Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)General Outline
A New Tax System (Goods and Services Tax Transition) Bill 1998 (the Transition Bill) is one of several Bills which introduce and implement the goods and services tax (GST). It also deals with the transition from the wholesale sales tax (WST) system, and makes other changes.
The Transition Bill provides the arrangements that will establish whether a taxpayers entitlements and obligations in connection with supplies of goods, real property and things other than goods and real property will be determined under the WST law, if applicable, or under the GST law. WST applies only to goods, whereas the GST applies to goods, real property and things other than goods and real property, including services.
Unless otherwise stated, all references are to the Transition Bill.
The main Act implementing the GST, titled A New Tax System (Goods and Services Tax) Act 1998, is referred to in this Explanatory Memorandum (EM) as the GST Act.
Main features of the Bill
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- The Transition Bill provides for the registration of entities for GST purposes prior to the implementation date of the GST Act.
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- The commencement date of the Transition Bill is the day after the last of the Bills implementing the GST receives the Royal Assent. The Transition Bill should be read in conjunction with the other GST Acts and the WST law.
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- The Transition Bill provides the rules for determining which taxing system will apply to transactions and events, particularly those spanning the implementation date.
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- Having determined which taxing system is relevant, the laws of that system are then applied.
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- Transactions occurring prior to 1 July 2000 and which span the date of implementation of the GST may be affected by the transitional arrangements with the effect that GST is payable.
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- Where a taxable supply is made but the invoice was issued or payment was made prior to 1 July 2000, the Transition Bill provides that payment of any GST liability is not due until the first tax period commencing on or after 1 July 2000.
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- WST will not apply to supplies of assessable goods made after 30 June 2000, and monthly and quarterly WST returns will not be required for periods starting on or after 1 July 2000.
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- Provision is made for a special credit for WST embedded in stock on hand at the date of implementation. The special GST credit is offset against GST liability during the first six months of the GST system. This credit is not available for stocks of beer, wine, spirits and similar drinks, second hand goods or goods for hire, amongst other goods.
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- The Transition Bill provides for the phasing-in over two years of input tax credits for motor vehicles. Those who would be entitled to WST exemption, if WST continued, will be entitled to full input tax credits.
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- A schedule to the Transition Bill provides for the reduction of WST rates on certain goods from 32% to 22% from the date of Royal Assent to the GST Act, by means of a transitional credit effected through amendments to the Sales Tax Assessment Act 1992 (STAA).
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- Items 4 to 14 of Schedule 5 of the Sales Tax (Exemptions and Classifications)Act 1992 [ST(E & C) Act] are repealed, giving effect to the reduction of rates.