Senate

Addendum to Supplementary Explanatory Memorandum

(Circulated by the authority of the Treasurer, the Hon. J.S. Dawkins, M.P.)

Sales Tax Assessment Bill 1992

Exempt use

1. Explanation of additional amendment to insert Credit Ground CR5A

Effect of the original amendments: The Sales Tax (Exemptions and Classifications) Bill will be amended to exempt the following goods:

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goods donated to always exempt bodies (for example, certain charities);

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goods incorporated (for example, by a repairer) into other goods that are for use by a person in exempt circumstances; and

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goods incorporated into property owned by or leased to, or to be owned by or to be leased to, an always exempt body.

Effect of the additional amendment: The additional amendment will insert a new credit ground (CR5A) to apply in these situations, if the goods have already borne tax.

Reason for change: In the above cases, the goods would be drawn mostly from tax-paid stock, so that the exemption user would require a credit for the tax already paid, rather than an exemption from tax. As a general rule, credits will only be available under the new law to wholesalers, retailers and registered exemption users. However, the insertion of credit ground CR5A will allow these exemption users to obtain a credit directly from the Commissioner where the goods are supplied on a tax-free basis.

Alterations to the Supplementary Explanatory Memorandum

The following alterations to the Supplementary Explanatory Memorandum are required to reflect the proposed amendment to insert new credit ground CR5A:

General Outline and Financial Impact, page 5, under heading 'Donations to and by exempt bodies', omit the paragraph headed 'Change to Bill', and substitute the following:

" Change to the Bill: An exemption (and credit) will be provided for goods donated to exempt bodies. An exemption will also be provided for goods given away by exempt bodies and goods for use as prizes and awards by exempt bodies."

General Outline and Financial Impact, page 5, under heading 'Repairs to goods owned by exempt bodies and exempt users', omit the paragraph headed 'Change to Bill', and substitute the following:

" Change to the Bill: An exemption (and credit) will be provided for parts and materials incorporated by external repairers into goods owned by exempt bodies and exempt users."

General Outline and Financial Impact, page 6, under heading 'Buildings owned or leased by exempt bodies', omit the paragraph headed 'Change to Bill', and substitute the following:

" Change to the Bill: An exemption (and credit) will be provided, broadly, for goods incorporated into buildings that are owned by exempt bodies or leased by exempt bodies."

Insert at the end of page 42 the following:

" Credit Ground 5A: AOU where certain exemption Items are satisfied

General description: Claimant has applied assessable goods to own use in circumstances that satisfy exemption Item 192, 193 or 194. Claimant has borne tax on the goods.

Coverage: This ground will enable any person to obtain a credit direct from the Commissioner if the person applies tax-paid goods to own use in circumstances that satisfy one of three exemption Items. This would occur when the claimant has failed to quote in respect of the purchase or delivery of the goods. The Items are:

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Item 192, which will exempt goods used in the construction, repair etc. of property that is owned or leased by an exempt body or a foreign government;

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Item 193, which will exempt goods donated or loaned to an exempt body or a foreign government;

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Item 194, which will exempt goods for use by a person so that property in them passes to another person, provided that the other person could have quoted for the goods if the other person had purchased them.

The amount of the credit will be the amount of the tax previously borne by the claimant.

Requirement that the tax has not been passed on: Yes.

Change from existing law: Under the existing law, goods used in the repair of goods or in the construction of property for the owner are deemed to be sold to the owner. If tax-paid goods are deemed to be sold to an exempt body or exempt user in this way, then, under certain administrative arrangements, a credit can be obtained by the repairer or builder from the wholesale supplier of the goods (but not from the Commissioner).

Under the new law, goods used in the repair of goods or in the construction of property will be treated as applied to own use by the repairer or builder. The new law will not generally allow a person to obtain a direct credit from the Commissioner solely on the ground that the person could have quoted an exemption declaration but did not. The credit grounds under the new law will be widened to allow an unregistered repairer or builder who applies tax-paid goods to own use in the circumstances described above, to obtain a credit directly from the Commissioner."