by the trustees of the Services Canteens Trust Fund.

Reason for omission: The Services Canteens Trust Fund was wound up in December 1986.

Existing Item 76(2): Goods produced by Reserve Bank

General description : This item exempts goods produced by the Reserve Bank and not for sale by that Bank otherwise than to the Commonwealth.

Reason for omission: The goods which are exempted by this item will be exempted by Item 126, Schedule 1 in the new law.

Existing Items 82(1): Bricks, tiles, blocks, slabs etc. 82A: Piping or tubing, fittings for piping or tubing, piping or tubing for fixed electrical installations, parts for construction or repair in situ of piping or tubing 83: Plaster, plaster products and similar goods, boards, sheets or linings, adhesives and sealants 84: Metal building materials builders hardware, metal window & door hardware 85: Roofing materials 87: Flooring materials & damp course materials 88: Ventilators & fittings, wall ties 89B: Glass, leadlights etc. 90A: Window fittings

General description : The items listed above exempt a wide variety of goods and materials used in the construction or repair of buildings or other fixtures and wrought into or attached so as to become part of those buildings or other fixtures. There are a number of goods which are taxable, for example, air conditioning systems and bathroom fittings.

Reasons for omissions: The existing exemptions for building materials are voluminous, complex and repetitive. All of the exemption provisions listed above will be incorporated in Item 39, Schedule 1 in the new law. Further details on Item 39 are contained in Chapter 7 "Schedule 1 - Other Exemptions".

Exemption will be limited, as for other building materials, to goods that are of a kind ordinarily used in the construction or repair of buildings.

Existing Items 91: Containers 92: Bags & sacks 93: Boxes, cases & crates 94, 94A & 95: Bottles, jars, cases, crates etc.

General description : These items exempt a range of containers used for goods covered by the First Schedule to the Sales Tax (Exemptions and Classifications) Act 1935.

Reason for omissions: As part of the new structure for dealing with containers, most of the items in the First Schedule that deal with containers will not be necessary. The general exemption Item for containers in the new law will be Item 27, Schedule 1. However existing exemption Items for gas cylinders and shipping containers will be carried over into the new law (new Items 32 and 60). There will also be a specific exemption for pallets in the new law (new Item 31).

Existing Items 100 and 103: Small manufacturers

General description : Item 100 exempts goods manufactured and sold by a person if the average annual sales of all of the persons goods does not exceed $50,000. Item 103 exempts goods manufactured by a person if the amount of sales tax payable by that person would not exceed $1000 per annum.

Reason for omission: These items will not be required because the new rules for small business will be incorporated in the new Sales Tax Assessment Bill.

Note:
The Sales Tax Amendment (Transitional) Bill 1992 contains transitional arrangements dealing with existing items 100 and 103. The items will be retained to ensure that manufacturers currently entitled to exemption under the existing law will maintain that entitlement. Without the transitional provision, it is possible that, in some isolated cases, persons currently entitled to exemption would lose that entitlement.

Existing Item 103A: In-ground pools

General description : This item provided that the small business exemption did not apply to the construction of in-ground pools.

Reason for omission: The construction of an in-ground pool will not be a taxable dealing in the new law.

Existing Item 105: Certain ultra high frequency television transmitters

General description : This item exempts certain ultra high frequency television transmitters subject to the fulfilment of a number of conditions.

Reason for omission: The item will be incorporated in the Sales Tax Amendment (Transitional) Bill 1992 because it will be effective only for a limited period, until 1 January 1993.

Existing Item 108A: Food for aquatic or marine animals

General description : This item exempts goods marketed exclusively or principally as food for aquatic or marine animals (including fish, oysters, crayfish, prawns and crabs) farmed for commercial purposes.

Reason for omission: The goods exempted by this item will be able to qualify for exemption under provisions in the new law which will allow the tax free purchase of certain business inputs.

Existing Item 110: Goods to be exported

General description : This item exempts all goods exported or to be exported or goods sold by any person for export by the purchaser from him.

Reason for omission: The existing item will not be necessary because the exemption for exported goods will be included in the new Sales Tax Assessment Bill.

Existing Item 114A: Goods sent to Australia or imported into Australia by Defence Force members and certain persons associated with defence forces

General description : The existing item exempts goods sent or brought to Australia by members of the Defence Force, goods sent to members of the Defence Force serving in Australia, goods sent to members of certain foreign defence forces serving in Australia, goods imported by certain organisations associated with Australian or foreign military forces e.g. the American Red Cross and the Navy, Army and Air Force Institutes (NAAFI). The item also exempts goods sent to a non-citizen child in Australia by a relative or guardian. With certain exceptions, the exemption is limited to the importation of goods with a value less than ten pounds sterling in any twelve month period.

Reason for omission: The existing item had application only during the years of the Second World War. The NAAFI and the American Red Cross no longer operate in Australia and goods are no longer imported into Australia by the Government of the United Kingdom (or its allies or associates in any war) for sale in military canteens. The exemption for goods of ten pounds value or less sent to defence force personnel or to non-citizen children is no longer necessary because imported goods of insubstantial value are exempt from sales tax under another Item.

Existing Item 116: Imported goods the produce of Australia and imported or re-imported goods upon which sales tax has been paid and not refunded

General description : This item exempts imported goods that had been manufactured in Australia, and had they been used in Australia, would have qualified for exemption. It also exempts imported goods or re-imported goods if sales tax became payable on them before their importation or re-importation and the Commissioner is satisfied that all of the tax has actually been paid and not refunded.

Reason for omission: Most goods are now treated the same for sales tax purposes, whether manufactured in Australia or imported, and there is little need to have a special provision for Australian goods that have been exported and re-imported. Under the new law if tax is paid on goods and they are then used in Australia, a credit of tax will not be available on their exportation. Once goods have been applied to own use in Australia they will no longer be subject to the sales tax law. This item is not necessary.

Existing Item 118: Secondhand leased goods

General description : This item exempts secondhand plant, machinery or equipment which has been used by a person in the course of a business and is subsequently leased by him or others; and other second hand goods which are leased under a hire purchase agreement.

Reason for omission: Under the Sales Tax Assessment Bill 1992 there will be no tax liability on the leasing of secondhand goods.

Existing Item 126: Tax paid goods sold by retail etc

General description : This item exempts goods sold by retail upon which tax has already been paid or is payable because of a previous retail sale of those goods. It also exempts goods sold by retail if tax has been paid or is payable and has been included in the price for which the retailer purchased the goods.

Reason for omission: The item will be omitted because the Sales Tax Assessment Bill 1992 will contain the rules regarding the sales tax treatment of these goods.

Existing Item 133: Producer gas units

General description : This item exempts producer gas units and parts and accessories therefor for use in the production of fuel for land transport vehicles including tractors.

Reason for omission: Producer gas units are no longer manufactured.

Existing Item 141(b): Flag of XII Commonwealth Games

General description : This item exempts XII Commonwealth Games flags made of cloth, paper or plastic sheeting.

Reason for omission: This exemption was provided only for the year of the XII Commonwealth Games (1982) and has had no application since then.

Existing Item 144: Warranty parts

General description : This item exempts replacement articles supplied free of charge to replace defective goods, if the cost of the replacement articles was recouped in the price for which the goods were originally sold by wholesale.

Reason for omission: The item will be omitted because the exemption for warranty parts will be dealt with under the credit rules. These rules will be contained in the Sales Tax Assessment Bill 1992.

Existing Item 149: Metric conversion goods

General description : This item exempts certain goods used for the purpose of converting or adapting measuring equipment to the metric system.

Reason for omission: Metrification of measuring equipment has been completed.

Second Schedule

Existing Items 44: Tape recorders 45: Radio & television receivers 45A: Video tape & disc players etc 47: TV-Radios, video recorder-players, cassette-radios etc 48: Tuners, amplifiers, equalisers, turntables etc 49: Goods incorporating radios, TVs etc 50: Accessories & parts for goods covered by 44, 45, 45A, 47, 48 & 49. 53: Thermionic valves for radios etc

General description : These items cover a range of electronic equipment.

Reason for omission: The items above constitute a complex and voluminous body of law. The new law will contain a shorter and simpler Item (Item 12, Schedule 5) which will cover all of the goods presently covered by the items listed above.

Existing Item 63: Containers for goods covered by the Second Schedule

General description : This item covers containers for any goods that are covered by one of the items in the Second Schedule to the Sales Tax (Exemptions and Classifications) Act.

Reason for omission: The Sales Tax Assessment Bill 1992 will contain rules for the sales tax treatment of containers.

Third Schedule

Existing Item 17: Containers for goods covered by the Third Schedule

General description : This item covers containers for any goods that are covered by one of the items in the Third Schedule to the Sales Tax (Exemptions and Classifications) Act.

Reason for omission: The item will be omitted because the Sales Tax Assessment Bill 1992 will contain rules for the sales tax treatment of containers.

Existing Item 18: Containers for use in marketing biscuits, ice-cream etc and take-away beverages or foodstuffs

General description : This item covers containers for biscuits, ice-cream products and certain frozen confectionery etc. manufactured in retail premises for sale from those premises and containers for take-away foodstuffs and beverages.

Reason for omission: This is a conditionally rated item and the new law will not have a concept that goods can be treated at two different tax rates. Containers for take-away beverages and foods will be taxed according to the identity of the container.

Fourth Schedule

Existing Item 1: Commercial motor vehicles

General description : Motor vehicles ordinarily used for commercial purposes, but not including motor cycles, tractors and passenger motor vehicles, including station wagons.

Reason for omission: Schedule 4, which taxes goods at 20%, covers all goods that are not covered by any other rating schedule. These motor vehicles will remain taxable at 20%, so it is not necessary to have a separate Item to cover them.

Existing Item 2: Negatives, transparencies & film strips

General description : This item covers negatives, transparencies and film strips manufactured from exposed photographic or cinematographic film supplied by persons for whom the negatives, transparencies or film strips are manufactured.

Reason for omission: It is not necessary to specify separately goods that are taxable at 20% and have no other link with goods in one of the other taxing schedules.


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