House of Representatives

Explanatory Memorandum

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

Chapter 2

Commencement and Application

A. Introduction

2.1 This chapter discusses the commencement and special application rules of the new law. The rules dealt with are:

•

Commencement provisions

•

Application of the law to the external Territories

•

Application of the law outside Australia

•

Application of the law to things that happen before the new law starts

•

Application of the law to offshore installations

•

Application of the law to the States and Territories

Unless otherwise stated, clause references in this chapter are to clauses in the Sales Tax Assessment Bill 1992.

B. Explanation and Commentary

Commencement Provisions

2.2 The new law will commence on the 28th day after it receives Royal Assent. However, the new law will not commence to impose tax. on any assessable dealing until the 'first taxing day' . That term is defined to be the start of the fourth month after the month in which the new law receives the Royal Assent.

Example:

If the new law receives Royal Assent by 30 June, then the first taxing day will be 1 October.

2.3 The purpose of delaying the imposition of tax until the first taxing day is to allow the Commissioner to register the extended classes of persons entitled to register under the new law. It will also enable training and public information documents to be prepared and disseminated. [clause 2 , and clause 5, definition of 'first taxing day']

Application of the law to the external Territories

2.4 The new law will not extend to Australia's external Territories. Further, in the case of two of the external Territories (Christmas Island and Cocos (Keeling) Islands), these Territories will not be treated as part of Australia for the purpose of the sales tax law. The effect of this exclusion is to treat these two named territories as if they were foreign countries. As a consequence, goods brought to the named Territories from a place outside Australia will not be imported into Australia at that time but goods brought to Australia from a named Territory will be imported into Australia. Similarly, a dealing with goods when they are in either of the two named Territories will not be an assessable dealing for sales tax purposes. [clause 3 , and clause 5, definition of 'Australia']

2.5 Similar amendments of the Customs Act 1901. will ensure that the concept of 'import' and 'imported goods' (and related expressions) in relation to the external Territories will have the same meaning for customs and sales tax purposes.

Application of the law outside Australia

2.6 The new law will extend to acts, omissions, matters and things that occur outside. Australia. However, this rule will be displaced by any contrary intention in the new law. [subclause 3(1)]

Example 1:

Company X makes a wholesale sale of goods that are in Australia at the time of the sale, but the sale is entered into in New Zealand (and both parties are in New Zealand at the time of the sale).

Result: The new law will apply to the sale, even though it is entered into outside Australia.

Example 2:

Company Y makes a wholesale sale of goods that are in New Zealand at the time of the sale, but the sale is entered into in Australia (and both parties are in Australia at the time of the sale).

Result: The new law will not apply to the sale because it will be an essential element of every assessable dealing under the new law that the goods be in Australia at the time of the assessable dealing.

Application of the law to things that happen before the new law starts

2.7 The new law will apply to acts and omissions that happen before the law comes into operation. This is an important concept in the new law and an integral part of the transitional arrangements that will apply. [subclause3(2)]

2.8 The main purpose of these provisions is to ensure that a course of conduct (or omission) does not fall outside the new law (and the existing law) simply because one of the elements of the course of conduct happens before the new law starts.

Example:

Company A manufactures goods before the new law starts, but sells the goods by wholesale after the new law has started.

Result: The wholesale sale will be an assessable dealing under the new law.

Application of the law to off-shore installations

2.9 The existing law contains a number of provisions which impose sales tax on certain off-shore installations that are attached to waters adjacent to Australia. The purpose of the provisions is to treat the installations (and goods on them) as imported into Australia at the time of attachment and for the installations then to be treated as part of Australia. The new law will retain exactly the same effect but has been significantly simplified. [clause 6]

Application of the law to the States and Territories

2.10 The new law will bind the States, the Australian Capital Territory and the Northern Territory. This means that they will be liable to tax on most assessable dealings with goods (unless an exemption applies). [clause 4]