Senate

Revised Explanatory Memorandum

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

Chapter 2 - GST-free supplies

Outline of Chapter

2.1 This Chapter explains the amendments made by Schedule 2 to this Bill. Schedule 2 inserts a number of measures into the GST-free supplies provisions of the GST Act. These cover the following:

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education goods;

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sewerage services;

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farm land;

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medical services; and

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goods sold through inwards duty free shops.

Context of reform

2.2 The proposed changes to the law clarify the application of the GST in line with the Government's objectives for GST-free supplies outlined in the ANTS proposals.

Detailed explanation of new law

Medical services

2.3 Item 7 inserts a new definition of medical service into the Dictionary. The new definition makes GST-free a supply of a medical service for which a medicare benefit is payable under the HIA 1973. This expands the services which are GST-free as medical services and will include supplies such as the supply of a medical report on a person for which a medicare benefit is payable.

2.4 The types of reports (may be referred to as Treating Doctor's Reports) that will now be GST-free include those for assessment by Centrelink in relation to social security payments such as Disability Support Pension, Carer Payment and Sickness Allowance. Other reports covered include reports for older persons and people with a disability who are required to obtain certification from a medical practitioner prior to extending their driver's licence. [Item 7, section 195-1]

Education goods

2.5 Item 1 inserts new section 38-97 into Subdivision 38-C. This new section allows the lease or hire of goods to be GST-free where:

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the goods are owned and leased or hired by the provider of a pre-school, primary or secondary school course;

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the goods are leased or hired for use directly or principally by a student undertaking the course;

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the school or course provider leasing or hiring the goods at all times retains the right to decide who uses the goods and the use to which the goods will be put; and

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the lease or hire is not part of an arrangement to transfer ownership of the goods from the owner to any person.

2.6 The new provision is designed to allow schools to lease/hire goods such as laptop computers, textbooks, musical or sporting equipment to students GST-free. A sale or transfer of ownership of such goods to a student or other person will still attract the GST. [New section 38-97]

2.7 Item 2 is an amendment as a consequence of the insertion of new section 38-97 . This amendment ensures that the lease or hire of goods under new section 38-97 is not taxed by section 38-100.

Sewerage services

2.8 Item 4 inserts a new subsection (2) into section 38-290. The new section provides for the removal of waste matter from residential premises to be GST-free where the premises are not connected to a system of sewers. The waste matter must be of a kind that would normally be removed by sewers, that is, it cannot be toxic waste or any other waste which is not permitted to be disposed of by means of sewers. This amendment will mean that those households which use units such as 'night cans', sullage tanks and 'biosystems' will not pay GST on the service of emptying those units.

2.9 The supply of servicing a householder's biosystem (a self-contained sewage unit, more common on rural properties) or aerated septic tank will also be GST-free [item 4] . Any chemicals which are purchased in relation to the servicing of a biosystem will not be GST-free. Item 3 amends the heading of section 38-290 as a consequence of new subsection 38-280(2) .

Farm land

2.10 Subdivision 38-O of the GST Act provides that a supply of farm land is GST-free if the supply is by way of freehold interest or long term lease. Long term lease means a lease of at least 50 years (section 195-1). There are some government leases of farm land that run for shorter periods. However, the supply under these shorter leases is akin to a sale or long term lease as it is normally renewed. The reasons for the shorter term lease (e.g. 10 years) may be to ensure compliance by the farmer with conditions of the use of the land, for example, with respect to conservation, water restrictions, etc.

2.11 Items 5 and 6 will amend subsection 38-475(1) and section 38-480 respectively to include supplies of leased farm land where the lease is for a period of less than 50 years and is a government lease.

Supplies through inwards duty free shops

2.12 Item 4A repeals section 38-415 of the GST Act and inserts a new section 38-415. The new section will grant GST-free status to all airport shop goods sold through an inwards duty free shop to a relevant traveller. At present, only imported and excisable goods are GST-free.

2.13 Item 8 makes a consequential amendment to the definition of 'relevant traveller' in section 195-1 of the GST Act.