Senate

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Ralph Willis, MP)

Chapter 3 - Model aircraft

Overview

3.1 Schedule 1 to the Bills will modify the Sales Tax (Exemptions and Classifications) Act 1992 to ensure that sales tax is paid on model aircraft at the general rate of 21%.

Summary of modifications

Purpose of modifications

3.2 The modifications will give effect to longstanding policy on the treatment of model aircraft.

Date of effect

3.3 The modifications will apply to dealings with goods after 7.30 pm. eastern standard time on 9 May 1995. [Clause 5]

Background to the legislation

3.4 Aircraft are exempt from sales tax under Item 61 of Schedule 1 to the Sales Tax (Exemptions and Classifications) Act 1992 . That item applies to aircraft other than non-motorised gliders or hang gliders. Model aircraft have long been treated as being subject to sales tax at the rate of 21% applicable to toys. The Federal Court recently held that model aircraft that are capable of flight are eligible for exemption under Item 61 ( Bons & Anor t/a Scale Aviation Australia v FC of T 94 ATC 4372). This outcome is considered to be contrary to the intention of the exemption item. It is therefore necessary to amend the sales tax law to specifically exclude model aircraft from the exemption for aircraft.

Explanation of the modifications

3.5 Subitem 61(1) of Schedule 1 to the Sales Tax (Exemptions and Classifications) Act 1992 is modified by adding model aircraft (including model aircraft which fly) to the classes of goods which do not qualify for sales tax exemption under Item 61. [Item 5 of Schedule 1]

3.6 For the purposes of this amendment, model aircraft are not to be restricted to models that are smaller representations of real aircraft. A model aircraft based on an imagined design will also be excluded from the exemption.