Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)Chapter 6 - Other arrangements
Overview
6.1 The Transition Bill contains the operative provisions for parts of the GST Act. It also contains special provisions relating to arrangements spanning implementation for certain industries or events.
6.2 The information contained in this chapter is set out as follows:
| Transition Bill | EM paragraph | |
|---|---|---|
| Second hand goods on hand at 1 July 2000 | Section 17 | 6.3 |
| Insured events before 1 July 2000 | Section 20 | 6.5 |
| Gambling | Section 21 | 6.7 |
Second hand goods acquired before 1 July 2000
6.3 Division 66 of the GST Act applies to second-hand goods even if they were acquired before the GST starts. The Division applies to goods only if they are held at the start of 1 July 2000 for the purposes of sale or exchange in the ordinary course of business. [Section 17]
6.4 Section 17 has the effect of extending the application of Division 66 of the GST Act to goods for sale or exchange which would otherwise be excluded by subsection 66-5(2) of that Act.
Insured events before 1 July 2000
6.5 Insurance arrangements can span implementation when the insured event and the settlement of a claim under an insurance policy fall either side of implementation.
6.6 If an insurance company settles an insurance claim on or after 1 July 2000 in relation to an event that occurred before that date, section 20 provides that:
- •
- the acceptance of the payment by the insured is not a taxable supply by them [Subsection 20(1)] ; and
- •
- the acquisition by the insurance company of the insured persons right to pursue the claim any further is not a creditable acquisition. [Subsection 20(2)]
Gambling
6.7 Division 126 provides for the treatment of gambling under the GST law. It provides for a global accounting approach, and involves the identification of gambling supplies and gambling events.
6.8 Gambling supplies and gambling events can span implementation, so the Transition Bill provides a basis for determining under which taxing system they fall. In doing so, the time of the gambling event, at which the outcome of the race, lottery, raffle etc is established, is the determinant.
6.9 Where the gambling event occurs on or after 1 July 2000, all the gambling supplies associated with that gambling event will fall under the GST system. Any gambling supplies made before 1 July 2000, for example tickets purchased, wagers made or bets placed, are taken to have been made on 1 July 2000, and will be subject to GST. [Subsection 21(1)]
Example
A lottery is drawn on 1 August 2000, tickets for which have been sold throughout the period from 1 May 2000 to mid-July 2000.
Each of the ticket sales is a gambling supply . The drawing of the lottery is a gambling event. All of the tickets would be subject to GST. Consideration received for tickets sold before 1 July 2000 would be attributed to the first tax period starting on or after 1 July 2000.
6.10 Where the gambling event occurs before 1 July 2000, the gambling supplies are not subject to GST, and any prizes paid out in respect of that event are not included in the calculation of the global gambling GST amount under section 126-10 of the GST Act. [Subsection 21(2)]