House of Representatives

Explanatory Memorandum

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

Chapter 5 Miscellaneous changes to the Sales Tax (Exemptions and Classifications) Act 1992

Miscellaneous Changes to the Sales Tax (Exemptions and Classifications) Act 1992

This chapter discusses the miscellaneous changes proposed to the Sales Tax (Exemptions and Classifications) Act 1992 as part of the fine-tuning of the new sales tax law. The changes do not represent new policy but rather they restore or clarify existing concessions under the current law.

5.2 The changes discussed in this chapter cover the following goods:

A.

Business inputs for the oil industry

B.

Building materials

C.

Crude and diesel oil

D.

Parts for spectacles and wheelchairs

A. Business inputs for the oil industry

Summary

5.3 An amendment is proposed to ensure that all business inputs exemptions are available to qualifying company groups in the oil industry.

Explanation

5.4 Certain business inputs are available to companies engaged principally in the sale of petroleum and oil products by wholesale where the goods have been manufactured by another company in the same company group. The intention of the concession is to provide these companies with the same business input concessions that are available to other petroleum companies that sell similar products by wholesale. These other companies are entitled to business input concessions because they own the crude oil from which the various petroleum products sold by them are made.

5.5 However, insofar as oil companies in qualifying company groups are concerned, the new law does not cover all of the business inputs concessions that are available to the oil companies that supply the crude oil. In particular, exemption will not be available for equipment used to test the quality of the petroleum products, to label or package the petroleum products, to clean the storage receptacles for those products, or to process or treat those products to bring them into the final form in which they are to be used or marketed.

5.6 The amendment will ensure that qualifying oil companies will receive the same business input concessions that are presently available to oil companies that own and supply the crude oil to independent refiners to be made up into petroleum products for sale by them. [clause 18 of the Sales Tax Laws Amendment Bill (No. 2) 1992]

B. Building materials

Summary

5.7 Exemption Item 39 provides exemption for certain goods if they are of a kind ordinarily used as raw materials in the construction or repair of buildings, fixtures, structures or other works that are attached to land. The goods exempted are specifically listed. The following goods are to be added to the goods listed in Item 39:

(a)

goods having structural uses similar to plaster and plaster products; and

(b)

doors and door frames, windows, shutters, window frames, louvre frames, window sashes, and window screens.

Explanation

5.8 In simplifying the exemption items relating to building materials it was not considered necessary to specify all goods covered by the existing building materials items. The existing items overlap to a considerable extent and in a simplified law it was desirable to eliminate the overlaps as far as possible. The elimination of overlapping provisions has resulted in the possibility that certain building materials exempt under the existing law do not qualify for exemption under the new law.

5.9 For example, in the new law windows and window frames were considered to be covered by the term "structural building units", but doubts have been raised that they fit that description.

5.10 The goods listed in paragraphs (a) and (b) in the summary of the change above will be specifically added to Item 39. This will make it clear that the goods specified are exempt where they are of a kind ordinarily used as raw materials in the construction or repair of buildings, fixtures etc. [clause 18 of the Sales Tax Laws Amendment Bill (No. 2) 1992]

C. Crude oil and diesel oil

Summary

5.11 Exemption Item 55 provides exemption for a range of fuels, subject to the goods specified not being marketed principally for a use other than as a fuel. There will be two changes to the Item:

(a)

diesel oil will be added to the goods listed in the Item; and

(b)

the marketing condition will be removed so that the goods listed will be exempt irrespective of how they are marketed.

Explanation

5.12 Under the existing law most goods used as fuels are unconditionally exempt from sales tax. They are not subject to any marketing test. Crude oil is among the goods presently unconditionally exempted. Diesel oil is not specifically listed in the existing law but it qualifies for exemption under sub-item 48(1) which exempts substances for use as fuel for internal combustion engines. Because diesel oil is used virtually exclusively as a fuel for internal combustion engines it has been treated administratively as unconditionally exempt.

5.13 The removal of the marketing test from Item 55 will automatically result in crude oil becoming an always exempt good because it is specifically listed in subitem 55(1). The listing of diesel oil in sub-item 55(2) will also make it an always exempt good. [clause 18 of the Sales Tax Laws Amendment Bill (No. 2) 1992]

D. Parts for spectacles and wheelchairs

Summary

5.14 An exemption for parts will be added to Exemption Items 85 and 94.

Explanation

5.15 Under the existing law there is an exemption for parts for spectacles and parts for wheelchairs and other carriages for disabled persons. In drafting the new law the exemption for parts was inadvertently omitted from these Items.

5.16 Exemption Items 85 and 94 will be amended to include parts. [clause 18 of the Sales Tax Laws Amendment Bill (No. 2) 1992]

Commencement

5.17 The Bill will commence from the day on which it receives the Royal Assent. However, the changes to the Sales Tax (Exemptions and Classifications) Act 1992 that are made by this Bill will not apply to dealings before 1 January 1993. [clause 2 of the Sales Tax Laws Amendment Bill (No. 2) 1992]