House of Representatives

A New Tax System (Goods and Services Tax) Bill 1998

A New Tax System (Goods and Services Tax) Act 1999

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)

Guide and Overview of the Bill

This Explanatory Memorandum is set out in the following way.

Overview of the Bill

Chapter   1 provides an Executive Summary of the Goods and Services Tax.
Chapter   2 tells you who is in the goods and services tax system.
Chapter   3 discusses the central concepts of the goods and services tax.
Chapter   4 tells you how to account for the goods and services tax.
Chapter   5 sets out those things that are GST-free and input taxed.
Chapter   6 discusses the special rules that alter the central concepts in particular situations.
Chapter   7 tells you about various matters related to working with the goods and services tax.

Terms In this Explanatory Memorandum the following terms are used:

The Bill A New Tax System (Goods and Services Tax) Bill 1998
The Administration Act A New Tax System (Goods and Services Tax Administration) Act 1998
The Transition Act A New Tax System (Goods and Services Tax Transition) Act 1998
Commissioner The Commissioner of Taxation
GST goods and services tax

OVERVIEW OF THE BILL

Structure

The Bill is structured so that the basic rules and central concepts are at the beginning. The transactions of most entities will be covered by these rules in Chapter 2 of the Bill. If they need to consider other provisions, the Bill provides sign-posting and checklists to guide them. The exceptions set out in Chapters 3 and 4 of the Bill override or modify the general rules in a number of ways to tailor the operation of the GST to particular situations or provide special concessions.

Chapter 2: Basic Rules

Chapter 2 of the Bill provides the basic rules about situations that are likely to have GST consequences. These cover most transactions most of the time. There are general rules that tell you which supplies and acquisitions give rise to GST liabilities, who is liable to pay GST, how to calculate the amount of GST and how amounts are paid or refunded on a periodic basis.

Chapter 3 of the Bill covers the non-taxable supplies. These are the particular types of supplies, acquisitions and importations that do not attract GST. The non-taxable supplies are the first type of exception to the general rules. For example, most supplies of health, education and childcare are GST-free. For other non-taxable supplies, the supplier does not charge GST on the supply but is not able to get credits. These supplies are input taxed. For example, supplies of residential rents and financial services are input taxed.

Chapter 4 of the Bill contains the special rules. The special rules modify the application of the general rules, but apply only in limited circumstances or to a limited group of entities. The special rules are the second type of exception to the general rules. For example, the rules in Chapter 2 make a person who makes a supply liable to pay the tax. In some cases covered in Chapter 4 of the Bill someone else is liable to pay the tax. For example, where GST groups of companies are formed, or where an agent is acting on behalf of a non-resident.

Provisions dealing with collection and recovery aspects of GST are not in the Bill. As indicated in the diagram, they will be in the Taxation Administration Act 1953 as for administrative provisions for other taxes.


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