Explanatory Memorandum
(Circulated by the authority of the Treasurer, the Hon. J.S. Dawkins, M.P.)Miscellaneous
A. Introduction
18.1 This chapter describes several miscellaneous provisions which will be necessary to enable the new sales tax legislation to operate effectively. The new provisions will have broadly the same effect as those in the existing legislation. These matters are dealt with in Part 11 of the Sales Tax Assessment Bill 1992.
B. Explanation and Commentary
Judicial notice of Commissioner's signature
18.2 The new law will provide that the court must take judicial notice of signatures of the Commissioner, Second Commissioner or a Deputy Commissioner, if that signature appears on any official document in connection with the sales tax law. For the purposes of this clause, "court" will include a tribunal and any judge or person acting judicially and authorised by law to hear evidence. [clause 5, definitions of 'Commissioner', 'Second Commissioner' and 'Deputy Commissioner' and clause 115]
Evidentiary effect of notices of assessment etc.
18.3 Under the new law, the production of a notice of assessment or the making of a credit decision that is signed by the Commissioner, a Second Commissioner or a Deputy Commissioner shall be conclusive evidence that the notice of assessment or credit decision is correct. The clause will also cover associated matters of evidence dealing with production of documents, extracts of documents, certificates and issue of notices in the Gazette. [clause 116]
18.4 There will be no changes to the effect of the existing law under this provision.
Partnerships and Unincorporated Companies
18.5 The existing law enables recovery of sales tax from businesses operated by partnerships or unincorporated companies but is silent on the general application of the sales tax legislation to these kinds of entities. The new law will state that the sales tax law applies to partnerships and unincorporated companies and will include the obligations of partners and, in the case of unincorporated companies, members of the committee of management. It will also provide that if a person is prosecuted for an offence under these provisions, certain defences will be available . [clauses 117 and 118]
Each capacity of trustee treated separately
18.6 The existing law does not deal expressly with persons who act as trustees in more than one capacity. The new law will make it clear that a person who is a trustee in more than one capacity is to be treated as a separate person in relation to each of those capacities. One effect of this rule will be that the same person could be registered several times in respect of different trustee capacities. [clause 119]
18.7 The existing law requires that every company which is a manufacturer or a wholesale merchant must appoint a public officer for sales tax purposes and must also notify the Commissioner of Taxation of that appointment and any subsequent appointments. The public officer is responsible for ensuring that the company meets all its obligations under the sales tax law and is liable if the company defaults on those obligations.
18.8 Under the new law the person appointed as public officer for purposes of the Income Tax Assessment Act 1936, will also be the public officer for sales tax purposes. This will enable the existing provisions to be simplified. Companies will no longer be required to separately appoint public officers for sales tax and income tax purposes.
18.9 The responsibilities of a public officer under the new law will remain the same. The public officer will be responsible for doing everything required to be done by the company under the sales tax law. A proceeding may be brought against the public officer and notices or other documents relevant to the sales tax law may be served on the public officer. [clause 120]
18.10 Under the new law "company" will be defined to include any body or association whether or not it is incorporated. Any unincorporated bodies or associations which are subject to sales tax legislation will satisfy the public officer requirement if they have appointed a public officer for purposes of the Income Tax Assessment Act 1936. [clause 5, definition of 'company' and clause 120]
18.11 Directors and other company officers will retain the same potential liabilities under the new law as they have under the existing law. If the Commissioner thinks fit, documents may be served upon them and they will have the same liability as the company or its public officer. [clause 121]
18.12 The existing law contains provisions dealing specifically with the sales tax obligations of trustees and agents including auctioneers. All agents and trustees are required to comply with the sales tax legislation generally and are personally liable for sales tax payable in their representative capacities. The new law will contain similar provisions. With the exception of auctioneers, the obligations of agents and trustees under the new law will be the same as under the existing law.
18.13 Broadly the obligations of an agent or trustees will be:
- (a)
- to provide returns and information in relation to assessable dealings;
- (b)
- to pay tax on the dealings (but be liable only in their representative capacity);
- (c)
- to retain sufficient money held in a representative capacity to pay any tax due; and
- (d)
- to be answerable generally for all things required to be done under the sales tax law.
In the new law "agent" will include a person in Australia who manages or controls any business or property for another person who is outside Australia. These agents will have the same obligations under the sales tax law as agents for principals who are in Australia.
18.14 To ensure payment, the Commissioner will have the same remedies against the attachable property under the control of the agent or trustee as he will have against the property of the taxpayer. [clause 5, definition of 'trustee' and clause 122]
18.15 Under the existing law, auctioneers who sell goods on behalf of persons who are registered for sales tax are required to send any tax charged (and a sales tax return) to the Commissioner within 7 days of the sale. Under the new law auctioneers will not be subject to this rule but will have the same obligations as any other taxpayer who is liable to pay tax. Any returns required to be lodged will come within the provisions dealing with general lodgement of returns. Broadly, this means that auctioneers will lodge returns on either a monthly or quarterly basis. (Refer to Chapter 12)
18.16 The new law will contain a reorganisation of the provisions dealing with trustees of various kinds including receivers and liquidators. A wider definition of 'trustee' will be included. It will be a slightly modified version of the definition of "trustee" found in the Fringe Benefits Tax Assessment Act 1986. [clause 5, definitions of 'liquidator' and 'trustee']
18.17 The liabilities of receivers and liquidators will be the same under the new law as under the existing law. That is, a liquidator or receiver who takes control of the assets of a company will be required to notify the Commissioner of that fact within 14 days. As soon as practicable the Commissioner will be required to notify the liquidator etc of the amount necessary to set aside to cover sales tax that is payable by the company or may become payable. The liquidator will not be able to part with any assets of the company without the Commissioner's permission but this obligation will not apply to the payment of a debt that is not an ordinary debt. An ordinary debt is an unsecured one that is not required by any law to be paid in priority to the other debts of the company.
18.18 A significant feature of the new legislation will be the inclusion of a simplified formula for use by liquidators in calculating the amount to be set aside out of a company's ordinary debts for the payment of sales tax. The amount to be set aside will be the same as under the existing law.
18.19 The simplified formula will include the expression 'notified other taxes' which means the total of any amounts, other than sales tax, which the Commissioner has notified as being outstanding. These other outstanding taxes and charges are referred to as "prescribed tax" in the existing law. The use of "Notified other taxes" will remove the need for the list of "prescribed taxes" found in the existing law and will save having to continually amend the law because of changes to that list. [clause 123]
Agent winding up business for absentee principal
18.20 The new law will contain a more detailed statement of the sales tax obligations of agents winding up businesses for absentee principals. In the new law the expression 'non-resident' principal will replace 'absentee' principal. The obligations of agents for non-resident principals will basically remain the same as those in the existing law but will be stated in more detail.
18.21 An agent for a non-resident principal will be required to advise the Commissioner within 14 days of being instructed by the principal to wind-up the business. The Commissioner will then be required to advise the agent of any sales tax payable by the principal and the agent will be required to set aside sufficient assets to pay the sales tax. The agent will be liable as trustee to pay sales tax owing by the principal to the extent of the assets that the agent is required to put aside. If the agent, without reasonable excuse, fails to do this, the agent will be personally liable to pay the sales tax and will be guilty of an offence punishable on conviction by a fine of up to $1,000. [clause 124]
18.22 The existing law requires that where a taxable wholesale sale is made and an invoice is issued, the taxpayer must show the amount of sales tax on that invoice. The new law will restate this principle. [clause 125]
18.23 The new law will impose record keeping requirements on a person who is the taxpayer for an assessable dealing, or the claimant of a credit. Two significant changes will be made to the provisions concerning the obligations to keep records of sales tax matters. The first will require that there be sufficient records to explain all relevant sales tax transactions and other relevant acts for the purposes of the sales tax legislation. The second will be that the records be in writing in the English language, or be accessible and easily converted into writing in the English language, so that where necessary, a person's sales tax liability can be determined.
The changes will make the record keeping requirements of the sales tax law more consistent with similar requirements in other revenue laws e.g. the Income Tax Assessment Act 1936 and the Fringe Benefits Tax Assessment Act 1986. Records will be required to be kept for 5 years. [clause 127]
Effect of change to sales tax law on contract prices
18.24 The existing law provides that if a change to the sales tax law affects the cost of goods under a contract for the sale of goods or a contract for the construction of a building or other work, the contract price is automatically altered by the difference in the tax payable on the goods as a result of the change unless the contract provides otherwise.
18.25 The new law will be expressed in simpler terms but will have the same effect. The existing requirement for certain contractors to provide written notice of price alterations caused by changes to the sales tax law will be removed. It is an unnecessary requirement. [clause 128]
Example:
Parties make a contract for the construction of a building and agree upon a price for the goods and services required. There are no express or implied terms in the contract concerning the effects on the contract price if the sales tax law is changed. A change is made to the sale tax law which causes an additional amount of tax to be payable on materials to be incorporated in the building.
Result: The contract price will be automatically increased by the additional amount of sales tax which becomes payable as a result of the change to the sales tax law. The vendor will not be required to provide a written notification containing details of the price increase. Note that if the contract contains a clause which states that there will be no alteration to the price because of changes to the sales tax law, the contract price will not be increased.
18.26 The existing law (section 12F of the Sales Tax Procedure Act) operates to remove liability for a sales tax penalty which would otherwise be incurred in the 28 day period after a sales tax amendment Act receives Royal Assent, where that penalty applies as a result of the amending law. The effect of the provision is that until the 28th day after Royal Assent is reached for the amending law, a person cannot be guilty of an offence or be liable to a penalty that arises from an infringement of the amending law. The new law will contain provisions which achieve the same effect. [clause 129]
Commonwealth-controlled authorities and cancellation of certain exemptions
18.27 Under the new law, provisions in another Act which provide for a Commonwealth-controlled authority to be exempt from sales tax will be of no effect unless the provision is enacted after 13 May 1987 and specifically refers to sales tax. A Commonwealth-controlled authority will be defined as a body established before 14 May 1987 and specified in the regulations or a body of the following kind established on or after 14 May 1987:
- (a)
- a corporation established for a public purpose by a law of the Commonwealth;
- (b)
- a company in which the Commonwealth has a controlling interest;
- (c)
- a company in which a controlling interest is held by:
- (i)
- a corporation established for a public purpose by a Commonwealth law
- (ii)
- a company in which the Commonwealth has a controlling interest.
The regulations will list Commonwealth-controlled authorities that were established before 14 May 1987 and which will not be entitled to exemption from sales tax. [clause 130]
18.28 This provision will not change the effect of the existing law.
18.29 The Governor-General has power under the existing law to make regulations for carrying out or giving effect to the sales tax legislation. This broad regulation making power will be restated in the new law. The new law will also give the Governor-General specific regulation making power in relation to the payment of sales tax on goods temporarily imported and in relation to the service of documents. The regulations will be able to prescribe penalties by way of fines not exceeding $1000 for offences against them. [clause 131]
C. Summary of Main Changes
18.30 The main changes to the existing law discussed in this chapter are:
| CHANGE | REASON |
|---|---|
| 1. Appointment of public officer for sales tax purposes will not be required if a public officer has been appointed for purposes of the Income Tax Assessment Act 1936. | To relieve taxpayers of the burden of having to make separate appointments of public officers for income tax and sales tax purposes. |
| 2. Written notification of price alterations on building or service contracts due to change in sales tax law will no longer be required. | To relieve taxpayers of the burden of having to make written notifications. |
| 3. Auctioneers will not be required to pay sales tax charged (and lodge sales tax returns) within 7 days of a taxable sale. Auctioneers will have the same obligations as other taxpayers in regard to these matters. | To relieve auctioneers of the burden of having to lodge returns and pay sales tax at an earlier date than other taxpayers. |
| 4. Sales tax records will be required to be maintained in English or be accessible and in a form capable of conversion to English. Records will be required to be of a standard that facilitates the ready computation of a persons sales tax liability. | To improve the standard of record keeping required for sales tax purposes. To make the record keeping requirements of the sales tax law more consistent with similar requirements in other revenue laws e.g. the Income Tax Assessment Act 1936 and Fringe Benefits Tax Assessment Act 1986. |