Senate

Addendum to Supplementary Explanatory Memorandum

(Circulated by the authority of the Treasurer, the Hon. J.S. Dawkins, M.P.)

Sales Tax (Exemptions and Classifications) Bill 1992

Deemed Manufacturers

1. Explanation of additional amendment

The replacement amendment of the Sales Tax (Exemptions and Classifications) Bill will allow business inputs concessions to be available for a person who supplies materials to a manufacturer to be made up into goods, provided that the made-up goods are mainly for wholesale sale and/or indirect marketing sale by the supplier. [Amendment No. 3 of the E & C Bill (new definition of 'wholesaler's-materials goods' in subclause 3(2))]

Effect of the original amendments: The original amendments (No's. 2, 3 and 10 to 15) will allow business inputs concessions to continue to be available for a person who supplies materials to a manufacturer to be made up into goods, provided that the made-up goods were mainly for wholesale sale by the supplier. As virtually all wholesale sales of the made-up goods would be within the tax base, the proviso would ensure that the concessions would only be available where the cost of the business inputs would be included in the taxable value of a later dealing with the made-up goods. Retail sales would be excluded from the scope of the exemption because they are generally not taxable dealings and, consequently, the cost of the business inputs would not be included in the tax base.

Reason for change: There is a category of retail sale, known as an indirect marketing sale, which is also an assessable dealing. These sales occur where a person, who has not manufactured the goods, sells them through another person (such as a door-to-door commission agent) who is not an employee. As the value of any business inputs would be included in the taxable value of an indirect marketing sale of the made-up goods, it is consistent and equitable for the concessions also to be available if the made-up goods are mainly for wholesale sale and/or indirect marketing sale.

2. Alterations to the Supplementary Explanatory Memorandum

The following alterations to the Supplementary Explanatory Memorandum are required to reflect the proposed additional amendment discussed above:

General Outline and Financial Impact, page 4, under heading 'Deemed Manufacturers', omit the paragraph headed 'Change to the Bill', and substitute the following:

"Change to the Bill: Business inputs concessions will be available for a person who supplies materials to a manufacturer to be made up into goods, provided that the made-up goods are mainly for wholesale and/or indirect marketing sale by the supplier."

Paragraph 5.1, page 30, omit the paragraph and substitute the following:

" 5.1 Access to business inputs concessions will be extended to a person who supplies materials to a manufacturer to be made up into goods, provided that the made-up goods (to be referred to as 'wholesale's-materials goods') are mainly for wholesale sale and/or for indirect marketing sales, by the supplier of the materials. The new provision will not apply if the materials supplied have been purchased from the manufacturer. [Amendment No.3 of the E & C Bill (new definition of 'wholesaler's-materials goods' in subclause 3(2))]"

Paragraph 5.11, omit subparagraph (d) and the Note immediately following that paragraph, and substitute:

"(d) it must be likely, at the time of delivery of the made-up goods by the manufacturer, that the made-up goods are to be sold by the exemption user mainly by wholesale sale and/or by indirect marketing sale. To satisfy this test, it will be necessary that more than half of the sales of all goods manufactured for the exemption user (as mentioned in paragraph (a)), out of the materials supplied by the exemption user (as mentioned in paragraphs (b) and (c)), will be sold either by wholesale and/or by indirect marketing sale by the exemption user. Made-up goods intended for retail sale by the supplier of the materials will not be able to be taken into account in this calculation.