House of Representatives

Indirect Tax Legislation Amendment Bill 2000

Second Reading Speech

Hockey, Joe, MP (North Sydney, Minister for Financial Services and Regulation, LP, Government)

I move:

That the bill be now read a second time.

In just over 50 days, Australia will see the implementation of the most significant tax reform since World War II, including the largest tax cuts in Australia's history. The reform package also includes large increases to family assistance, increases to pensions and all other government benefits, the abolition of wholesale sales tax and the introduction of the GST.

As part of the implementation phase of the GST, the government has embarked upon an extensive information and community education program. Both the Australian Taxation Office and GST Start-Up Assistance Office have played key roles with comprehensive seminar programs, the provision of booklets and fact sheets on the operation of the GST, and several infolines addressing both tax issues and the business skills needed to prepare for tax reform.

The Australian Taxation Office has also issued a large number of rulings on detailed operation of the law in relation to the GST.

As a result of the detailed examination of the law through the rulings process, feedback received from taxpayers on the GST legislation, as well as comments from the New Tax System Advisory Board, several issues have been raised by interested parties including the need for amendments. The government has looked at the issues raised and considers that a number of amendments need to be made to ensure that the legislation remains consistent with the government's original intentions.

The amendments in this bill will apply to the A New Tax System (Goods and Services Tax) Act 1999, the GST act, and related legislation. They give effect to the measures announced in the Treasurer's press release No. 37, of 3 May 2000, as well as some other issues not previously announced.

The measures in this bill cover approximately 30 minor policy issues and nine technical issues. The majority of the amendments are concessional in nature and will be welcomed by business. In addition, there are a small number of amendments which are regarded as anti-avoidance measures to ensure that aspects of the law operate as intended. The other amendments are technical in nature but are essential to ensure that the legislation operates effectively.

Some of the more important amendments contained in this bill are as follows.

This bill will amend the GST act to give the Commissioner of Taxation the power to issue guidelines to specify that certain fundraising events undertaken by charities can be treated as input taxed. These fundraising events could include a fete, ball, or other similar event that is separate from, nor forming part of, a series of similar events. Events involving the sale of small fundraising items such as badges, flowers and confectionery will be included provided the charitable entity is not in the business of selling such items.

Where the fundraising event does not meet this description, the amendments provide that a charitable entity may make a request to the commissioner to apply his discretion to treat an activity as input taxed. In applying his discretion, the commissioner would need to have broad regard to whether the charitable entity is in the business of making such supplies. In addition, the commissioner must be satisfied that the fundraising is genuine and the proceeds are for the direct benefit of the charity.

This bill amends the GST act to make the delivery of livestock to a processor a taxable supply. This confirms the government's policy in respect of food to ensure that, as far as practicable, farmers should be in a position to sell their produce subject to GST.

This bill also amends the GST act to ensure the lease or hire of goods by preschools, primary schools and secondary schools to students are GST free provided the school retains property of those goods. These supplies will be GST free as long as there is not any transfer, or agreement to transfer ownership of the goods to any student or anyone else at any stage, and the supply must be directly and principally for use by that student in a GST-free education course supplied by the school.

Other measures in this bill relate to:

streamlined processes to let businesses inform insurance companies of their input tax credit status;
allowing more flexible arrangements for accounting for GST for transactions between agents and principals;
clarifying the GST treatment of supplies involving nonresidents;
rules for calculating GST;
taking borrowing out of the financial supplies de minimus threshold except for those borrowings that are related to making financial supplies;
applying consistent principles to GST turnover tests to assist pubs and clubs; and
two revenue protection measures to prevent stockpiling of alcoholic beverages.

The amendments in this bill demonstrate that the government is responding to consultations and is prepared to make changes necessary to ensure an effective tax system.

Full details of the amendments in this bill are contained in the explanatory memorandum.

I commend the bill and present the explanatory memorandum.