senate

Explanatory Memorandum

(Circulated by the authority of the Treasurerthe Hon John Dawkins, M.P.)This Memorandum takes account of amendments made by the House of Representatives to the Bill as introduced.

Chapter 14 SALES TAX EXEMPTION FOR THE RSPCA AND CHILD CARE SERVICES

Overview

14.1 The amendments will:

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exempt the RSPCA from sales tax on goods used mainly in carrying out inspections and operating animal shelters [Subclause 141(d)] .

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exempt certain child care bodies and family day care coordination units [Subclause 141(c)].

Summary of proposed amendments

14.2 Purpose of amendments: The Taxation Laws Amendment Bill (No. 3) 1993 will:

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amend the Sales Tax (Exemptions and Classifications) Act 1992 to provide an exemption from sales tax on goods used mainly in the inspectorial and shelter activities, that are not commercial activities, of the Royal Society for the Prevention of Cruelty to Animals (RSPCA) [Subclause 141(d)] ; and

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provide a credit to the RSPCA of sales tax paid on goods used mainly in their inspectorial and shelter activities, that are not commercial activities, that were purchased on or after 13 March 1993 and before this Bill receives Royal Assent [Clause 143] .

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amend the Sales Tax (Exemptions and Classifications) Act 1992 to provide sales tax exemption for goods fur use mainly be certain providers of child care services (other than employer sponsored centres). The exemption will also apply to goods for use by bodies which coordinate family day care.

Generally, exemption will only be available to child care bodies or family day care coordination units which are entitled to receive child care funding from the Commonwealth, a State or a Territory. Child care services which are approved by the Minister for Family Services will also be entitled to an exemption [Subclause 141(c)].

14.3 Date of effect: The amendments will take effect from the date the Bill receives the Royal Assent [Subclause 2(1)] .

Sales tax exemption: RSPCA

Background to the legislation

14.4 The RSPCA, through its State, Territory and National bodies, provides a range of services directed towards the welfare of animals, such as the collection of stray animals, the provision of shelter and veterinary care for these and other animals, and the inspection of sites of possible animal abuse.

14.5 Under the existing law, the RSPCA is entitled to exemption on food to feed animals housed in its shelters but not on other goods used in the welfare of animals.

Explanation of proposed amendments

14.6 The Bill will amend Schedule 1 to the Sales Tax (Exemptions and Classifications) Act 1992, by inserting new Item 163A, to provide an exemption for goods used by the RSPCA mainly in carrying out activities associated with [Subclause 141 (d)] :

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inspectorial functions; or

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the operation of animal shelters;

provided that they are not used mainly in commercial activities.

14.7 Thus exemption will apply to goods used mainly in the following types of activities:

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shelter of stray animals;

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veterinary care for stray and injured animals;

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inspection of sites of possible animal abuse; and

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collection of stray or injured animals.

14.8 However, exemption will not apply to goods used mainly in the following types of activities:

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commercial kennels;

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inspections on a commercial fee-paying basis; and

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veterinary services provided in competition to commercially supplied veterinary services.

Motor Vehicles

14.9 Motor vehicles used mainly to carry out inspections or the collection of injured or stray animals will be covered by the exemption. However, motor vehicles supplied for general use of RSPCA executives and staff (and for example as part of salary packages) will not be covered, unless they are mainly used as mentioned above.

Credit for tax already paid

14.10 The Bill will provide the RSPCA with a credit for sales tax paid on goods purchased on or after 13 March 1993 and before the Royal Assent of this Bill. This credit will be by way of a transitional provision in this Bill. The credit will only be able to be obtained, by the RSPCA, by way of a credit claim to the Australian Taxation Office [Clause 143] .

14.11 The transitional credit will not be available on sales tax paid on purchases by the RSPCA after the Royal Assent of this Bill.

Composition of the RSPCA

14.12 The RSPCA is an organisation comprising a number of State and Territory bodies plus a National body.

14.13 The Bill will provide exemption to all of these bodies. New exemption Item 163A of Schedule 1 to the Sales Tax (Exemptions and Classifications) Act 1992 ,specifies these bodies as those listed in items 4.2.6 to 4.2.14 (inclusive) of table 4 in sub-section 78(4) of the Income Tax Assessment Act 1936. The bodies listed are as follows:

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the Royal Society for the Prevention of Cruelty to Animals New South Wales;

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the Royal Society for the Prevention of Cruelty to Animals (Victoria);

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the Royal Queensland Society for the Prevention of Cruelty;

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the Royal Society for the Prevention of Cruelty to Animals (South Australia) Incorporated;

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the Royal Society for the Prevention of Cruelty to Animals Western Australia (Incorporated);

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the R.S.P.C.A. (Tasmania) Incorporated;

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the Society for the Prevention of Cruelty to Animals (Northern Territory);

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the Royal Society for the Prevention of Cruelty to Animals (A.C.T.) Incorporated; and

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the R.S.P.C.A. Australia Incorporated.

Background to the legislation

14.14 Schedule 1 to the Sales Tax (Exemptions and Classifications) Act 1992 identifies goods which are exempt from sales tax. The Act does not currently contain a specific exemption for child care services.

Explanation of proposed amendments

14.15 These amendments will insert a new Item (Item 144A) into Schedule 1 of the Sales Tax (Exemptions and Classifications) Act 1992 which will give effect to the proposed exemption for child care services [Subclause 141(c)] .

Exempt child care bodies

14.16 Only "exempt child care bodies" will be able to claim exemption. There will be two types of child care body which may be exempt:

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bodies whose principal function is to provide one or more of the following types of child care:

long day care - this service is provided in specially adapted centres to predominantly under school age children. Care is provided on a regular full or part time basis and is generally available for 8 hours a day, 48 weeks per year.

outside school hours care - this service is for school age children before and after school hours.

vacation care - this service is for school age children during school holidays.

occasional care - this service is for flexible child care. Children are not necessarily cared for on a regular basis but as the need arises.

Persons who provide family day care in their homes will not be regarded as child care bodies. Employer sponsored bodies will be excluded from the exemption.

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family day care co-ordination units. A family day care scheme is a network of individuals, organised by a central co-ordination unit, who provide care in their own homes for other people's young children. A co-ordination unit organises the provision of family day care, supports the care providers, arranges the placement of children with care givers and monitors the care.

14.17 However, these bodies will be required to meet a further condition to qualify for exemption. They will only be exempt if they are eligible to receive Commonwealth, State or Territory government funding or are approved by the Minister for Family Services [Clause 140: new section 3B of the Sales Tax (Exemptions and Classifications) Act 1992] .

Commonwealth, State or Territory funding

14.18 A child care body of the kind described above, which provides long day care, outside school hours care, vacation care and/or occasional care will be able to claim sales tax exemption if it is eligible to receive funding from the Commonwealth or a State or Territory in connection with that child care. This is funding specifically to assist with, or support, the provision of the child care [Clause 140: new section 3B of the Sales Tax (Exemptions and Classifications) Act 1992] .

14.19 Similarly, a family day care co-ordination unit will be able to claim exemption if it is eligible to receive funding from the Commonwealth or a State or Territory in connection with the organising, supporting and monitoring of family day care. This is funding specifically to assist with, or support, those activities [Clause 140: new section 3B of the Sales Tax (Exemptions and Classifications) Act 1992] .

14.20 Generally, eligibility for the relevant funding will be determined in accordance with child care guidelines administered by the relevant State or Territory department or the Commonwealth Department of Health, Housing, Local Government and Community Services. Eligibility for funding is usually evidenced by the signing, and continued existence, of an agreement between the child care service and the government funding the service. The terms of the agreement are basically that the child care body will be eligible for funding if it continues to observe certain conditions.

14.21 Eligibility for Childcare Assistance (fee relief) may qualify a child care body for exemption. Other kinds of funding which may qualify a child care body for exemption are operational assistance and establishment or capital grants.

14.22 Funding which is intended to benefit a particular group in the community, but which incidentally benefits a child care body will not qualify the body for exemption. For example, receipt of funds to enable a child care body to employ a disabled person would not, of itself, qualify it for sales tax exemption.

Approval by the Minister for Family Services

14.23 The Minister for Family Services will also have a discretion to approve exemption for child care bodies which are funded in other ways. The approval will be in accordance with guidelines agreed between the Assistant Treasurer and the Minister for Family Services and take the form of a disallowable instrument [Clause 140: new sub-sections 3B(1), 3B (3) and 3B(4) of the Sales Tax (Exemptions and Classifications) Act 1992] .

Employer sponsored child care centres

14.24 Certain employer sponsored child care bodies will be excluded from the exemption. The bodies which will be excluded will be:

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bodies established and maintained principally for the provision of long day care, outside school hours care, vacation care or occasional care;

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located on premises owned or leased by one or more employers; and

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where the provision of care is principally for children of employees or the employer [Clause 140: new sub-section 3B(2) of the Sales Tax (Exemptions and Classifications) Act 1992] .

Exempt goods

14.25 Not all goods purchased by an exempt child care body will be exempt. In the case of exempt child care bodies established and maintained principally for the provision of long day care, outside school hours care, vacation care or occasional care, exemption will only be allowed for goods for use mainly in the provision of those kinds of care. For example, a body responsible for a long day care centre which also provides family support services will not be able to claim exemption for goods which will be used mainly in the provision of the family support services [Clause 141: new Item 144A, Schedule 1 to the Sales Tax (Exemptions and Classifications) Act 1992] .

14.26 The goods for which family day care co-ordination units will be able to claim exemption will be goods used mainly in organising, supporting and monitoring the provision of family day care. Exemption will not extend to goods acquired by individual care givers for use in providing care in their homes [Clause 141: new Item 144A, Schedule 1 to the Sales Tax (Exemptions and Classifications) Act 1992] .