REPLACEMENT Explanatory Memorandum
(Circulated by the authority of the Treasurer the Hon John Dawkins, M.P.)CHAPTER ONE Sales Tax: General Rate Increases
Existing sales tax rates will increase by 1% from 18 August 1993 and will be increased by a further 1% from 1 July 1995. [clause2, STAM, STEA, STGA, STCA, STPA].
Sales tax rates are set in Schedules to the Sales Tax (Exemptions and Classifications) Act 1992 (E & C Act). Schedule 1 covers goods which are exempt from sales tax. Schedules 2 to 5 cover goods on which sales tax is payable. Each Schedule sets a different rate of sales tax for taxable dealings with the goods covered by that Schedule. The rates applicable under those Schedules are 10%, 15%, 20%, and 30% respectively.
The following table shows the Schedules to the E & C Act, the current rates of sales tax set by those schedules, the rates which will apply from 18 August 1993 and the rates which will apply from 1 July 1995.
| EXISTING RATE | RATE FROM | 18 AUGUST 1993 | RATE FROM 1 JULY 1995 |
|---|---|---|---|
| Schedule 1 | Exempt | Exempt | Exempt |
| Schedule 2 | 10% | 11% | 12% |
| Schedule 3 | 15% | 16% | 17% |
| Schedule 4 | 20% | 21% | 22% |
| Schedule 5 | 30% | 31% | 32% |
| Schedule 6 | Not applicable | 45% | 45% |
Each rating Schedule will be amended to increase the rate set by that Schedule by one percentage point for taxable dealings occurring on or after 18 August 1993 [items 4,5,6,7 in schedule1 to clause 5;STEA, STGA, STCA, and STPA].
The Bill will also insert a new Schedule (Schedule 6) which will apply to luxury motor vehicles. Schedule 6 will apply a 45% rate to those vehicles. However, for each taxable dealing covered by Schedule 6, the Sales Tax Assessment Act 1992 ( The Assessment Act) will substitute a special taxable value (proposed Section 42A). That special value will ensure that the 45% rate is only applied to that proportion of the taxable value that exceeds the Income Tax depreciation limit for motor vehicles [clause 4, STAAM and item 8 in schedule 1 to clause 5,STEA, STGA and STCA]. .
The increased rates will be further increased by another percentage point from 1 July 1995. The rate, however, for luxury motor vehicles, will remain at 45% [items 1,2,3,4 in schedule 2 to clause 6,STEA, STGA,STCA,and STPA].
Appendix A to the Assessment Act contains examples of the operation of the sales tax laws, including calculations of tax payable. The Bill will amend those examples so that they reflect the increased rates proposed to apply from 18 August 1993. A further set of amendments proposed to commence on 1 July 1995 will adjust those examples to reflect further rate increases proposed to apply from that later date [clause 6 and appendix A of the schedule to clause 8,STAAM].