Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon. P.J. Keating, M.P.)BROAD FRAMEWORK OF SALES TAX LAW
The following broad framework of the sales tax law is provided to assist in an understanding of the changes being made by this package of 6 Bills.
Sales tax is a single stage tax levied on goods. In general, it is designed to fall at the wholesale level, but is payable by manufacturers and importers, as well as by wholesalers, the tax in each case being based on a sale value equivalent to the wholesale value of the goods. The overall intention is that goods that are produced in, or imported into, Australia for use or consumption here will bear the tax unless they are specifically exempted from it. Second-hand goods that have been used in Australia are not ordinarily taxed, but imported goods that have been used overseas are normally taxable on a basis corresponding with that applicable to new goods.
The levy is not limited to sales. Where goods have not already borne tax it could, for example, fall on leases of those goods or on the application of those goods to a taxpayer's own use. It may also fall on importations of goods where they are not imported for sale by a wholesaler, e.g., where they are imported by retailers or consumers.
Manufacturers and wholesalers are required to register with the Taxation Office, unless they deal only in exempt goods. When registered they are issued with a certificate of registration and by quoting the certificate number when purchasing or importing goods they can acquire the goods free of tax. The system of quoting certificates is designed to defer payment of the tax until the last wholesale sale.
Registered manufacturers and wholesale merchants are required to furnish monthly returns of their transactions to the Taxation Office. The tax is basically a self-assessment one and persons furnishing returns are required to calculate the tax payable on transactions for the month, and to forward payment of tax with each return. Importers are required to pay tax when clearing goods through Customs unless they are registered persons who quote their certificates for the goods.
Reflecting the fact that sales taxpayers are obliged to pay tax to the Taxation Office in this way they, in turn, when selling goods to a retailer or other customer, charge to the customer an amount equal to the tax that they are liable to remit when forwarding a sales tax return for the month. In that way the tax is passed on to the consumer.
The sales tax legislation is contained in a number of separate Acts. There are presently nine Sales Tax Acts that specify the rates at which tax is payable and each Sales Tax Act has a complementary Sales Tax Assessment Act providing the machinery for assessment, collection and administration of the tax imposed by the related Sales Tax Act. The subjects of taxation and the various Assessment Acts and Rates Acts are set out in the following table -
| Assessment Act and Rates Act | Subject of Taxation |
|---|---|
| Sales Tax Assessment Act (No. 1) and Sales Tax Act (No. 1) | Goods manufactured in Australia and sold by the manufacturer or treated by the manufacturer as stock for sale by retail or applied to the manufacturer's own use. |
| Sales Tax Assessment Act (No. 2) and Sales Tax Act (No. 2) | Goods manufactured in Australia and sold by a purchaser from the manufacturer. |
| Sales Tax Assessment Act (No. 3) and Sales Tax Act (No. 3) | Goods manufactured in Australia and sold by a person not being either the manufacturer or a purchaser from the manufacturer. |
| Sales Tax Assessment Act (No. 4) and Sales Tax Act (No. 4) | Goods manufactured in Australia and applied to own use by a purchaser who quoted a sales tax certificate number for the goods. |
| Sales Tax Assessment Act (No. 5) and Sales Tax Act (No. 5) | Goods imported into Australia. |
| Sales Tax Assessment Act (No. 6) and Sales Tax Act (No. 6) | Goods imported into Australia and sold by the importer or applied to own use by the importer. |
| Sales Tax Assessment Act (No. 7) and Sales Tax Act (No. 7) | Goods imported into Australia and sold by a person other than the importer. |
| Sales Tax Assessment Act (No. 8) and Sales Tax Act (No. 8) | Goods imported into Australia and applied to own use by a purchaser who quoted a sales tax certificate number for the goods. |
| Sales Tax Assessment Act (No. 9) and Sales Tax Act (No. 9) | Goods in Australia dealt with by lease. |
A further Act, the Sales Tax (Exemptions and Classifications) Act, contains a First Schedule that lists the classes of goods that are exempt from tax and specifies the circumstances in which that exemption applies. Further Schedules list the classes of goods that are taxable at specified rates. Goods not listed in any of the Schedules are taxable at what is called the general rate - currently 20%. Exemptions from tax set out in this Act extend to otherwise taxable goods that are for use by specified organisations or in particular industries or production processes.