A New Tax System (Managing the GST Rate and Base) Act 1999
Note: See section 10.
Sch 2 repealed by No 12 of 2009, s 3 and Sch 1 item 20, effective 1 July 2009. Sch 2 formerly read:
Schedule 2 - Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations
THE COMMONWEALTH OF AUSTRALIA THE STATE OF NEW SOUTH WALES THE STATE OF VICTORIA THE STATE OF QUEENSLAND THE STATE OF WESTERN AUSTRALIA THE STATE OF SOUTH AUSTRALIA THE STATE OF TASMANIA THE AUSTRALIAN CAPITAL TERRITORY, AND THE NORTHERN TERRITORY OF AUSTRALIA WHEREAS (1) the Special Premiers " Conference on 13 November 1998 developed principles for the reform of Commonwealth-State financial relations; (2) the Commonwealth, States and Territories are in agreement that the current financial relationship between levels of government must be reformed to facilitate a stronger and more productive federal system for the new millennium; (3) while a majority of the States and Territories support the introduction of the Goods and Services Tax (GST), the agreement of New South Wales, Queensland and Tasmania to the reform of Commonwealth-State financial relations does not imply their in-principle endorsement of the GST; (4) an Agreement was reached between the Commonwealth and the States and Territories on the reform of Commonwealth-State financial relations on 9 April 1999; (5) this revised Agreement was made necessary by the changes to the Commonwealth Government " s A New Tax System (ANTS) package announced by the Prime Minister on 28 May 1999; and (6) this revised Agreement supersedes the previous Agreement of 9 April 1999: IT IS HEREBY AGREED:
PART 1 - PRELIMINARYCommencement Clause
This Agreement will commence between the Commonwealth, the States and the Territories on 1 July 1999 unless otherwise agreed by the Parties. Objectives
The objectives of the reforms set down in this agreement include:
(i) the achievement of a new national tax system, including the elimination of a number of existing inefficient taxes which are impeding economic activity;
(ii) the provision to State and Territory Governments of revenue from a more robust tax base that can be expected to grow over time; and
(iii) an improvement in the financial position of all State and Territory Governments, once the transitional changes have been completed, relative to that which would have existed had the current arrangements continued. All parties
All Parties to the Agreement acknowledge the need to pursue on-going reform of Commonwealth-State financial relations. Acknowledgement of Agreement
The Commonwealth will attach the Agreement as a schedule to the A New Tax System (Commonwealth-State Financial Arrangements) Act 1999 . The Commonwealth will use its best endeavours to ensure the Act will require compliance with the Agreement. The States and Territories will attach the Agreement as a schedule to relevant State and Territory legislation. The States and Territories will use their best endeavours to ensure their legislation will require compliance with the Agreement.
PART 2 - COMMONWEALTH-STATE FINANCIAL REFORMReform Measures
The Parties will undertake all necessary steps to have appropriate legislation enacted to give effect to the following reform measures.
(i) The Commonwealth will legislate to provide all of the revenue from the GST to the States and Territories and will legislate to maintain the rate and base of the GST in accordance with this Agreement.
(ii) The Commonwealth will cease to apply the Wholesale Sales Tax from 1 July 2000 and will not reintroduce it or a similar tax in the future.
(iii) The temporary arrangements for the taxation of petrol, liquor and tobacco under the safety net arrangements announced by the Commonwealth on 6 August 1997 will cease on 1 July 2000.
(iv) The payment of Financial Assistance Grants will cease on 1 July 2000.
(v) The Commonwealth will continue to provide Specific Purpose Payments (SPPs) to the States and Territories and has no intention of cutting aggregate SPPs as part of the reform process set out in this Agreement, consistent with the objective of the State and Territory Governments being financially better off under the new arrangements.
(vi) The States and Territories will cease to apply the taxes referred to in Appendix A from the dates outlined below and will not reintroduce them or similar taxes in the future.
· Bed taxes, from 1 July 2000; · Financial Institutions Duty, from 1 July 2001; · Stamp duties on quoted marketable securities from 1 July 2001; · Debits tax by 1 July 2005, subject to review by the Ministerial Council;
(vii) The Ministerial Council will by 2005 review the need for retention of stamp duty on non-residential conveyances; leases; mortgages, debentures, bonds and other loan securities; credit arrangements, instalment purchase arrangements and rental arrangements; and on cheques, bills of exchange, promissory notes; and unquoted marketable securities.
(viii) The States and Territories will adjust their gambling tax arrangements to take account of the impact of the GST on gambling operators.
(ix) Following negotiations under the CSHA, the States and Territories will ensure that increases in pensions and allowances specified in the tax reform package will not flow through to increased public housing rents where these rents are linked to the level of pensions.
(x) Nothing in this clause will prevent any Party from introducing anti-avoidance measures that are reasonably necessary to protect its remaining tax base or liabilities accrued prior to the date the tax ceases to apply. GST Legislation
All Parties agree to reconsider this Agreement should the Commonwealth Parliament pass the GST legislation in a way that significantly affects this Agreement. Distribution of GST Revenue
The Commonwealth will make GST revenue grants to the States and Territories equivalent to the revenue from the GST subject to the arrangements in this Agreement. GST revenue grants will be freely available for use by the States and Territories for any purpose. Distribution of GST Revenue
The Commonwealth will distribute GST revenue grants among the States and Territories in accordance with horizontal fiscal equalisation (HFE) principles subject to the transitional arrangements set out below and other relevant provisions of this Agreement. Payment arrangements
Details of the payment arrangements are contained in Appendix B to this Agreement. Transitional Arrangements
In each of the transitional years following the introduction of the GST, the Commonwealth guarantees that the budgetary position of each individual State and Territory will be no worse off than it would have been had the reforms set out in this Agreement not been implemented.
The Commonwealth will extend the transitional period by Regulation (as provided for in the A New Tax System (Commonwealth-State Financial Arrangements) Act 1999 ) to give effect to the commitments in clause 10 in the event that transitional assistance is required by any State or Territory after 30 June 2003.
To meet this guarantee, the Commonwealth will make transitional assistance payments to each State and Territory, as necessary, over this period. These payments will take the form of interest free loans and grants in July 2000-01 and grants paid quarterly in subsequent years and will be freely available for use by the States and Territories for any purpose. Any payments or repayments made by way of loans or grants under the Commonwealth " s guarantee will be excluded from assessments of per capita relativities recommended by the Commonwealth Grants Commission (CGC).
The amounts of any additional assistance under the guarantee will be determined in accordance with the processes set out in Appendix C to this Agreement.
After the second year following the introduction of the GST, GST revenue grants will be determined on the basis of HFE principles. That is, after the first two years, any State or Territory which is receiving more than would have been received under the current arrangements will retain that excess. First Home Owners Scheme
To offset the impact of the introduction of a GST, the States and Territories will assist first homebuyers through the funding and administration of a new uniform First Home Owners Scheme.
This assistance will be provided to first home owners consistent with Appendix D to this Agreement. Application of the GST to Government
The Parties intend that the Commonwealth, States, Territories and local government and their statutory corporations and authorities will operate as if they were subject to the GST legislation. They will be entitled to register, will pay GST or make voluntary or notional payments where necessary and will be entitled to claim input tax credits in the same way as non-Government organisations. All such payments will be included in GST revenue.
The Commonwealth will legislate to require the States and the Northern Territory to withhold from any local government authority being in breach of clause 17 a sum representing the amount of unpaid voluntary or notional GST payments. Amounts withheld will form part of the GST revenue pool. Detailed arrangements will be agreed by the Ministerial Council on advice from Heads of Treasuries. Government Taxes and Charges
The Commonwealth, States and Territories agree that the GST does not apply to the payment of some taxes and compulsory charges.
The Parties will agree a list of taxes and compulsory charges that are outside the scope of the GST. This list will be promulgated by a determination by the Commonwealth Treasurer as set out in Division 81-5 of the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act).
In agreeing the list, the Commonwealth, States and Territories will have regard to the following principles:
(i) taxes that are in the nature of a compulsory impost for general purposes and compulsory charges by the way of fines or penalties should not be subject to GST as these will not relate to any specific supply of goods or services;
(ii) similarly, those regulatory charges that do not relate to particular goods or services should be outside the scope of the GST; and
(iii) the inclusion of any other charge in the Commonwealth Treasurer's determination notwithstanding that it may relate to the supply of a particular good or service will require the unanimous agreement of the Commonwealth, States and Territories.
The agreed list of taxes and other compulsory charges that are outside the scope of the GST will be subject to on-going review and adjustment as necessary in consultation with the Ministerial Council. The Parties will notify any objections to changes to the list within a period to be specified by the Ministerial Council. Reciprocal Taxation
Reciprocal taxation will be progressed on a revenue neutral basis, through the negotiation of a Reciprocal Taxation Agreement with the objectives of:
(i) improving the transparency of tax arrangements between all levels of government;
(ii) ensuring tax neutrality; and
(iii) replacing the Statement of Policy Intent (SOPI) for the taxation treatment of Government Business Enterprises with tax arrangements which are broader in scope.
It is the intention of the Parties to this Agreement that a National Tax Equivalent Regime (NTER) for income tax will be operational for State and Territory government business enterprises from 1 July 2000. It is also intended that the reciprocal application of other Commonwealth, State and Territory taxes will be subsequently implemented as soon as practicable.
Local government organisations will be consulted with a view to making the NTER for income tax operational for wholly owned local government business enterprises from 1 July 2000 and including local government in the Reciprocal Tax Agreement at a later date.
Where the application of full indirect reciprocal tax arrangements is prevented by the Constitution, jurisdictions have agreed to work cooperatively to introduce voluntary payment arrangements in these circumstances.
All governments have agreed that no further compensation payments will be payable by any jurisdiction under the SOPI. Monitoring of Prices
In accordance with the Trade Practices Act 1974 , as amended, the Australian Competition and Consumer Commission will formally monitor prices and take action against businesses that take pricing decisions in a manner inconsistent with tax reform.
In order to ensure that these measures apply to the whole economy, the States and Territories will adopt the Schedule version of Part VB of the Trade Practices Act 1974 (Part XIAA of The New Tax System Price Exploitation Code ) to extend the measures in Part VB to cover those areas outside the Commonwealth " s constitutional power. All Parties will work towards having any necessary legislation in place by 1 July 1999.
The monitoring and prohibition on unreasonable pricing decisions will commence on 1 July 1999 and continue until 30 June 2002.
PART 3 - ADMINISTRATION OF THE GSTManagement of the GST Rate
After the introduction of the GST, a proposal to vary the 10 per cent rate of the GST will require:
(i) the unanimous support of the State and Territory Governments;
(ii) the endorsement by the Commonwealth Government of the day; and
(iii) the passage of relevant legislation by both Houses of the Commonwealth Parliament. Management of the GST Base
Subject to clauses 34, 35 and 36 of this Agreement, after the introduction of the GST, any proposal to vary the GST base will require:
(i) the unanimous support of the State and Territory Governments;
(ii) the endorsement by the Commonwealth Government of the day; and
(iii) the passage of relevant legislation by both Houses of the Commonwealth Parliament.
All future changes to the GST base should be consistent with:
(i) the maintenance of the integrity of the tax base;
(ii) simplicity of administration; and
(iii) minimising compliance costs for taxpayers.
A proposal to vary the GST base by way of a Ministerial determination under the GST Act and the GST Transition Act will require the unanimous agreement of the Ministerial Council established under clause 40. The Ministerial Council will develop practical arrangements to ensure timely consideration of proposed Ministerial determinations.
During the first 12 months following the implementation of the GST, the Commonwealth Government will retain the discretion to make changes unilaterally to the GST base where such changes:
(i) are of an administrative nature (as defined in Appendix E to this Agreement);
(ii) are necessary to facilitate the implementation of the new tax; and
(iii) have regard to the need to protect the revenue of the States and Territories.
From July 2001, changes to the GST base of an administrative nature (as defined in Appendix E ) would require the majority support of the Commonwealth, the States and the Territories. Australian Taxation Office
The States and Territories will compensate the Commonwealth for the agreed costs incurred by the Australian Taxation Office (ATO) in administering the GST.
Accountability and performance arrangements will be established between the ATO and the State and Territory Governments consistent with Appendix F to this Agreement. These arrangements will include maximising compliance, cost efficiency, simplicity for taxpayers and administrative transparency.
The ATO and State and Territory Governments will collaborate to explore options for the States and Territories to benefit from the use of the Australian Business Number system.
PART 4 - INSTITUTIONAL ARRANGEMENTSEstablishment of Ministerial Council
A Ministerial Council comprising the Commonwealth, the States and the Territories will be established from 1 July 1999 to oversee the operation of this Agreement.
The membership of the Ministerial Council will comprise the Treasurer of the Commonwealth and the Treasurers of the States and Territories (or designated representatives).
The functions of the Ministerial Council will include:
(i) the oversight of the operation of the GST;
(ii) the oversight and coordination of the implementation of this Agreement;
(iii) the review of matters of operational significance raised through the GST Administration Sub-Committee;
(iv) discussion of CGC recommendations regarding relativities prior to the Commonwealth Treasurer making a determination;
(v) monitoring compliance with the conditions governing the provision of assistance to first home owners set out in Appendix D to this Agreement;
(vi) monitoring compliance with the Commonwealth " s undertaking with respect to SPPs;
(vii) considering reports of the GST Administration Sub-Committee on the performance of the ATO in GST administration;
(viii) reviewing the operation of the Agreement over time and considering any amendments which may be proposed as a consequence of such review;
(ix) making recommendations to the Commonwealth Treasurer on the Guaranteed Minimum Amount applying to each State and Territory under the Transitional Arrangements;
(x) approving changes to the GST base which require the support of a majority of Commonwealth, State and Territory Governments;
(xi) considering on-going reform of Commonwealth-State financial relations; and
(xii) considering other matters covered in this Agreement.
The Treasurer of the Commonwealth will convene the Ministerial Council in consultation with the other members of the Council not less than once each financial year. If the Commonwealth Treasurer receives a request from a member of the Council, he will consult with the other members concerning convening a meeting. The Treasurer of the Commonwealth will be the chair of the Council. The Council may also conduct its business by correspondence.
All questions arising in the Ministerial Council will be determined by unanimous agreement unless otherwise specified in this Agreement.
While it is envisaged that the Ministerial Council will take decisions on most business arising from the operation of this Agreement, major issues will be referred by the Ministerial Council to Heads of Government for consideration, including under the auspices of the Council of Australian Governments.
The Ministerial Council will establish a GST Administration Sub-Committee comprised of Commonwealth, State and Territory officials to monitor the operation of the GST, make recommendations regarding possible changes to the GST base and rate and to monitor the ATO " s performance in GST administration. The GST Administration Sub-Committee will function in accordance with the arrangements set out in Appendix E to this Agreement.
SIGNED for and on behalf of the Parties by:
The Honourable John Winston Howard, Prime Minister of the Commonwealth of Australia, on the 20th day of June 1999
The Honourable Robert John Carr, Premier of the State of New South Wales, on the 24th day of June 1999
The Honourable Jeffrey Gibb Kennett, Premier of the State of Victoria, on the 26th day of June 1999
The Honourable Peter Douglas Beattie, Premier of the State of Queensland, on the 25th day of June 1999
The Honourable Richard Fairfax Court, Premier of the State of Western Australia, on the 29th day of June 1999
The Honourable John Wayne Olsen, Premier of the State of South Australia, on the 25th day of June 1999
The Honourable James Alexander Bacon, Premier of the State of Tasmania, on the 25th day of June 1999
Kate Carnell, Chief Minister of the Australian Capital Territory, on the 22nd day of June 1999
The Honourable Denis Gabriel Burke, Chief Minister of the Northern Territory of Australia, on the 22nd day of June 1999