House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)

General outline and financial impact

Indirect Tax Acts

Schedule 1 to this Bill makes a number of amendments to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), the A New Tax System (Luxury Car Tax) Act 1999 (LCT Act) and the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act). Most are minor policy and technical amendments and include amendments to:

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ensure that exports are GST-free when ownership of goods passes to an overseas purchaser, who is not registered or required to be registered, before the goods are removed from Australia;

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provide special rules to reduce compliance costs for retailers who sell both taxable and GST-free goods (known as simplified accounting methods);

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confine the GST-free treatment of cows milk to processed cows milk;

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increase the 50% market value and cost of supply tests for the non-commercial supplies of charities to 75% for supplies of supported accommodation/community housing;

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double the existing cash accounting threshold to $1 million, and to allow the Commissioner of Taxation to make a cash accounting threshold determination for a class of entities so as to reduce the need for entities to apply individually;

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ensure that a return of a luxury car for repair purposes is not an adjustment event;

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align the grouping and joint venture provisions for the LCT with the GST;

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clarify the rules regarding liability for LCT on taxable importations;

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correct minor technical issues to LCT value;

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the wine definition to provide greater certainty as to the types of products covered by the WET;

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to ensure that private importations of wine are subject to WET;

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align the grouping and joint venture provisions for the WET with the GST; and

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remove wine tax credit related to intended export sales and clarify credit for sales to overseas travellers.

Date of effect: 1 July 2000

Proposal announced: Not announced

Financial impact: Negligible

Compliance cost impact: Compliance costs for these measures are expected to be negligible.

Customs Act 1901

Schedule 2 to this Bill makes a number of minor policy and technical amendments to the Customs Act 1901 (Customs Act). These include amendments to:

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allow Customs to remove from the COMPILE computer system an import entry that has been lodged, but not acted upon, where the entry covers goods that attract any duty, fee, charge or tax;

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ensure that the regulations will allow a security or an undertaking to be given in relation to goods that are imported on a temporary basis, and which would otherwise be subject to GST or LCT;

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ensure that an import entry is deemed to have been withdrawn if, in relation to the goods covered by the import entry, a fee, charge or tax that is payable remains unpaid; and

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make consequential amendments to the Customs Act.

Date of effect: Various

Proposal announced: Not announced

Financial impact: Negligible

Compliance cost impact: The compliance costs for these measures are expected to be negligible.

Income Tax Assessment Act 1997

This Bill makes a number of consequential amendments to the Income Tax Assessment Act 1997 . These include amendments to:

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exclude GST from income derived and, to the extent of an entitys input tax credit entitlement, from deductible amounts;

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exclude GST from amounts taken into account in calculating assessable income or deductions, such as disposal proceeds and cost-base elements for capital gains tax (CGT) purposes; and

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change certain terms used in income tax provisions to ensure consistency of meaning with the GST law.

Date of effect: 1 July 2000

Proposal announced: Not announced

Financial impact: Negligible. The amendments ensure that the net GST liabilities of entities are not subject to income tax.

Compliance cost impact: Minimal, as the GST component of transaction amounts will be readily ascertainable through tax invoices or as 1/11 of the relevant amount.

Trade Practices Act 1974, Tax Administration Acts and Indirect Tax Transition Acts

Schedules 4, 5 and 6 to this Bill make a number of minor policy and technical amendments to Commonwealth legislation. These include amendments to:

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bring forward the date of effect of the Australian Competition and Consumer Commissioners (ACCCs) enforcement powers under the Trade Practices Act 1974 so that the ACCC can exercise those powers immediately with respect to unreasonable price rises made before the GST is introduced;

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section 11 of the A New Tax System (Goods and Services Tax Transition) Act 1999 (GST Transition Act) to ensure that certain rights associated with warranties, software and options to purchase under hire-purchase agreements are not subject to GST where they relate to payments made prior to 1 July 2000;

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ensure that the grouping provisions cannot be used to circumvent the phasing in of credits for motor vehicles; and

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to provide a concession for vehicles purchased before 2 December 1998 and used in operating leases.

Date of effect: Various

Proposal announced: Not announced

Financial impact: Negligible

Compliance cost impact: Expected to decrease for GST registrants.

Amendments relating to the Tradex scheme

The Tradex scheme provides relief to businesses that currently pay customs duty and wholesale sales tax (WST) on imported goods that are subsequently re-exported or used as inputs to exports.

The Tradex scheme will assist importers who bring goods into Australia temporarily for activities such as processing, packaging or warehousing prior to export. The measures contained in these amendments, will enable goods imported into Australia under the Tradex scheme, to be entered free of WST, GST and WET. The amendments also ensure that if goods imported under the Tradex scheme are not exported or are used contrary to the Tradex rules, the relevant tax will be payable.

Date of effect: If the Tradex Scheme Act 1999 (Tradex Act) commences before 1 July 2000, the amendments affecting the WST commence on the day that Act commences and the amendments affecting GST and WET will commence immediately after the commencement of the GST on 1July 2000.

If the Tradex Act commences on 1 July 2000, the amendments affecting the WST will never commence, and the amendments affecting GST and WET will commence immediately after the commencement of the GST on 1 July 2000. If the Tradex Act commences after 1 July 2000, the amendments affecting WST will never commence, and the amendments affecting GST and WET will commence on the day that Act commences.

Proposal announced: The Tradex scheme was announced by the Prime Minister on 7 December 1997 as a key element of the Governments Investing for Growth industry statement.

Financial impact: Forward estimates make provision for an additional $30 million a year revenue cost as a result of the introduction of the Tradex scheme.

Compliance cost impact: The compliance impact of this measure will be negligible.

Other Acts

Schedule 8 to this Bill makes a number of consequential amendments to Commonwealth legislation, including the:

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Administrative Decisions (Judicial Review) Act 1977 ;

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Crimes (Taxation Offences) Act 1980 ;

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Freedom of Information Act 1982 ;

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Income Tax Assessment Act 1936; and

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Taxation (Interest on Overpayments and Early Payments) Act 1983 .

Date of effect: 1 July 2000

Proposal announced: Not announced

Financial impact: Nil

Compliance cost impact: Nil