House of Representatives

Tax Laws Amendment (2010 GST Administration Measures No. 2) Bill 2010

Second Reading Speech

Mr Griffin (Minister for Veterans' Affairs)

I move: That this bill be now read a second time.

The Bill amends the tax law to further progress a package of reforms announced in the 2009-10 budget aimed at simplifying and streamlining the administration of the GST, this time in the area of grouping, invoices and rulings.

These amendments arose from recommendations of the Board of Taxation in its review of the legal framework for the administration of the GST.

Schedule 1 amends the A New Tax System (Goods and Services Tax) Act 1999 and the Taxation Administration Act 1953 to adopt more principled and flexible rules for GST groups and GST joint ventures. The measure applies from 1 July 2010.

In particular, schedule 1 replaces the current inefficient system of requiring the Commissioner of Taxation to formally approve the formation and subsequent changes to a GST group and GST joint venture with a self-assessment system. In future, entities will be able to self-assess their eligibility to form or change a GST group or joint venture and need only notify the commissioner of their action provided this is done before the due date for lodgement of the GST return for the tax period. Entities will also be able to form or change a GST group or GST joint venture with a retrospective date of effect. However, to preserve the integrity of the GST system, such actions will require the commissioner's approval.

Schedule 1 also greatly increases the flexibility of the grouping rules. Entities will be able to form, change and dissolve a GST group or GST joint venture at any time during a tax period, rather than needing to wait until the beginning of a tax period or to unwind transactions back to the start of a tax period. This will greatly assist groups that acquire or dispose of entities by allowing a change in membership of the GST group or joint venture to take effect from the date of change of ownership of the entities concerned, regardless of whether or not that day happens to be at the beginning of a tax period. It will avoid delaying commercial decisions or unwinding transactions for GST purposes to the beginning of a tax period, as occurs under the current arrangements.

Finally, schedule 1 further increases certainty for members in GST groups and participants in GST joint ventures in relation to their exposure to group debts. Entities will be able to enter into indirect tax sharing agreements to limit their joint and several liabilities in respect of indirect tax law liabilities to a contribution amount agreed with the representative member for GST groups or the joint venture operator for GST joint ventures. A particular benefit of indirect tax sharing agreements is that an entity can leave a GST group or GST joint venture clear of any indirect tax law liability that has not yet become payable.

Schedule 2 amends the Taxation Administration Act 1953, the A New Tax System (Goods and Services Tax) Act 1999, the Excise Act 1901 and the Income Tax Assessment Act 1997 to include indirect tax rulings and excise advice in the general rulings regime.

Schedule 2 addresses problems which arise from not having an express legislative framework for GST rulings, including no formal review rights and no framework setting out taxpayers' rights and obligations.

Schedule 2 expands the income tax rulings regime to include GST, luxury car tax, wine equalisation tax and excise matters. In doing so, it simplifies the tax law and provides consistent rules that apply across different taxes. Specific differences between the rulings regimes are retained in cases where essential characteristics of the different taxes require a different approach. One such case is that, unless otherwise provided for, indirect tax rulings will continue to apply unless withdrawn.

Schedule 2 applies to rulings made by the commissioner on or after 1 July 2010. In order to reduce any transitional compliance costs resulting from the changes, the amendments also apply to rulings applied for before 1 July 2010. In addition, private indirect tax rulings in operation immediately prior to 1 July 2010 will be treated as if made under the revised rulings regime. This ensures that the rulings remain valid and do not impose additional compliance costs on affected parties by requiring new rulings to be obtained. Indirect tax rulings in operation immediately prior to 1 July 2010, that are gazetted or labelled as public rulings will also be treated as if made under the revised rulings regime.

Schedule 3 amends the A New Tax System (Goods and Services Tax) Act 1999 to introduce a more flexible set of requirements for tax invoices. It also allows recipients of supplies to disregard certain errors in a document intended to be a tax invoice where missing information can be obtained from other documents provided to the recipient by the supplier. These changes apply from 1 July 2010.

Tax invoices are a key element of GST integrity. A recipient must hold a tax invoice issued by the supplier in order to substantiate any claim for input tax credits in relation to a creditable acquisition. However, concerns have been expressed that the present requirements are overly restrictive, often invalidating tax invoices where all of the required information is available.

These amendments revise the requirements for a document to be a tax invoice so that key information will now need to be omitted before a document is not a tax invoice. Further, where recipients have received a tax invoice lacking required information, but can obtain this information from other documents issued by the supplier, then the recipient will be allowed to treat the document as a tax invoice.

These changes will ensure that, consistent with the recommendation of the board, it is only significant errors involving key information that cannot be obtained from other sources that will prevent a document being a tax invoice.

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

Debate (on motion by Mr Wood) adjourned.