Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)General outline and financial impact
Providing GST revenue to States and Territories
All Goods and Services Tax (GST) revenues will be paid to the States and Territories and, subject to transitional arrangements, distributed in accordance with the principles of horizontal fiscal equalisation.
Date of effect : States and Territories will be entitled to receive GST revenue grants from 1 July 2000.
Proposal announced : Announced by the Government on 13 August 1998, as part of its tax reform package in Tax Reform: not a new tax, a new tax system: The Howard Governments Plan for a New Tax System .
Financial impact : The States and Territories are expected to receive GST revenue grants of the order of $27 billion in 2000-01, $32 billion in 2001-02 and $33 billion in 2002-03 on the basis of current estimates.
Compliance Cost impact : No impacts are expected as the amount appropriated to the State and Territory Governments will be freely available for use for any purpose. No Regulation Impact Statement is required.
Changing the GST rate and base
The Bill provides for the GST rate and, in most cases, the GST base not to be altered without the unanimous agreement of the Commonwealth, State and Territory Governments.
Date of effect : This measure will apply after the A New Tax System (Goods and Services Tax) Act 1999 ; the GST imposition Acts; and the A New Tax System (Goods and Services Tax Administration) Act 1999 have commenced.
Proposal announced : Announced by the Government on 13 August 1998, as part of its tax reform package in Tax Reform: not a new tax, a new tax system: The Howard Governments Plan for a New Tax System .
Financial impact : None.
Compliance Cost impact : None. No Regulation Impact Statement required.
Transitional arrangements
The Commonwealth will provide transitional assistance to ensure that State or Territory budgets are no worse off. Transitional arrangements will apply for at least three years and any other years that may be prescribed by regulation.
Date of effect : States and Territories will be entitled to receive transitional assistance from 1 July 2000.
Proposal announced : Announced by the Government on 13 August 1998, as part of its tax reform package in Tax Reform: not a new tax, a new tax system: The Howard Governments Plan for a New Tax System .
Financial impact : The amount of transitional assistance which the States and Territories will receive will depend on actual collections of the GST revenue in the transitional years and estimates of a number of aspects of the proposal put to the States and Territories as part of the tax package including estimates of the revenues to be forgone by the States and Territories when a range of inefficient taxes are abolished. These estimates are the subject of negotiations with the States and Territories. (In the Mid Year Economic and Fiscal Outlook it was estimated that the States and Territories would receive transitional assistance of the order of $0.9 billion in loans in 2000-01 and of the order of $0.7 billion in grants in the following year.)
Compliance Cost impact : No impacts are expected as the amount appropriated to the State and Territory Governments will be freely available for use for any purpose. No Regulation Impact Statement is required.
Other payments
The States and Territories will continue to receive competition payments and any franchise fees windfall tax reimbursement payments.
Date of effect : States and Territories will be entitled to franchise fees windfall tax reimbursement payments and competition payments under this legislation from 1 July 2000.
Proposal announced : Announced by Government on 13 August 1998, as part of its tax reform package in Tax Reform: not a new tax, a new tax system: The Howard Governments Plan for a New Tax system .
Financial impact : Franchise fees windfall tax revenues are difficult to estimate. However, no payments to the States and Territories are expected over the forward estimates period.
Competition payments to the States and Territories are expected to total $454 million in 2000-01, $699 million in 2001-02 and $716 million in 2002-03.
Compliance Cost impact : No impacts are expected as the amount appropriated to the State and Territory Governments will be freely available for use for any purpose. No Regulation Impact Statement is required.