Senate

Explanatory Memorandum

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

Chapter 9 - Sales tax - exemption for rice milk

Overview

9.1 Schedule 5 of the Bill will amend the sales tax law to exempt rice milk from sales tax.

Summary of the amendments

Purpose of the amendments

9.2 The amendments will provide a sales tax exemption for certain beverages consisting principally of rice milk [Item 1] . This will ensure that rice milk is treated for sales tax purposes the same as other similar milk and soy milk beverages. Flavoured beverages that consist principally of rice milk will be taxed at the concessional rate, currently 12 per cent.

Date of effect

9.3 The amendments will apply from the date of introduction of the Bill. [Item 5]

Background to the legislation

9.4 Rice milk is subject to the general rate of sales tax, currently 22 per cent, while milk products and beverages consisting principally of soy milk are exempt from sales tax. Flavoured beverages containing 90 per cent or more milk or consisting principally of soy milk are currently taxed at the concessional rate of 12 per cent.

9.5 Rice milk is generally regarded as a substitute for both milk and soy milk. The inconsistent treatment of these very similar beverages has adverse consequences for those people who are allergic to both dairy products and soy milk.

9.6 The proposed amendments will ensure that rice milk is treated for sales tax purposes the same as other similar milk and soy milk beverages.

Explanation of the amendment

9.7 Schedule 1 to the Sales Tax (Exemptions and Classification) Act 1992 identifies goods which are exempt from sales tax.' 71 of Schedule 1 currently provides an exemption for beverages consisting principally of soy milk and this will be amended to also include rice milk. [Items 2 and 3]

9.8 Schedule 2 to the Sales Tax (Exemptions and Classification) Act 1992 identifies goods which are taxed at the concessional rate of sales tax, currently 12 per cent. Subitem 12(2) of Schedule 2 currently covers flavoured beverages that consist principally of soy milk. This subitem will be extended to include beverages consisting principally of rice milk. [Item 4]