Senate

Explanatory Memorandum

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

Chapter 5 - Building materials

Overview

5.1 Schedule 2 to the Bills will modify the exemptions for certain building materials. These building materials will become taxable at the rate of 12 per cent.

Summary of the modifications

Purpose of the modifications

5.2 The modifications make some categories of currently exempt building materials taxable at the concessional rate, which will be 12 per cent when the amendment comes into effect.

Date of effect

5.3 The modifications will apply to dealings occurring on or after 1 July 1995. [Clause 6 of the Bills]

Background to the legislation

5.4 The sales tax law currently exempts most building materials from sales tax. The modifications contained in the Bills will apply the concessional rate, which will be 12 per cent when the modifications come into effect, to a range of building materials.

Explanation of the modifications

Plaster

5.5 Plaster used as raw materials in construction and repair is currently exempt from sales tax. It will become taxable at 12 per cent by removing the reference to it in paragraph 39(1)(i) of Schedule 1 and including it in new item 16 in Schedule 2 of the E & C Act. Goods manufactured from plaster such as cornices, plaster boards and plaster sheets will remain exempt from sales tax under paragraph 39(1)(i) of Schedule 1, which will continue to exempt certain plaster products and goods having structural uses similar to plaster products. [Items 2 and 16 of Schedule 2] Ingredients for plaster mixtures

5.6 Goods of a kind marketed principally as ingredients for plaster mixtures are currently exempt from sales tax under subitem 41(2) of Schedule 1 to the E & C Act. They will become taxable at the rate of 12 per cent by removing the reference to plaster mixtures in subitem 41(2) of Schedule 1 and including them in subitem 16(2) of Schedule 2. [Items 6 and 16 of Schedule 2] Builders' hardware

5.7 All goods currently exempt from sales tax as builders hardware will become taxable at 12 per cent by removing paragraph 39(1)(o) of Schedule 1 and incorporating a reference to builders' hardware in paragraph 16(1)(a) of Schedule 2. [Items 3 and 16 of Schedule 2]

5.8 Examples of builders' hardware that will become taxable are nails, rivets, washers, screws, bolts and nuts. Wall and floor tiles

5.9 Tiles or floor coverings made of cork, linoleum, rubber, vinyls or similar materials are currently subject to sales tax. However, certain similar wall and floor tiles are exempt from sales tax. The law will be modified so that all other wall and floor tiles become taxable at 12 per cent. This will be done by excluding wall tiles or floor tiles or other floor coverings from the item 39 exemption, and including them in the new item 16 of Schedule 2. [Items 4 and 16 of Schedule 2] Timber floor coverings and parquet blocks

5.10 Subitem 42(b) of Schedule 1 currently exempts parquet blocks. Timber floor coverings including parquet blocks will become taxable at 12 per cent by removing the reference to parquet blocks in subitem 42(b) of Schedule 1 to the E & C Act and including timber floor coverings including parquet blocks in Schedule 2 under new subitem 17(1). Timber floorboards will continue to be exempt. An additional modification will be made to subitem 42 to ensure that goods covered by new item 17 or 19 of Schedule 2 to the E & C Act (office partitions etc) are not exempt under subitem 42(1). [Items 7, 8, 14 and 16 of Schedule 2] Paints, putties, wallpaper etc.

5.11 Paints, putties, wallpaper etc. are currently exempt from sales tax under item 44 of Schedule 1. These goods will become taxable at 12 per cent by omitting item 44 and creating a new item, item 18, in Schedule 2 which will cover precisely the same goods. [Items 1, 9, 14 and 16 of Schedule 2] Taps, nozzles, tap handles and showerheads

5.12 Taps, nozzles, tap handles and shower heads of a kind ordinarily installed as fixtures in houses and other buildings are currently exempt from sales tax under subitem 50(3) and paragraph 39(1)(j) of Schedule 1. These goods will become taxable at 12 per cent under new item 6A in Schedule 2 of the E & C Act. Item 6A will also cover parts for these goods. Item 50 and item 39 will be modified to ensure that they cannot exempt goods covered by item 6A. [Items 5, 11, 13 and 15 of Schedule 2] Office partitions and workstation panelling

5.13 Office partitions and office workstation panelling and various components of these goods are currently exempt from sales tax. They will become taxable at the rate of 12 per cent under new item 19 in Schedule 2 to the E & C Act. Fittings, accessories and attachments for office partitions and office workstation panelling will also be taxed at 12 per cent by inclusion in new item 19. Items 39 and 42 in Schedule 1 will be modified to ensure that it can no longer exempt goods to be covered by new item 19 in Schedule 2. [Items 5, 10 and 16 of Schedule 2]

5.14 Movable office screens are currently taxable at the rate of 21 per cent and will continue to be subject to that rate. Work surfaces, shelves and other office furniture designed to be attached to office partitions or office workstation panelling will not be covered by item 19 and will continue to be treated as commercial office furniture, currently taxable at 21 per cent. Kitchen cupboards and other storage units

5.15 Kitchen cupboards and other household storage units are currently treated as exempt under paragraph 42(c) of Schedule 1 to the E & C Act. Prefabricated timber cupboards, cabinets, storage units (including bathroom vanity units) and kitchens, of a kind ordinarily used for household purposes, will become taxable at 12 per cent under new subitem 17(2) of Schedule 2. [Item 16 of Schedule 2] Exclusions from building materials exemptions

5.16 Paragraph 39(3)(j) of Schedule 1 ensures that the current range of exemptions for building materials does not exempt certain classes of goods covered by Schedule 2 of the Act. This paragraph will be modified to include the classes of building materials which are to become taxable under items 6A, 16 or 19 of Schedule 2. [Item 5 of Schedule 2]