House of Representatives

Taxation Laws Amendment Bill (No. 8) 2000

Second Reading Speech

Mr Hockey (North Sydney - Minister for Financial Services and Regulation)

I move that the Bill be now read a second time.

This Bill contains minor and technical changes to improve the operation of the A New Tax System (Goods and Services Tax) Act 1999 ('the GST Act') and related legislation. As well as giving effect to the measures announced in the Treasurer's press release No. 90, of 14 September 2000, these changes address other issues that have been raised by tax practitioners, industry representatives, the Australian Taxation Office and some States and Territories.

Mr Speaker, under the New Tax System we now have around 3.2 million businesses and other entities registered with an Australian Business Number. We have over 2.1 million of these entities also registered for GST.

These registrations far exceed initial expectations and provide an early indication that businesses, community bodies, government bodies and the charitable sector are actively addressing their responsibilities under the new system.

The Government too is continuing to monitor the implementation of the new system and the measures in this Bill demonstrate our credentials in making sure the system is fine-tuned to increase administrative simplicity and compliance whilst ensuring protection of the revenue.

Under the Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations many of the changes required the approval of the States and Territories. I am advised that approvals are being processed expeditiously by Ministerial Council members and the Government expects there to be no difficulties in receiving all the appropriate approvals prior to the passage of this Bill.

The Bill contains no substantive policy issues, but there are several measures that will be welcomed by business.

The main measures in the Bill provide for:

increased flexibility to cancel GST registrations;
changes to the way debts are offset against Business Activity Statement (BAS) refunds;
increased flexibility to revoke monthly tax period elections;
fine-tuning the treatment of financial services;
changes to the GST treatment of representatives of incapacitated entities;
fine-tuning the treatment of re-importations and temporary importations; and
better interaction of the Fringe Benefits Tax (FBT) and the GST.

Mr Speaker, the changes to the refunding of BAS amounts is an important measure that will ensure businesses benefit from receiving BAS refunds without having them offset against other debts that are due but not yet payable.

Some entities may lodge income tax returns and have assessments made early in the lodgment cycle, resulting in a gap of several months between the establishment of the tax debt and the date when the tax is due for payment.

If these entities are GST registered and lodge a BAS claiming a net credit, the expected refund cannot be issued as the Commissioner of Taxation is required to offset the amount against the assessed income tax debt (even though this may not be payable for several months).

This Bill will give the Commissioner the discretion to be able to refund a running account balance surplus or credit rather than apply it against a tax debt (other than a BAS amount) that is due but not yet payable.

Mr Speaker, under the GST Act, an entity can choose to register for GST if it carries on an enterprise but its annual turnover is below the registration turnover threshold. Once an entity is registered for the GST, it must apply to the Commissioner if it wishes to have its registration cancelled. However, the Commissioner cannot cancel an entity's GST registration unless the entity has been registered for at least 12 months at the time of application. The Commissioner currently has no discretion to reduce this period.

This Bill will allow the Commissioner, in certain circumstances, to cancel the GST registration of an entity where an application to cancel its registration has been made before the entity has been registered for 12 months. The Commissioner will be able to decide on a cancellation date that is on or after Royal Assent of this Bill. This measure will avoid increased compliance costs for small businesses and non-profit bodies.

Mr Speaker, entities will generally lodge GST returns on a quarterly basis, although some entities are required to lodge monthly. Entities that are not required to account for GST monthly may still elect to account monthly by applying to the Commissioner. This choice could be made by ticking the relevant box on the ABN application form. Once this choice is made, an entity may revert to using quarterly tax periods by applying to the Commissioner. However, the entity must use monthly tax periods for at least 12 months before it can revert to using quarterly tax periods. The Commissioner currently has no discretion to reduce this period.

This Bill will allow the Commissioner, in certain circumstances, to revoke the monthly tax period election of an entity before 12 months after the election came into effect, if the entity so requests. The Commissioner may backdate the effect of the revocation to 1 July 2000. This measure will substantially reduce the compliance costs of affected businesses and non-profit bodies by reducing the frequency with which these entities are required to account for GST.

Some of the other fine-tuning measures relate to:

providing for the GST-free treatment of travel agents fees for arranging overseas supplies;
providing that the sale of residential premises that have been used as rental accommodation for at least 5 years will be input taxed; and
ensuring that the associates provisions operate in relation to non-profit sub-entities.

The changes in this Bill demonstrate that the Government is responding to minor problems identified by business and is prepared to make changes necessary to ensure that the Government's original policy is maintained and that the revenue is protected.

Full details of the changes in this Bill are contained in the Explanatory Memorandum.

I commend the Bill to the House and present the Explanatory Memorandum.