Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)Chapter 3 - Part 7A goods
Overview
3.1 The measures in Schedule 2 to the Bill correct and strengthen the new sales tax laws implementing a comprehensive scheme for dealing with sales tax evasion in the computer industry. The scheme is contained in Part 7A of the Sales Tax Assessment Act 1992 (the Act) which was inserted by Taxation Laws Amendment Act (No. 1) 1998 .
Summary of the amendments
3.2 The amendments to the Act will change the sales tax rules for computers by:
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- removing anomalies arising from current descriptions and tariff classifications in Part 7A of the Act;
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- increasing the maximum penalty for a person falsely representing himself or herself to be accredited, or a transaction to be authorised under Part 7A of the Act, and the maximum penalty for making improper or false quotes under Part 7A of the Act; and
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- strengthening the law with regard to Part 7A goods for export.
3.3 The corrections to the table in Part 7A of the Act will commence from the date of introduction of the Bill. The new penalties will apply from the date of Royal Assent. The new rules for exported goods will apply from a date to be prescribed.
Background to the legislation
3.4 New sales tax laws implementing a comprehensive scheme for dealing with sales tax evasion in the computer industry are contained in Part 7A of the Act. These were inserted by Taxation Laws Amendment Act (No.1) 1998 which received Royal Assent on 16 April 1998.
3.5 The new law applies to goods which fall within a description and corresponding tariff classification item in the table in Part 7A of the Act. The tariff classifications in the table which relate to CD drives and disc drives (hard and floppy) need to be updated. In addition two new items need to be inserted, for personal computers in the form of systems and processing units for personal computers.
3.6 In the new law there are penalties for a person falsely representing himself or herself to be accredited, or a transaction to be authorised, under Part 7A of the Act and for improper or false quoting. These penalties are not considered to be sufficient given the importance of the accreditation and authorisation system for the success of Part 7A of the Act in tackling evasion, and the level of penalty for similar offences elsewhere in the law.
3.7 Currently, a person can purchase or lease Part 7A goods tax-free for export, without any of the conditions which apply to tax-free purchases or leases of Part 7A goods for other purposes. A wholesaler cannot purchase Part 7A goods tax-free unless the wholesaler is accredited and the quote authorised, while an exporter buying or leasing goods tax-free is not required to be accredited, nor the exemption claim authorised.
Explanation of the amendments
3.8 The amendments in Schedule 2 ensure that the export exemption will not apply to Part 7A goods unless certain tests regarding the purchasers intentions for the goods and the circumstances of the sale or delivery are satisfied. If the goods are Part 7A goods, paragraphs 30(1)(b) & (c) and (2)(b) of the Act which deal with exemptions based on export, should not apply unless one of three specific tests are satisfied, or if the seller satisfies the Commissioner on reasonable grounds that he or she was satisfied that the tests were satisfied. [Items 1, 2 and 3]
3.9 The three tests are that the purchaser must be an accredited person who intends that the goods will be exported, the purchaser is not acquiring the goods for resale and satisfies the export low purchase value test, or the circumstances of the sale and delivery are prescribed. The low export purchase value test requires that the purchaser have a reasonable expectation that the total value of all acquisitions of Part 7A goods for 12 months before or after the current dealing will be less than $6000. A purchaser must give a signed statement, in a form approved by the Commissioner, that the purchaser satisfies the low export purchase value test in relation to the dealing. There is a penalty for a person falsely representing that a dealing with goods satisfies the test, equal to 50 penalty units. [Item 6, new section 32A; Items 9 and 10]
3.10 The exclusion of Part 7A goods from the export exemption applies equally where the goods are leased. If the goods are Part 7A goods, paragraphs 32(a) and (b) of the Act should not apply unless the lessee is accredited or the lease is made in prescribed circumstances, or the lessor satisfies the Commissioner on reasonable grounds that he or she was satisfied that either of these two tests were satisfied. [Items 4 and 5]
3.11 Amendments are also being made to the table in Part 7A of the Act to update the descriptions and corresponding tariff classifications for two items, CD drives and disk drives (hard and floppy). The two new descriptions and classifications are added to the table, for personal computers in the form of systems and separate processing units or file servers. [Item 7]
3.12 The amendments address the inadequacies in the present penalties by increasing the penalty for false quoting and the penalty for a person falsely representing himself or herself to be accredited, or a transaction to be authorised. The penalty specified by section 91 is increased from $2000 to 50 penalty units. The penalty specified by subsection 91ZE(1) is increased from 20 penalty units to 50 penalty units. These penalties will now be consistent with those applicable to other similar offences. [Items 8 and 11]
Application
3.13 The new rules for exported goods will start from a date to be prescribed to give exporters time to apply for accreditation. The corrections to the table in Part 7A of the Act will apply from the date of introduction of the Bill. The new penalties will apply from the date of Royal Assent. [Item 12]