House of Representatives

Explanatory Memorandum

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

Chapter 10 Exempt Parts of Taxable Value

A. Introduction

10.1 This chapter describes amounts that must be deducted from the taxable value of certain goods before tax is calculated on the goods. These amounts are known as exempt parts of the taxable value.

10.2 Exempt parts of taxable value are dealt with in Part 3 of the Sales Tax Assessment Bill 1992. [clause 44]

B. Explanation and Commentary

10.3 Goods that incorporate the following goods will have a reduced taxable value when they are the subject of an assessable dealing:

(i)

tax-advantaged computer programs;

(ii)

videotex equipment;

(iii)

solar panels;

(iv)

milk tanks;

(v)

luxury motor vehicles for certain disabled persons; or

(vi)

goods partly exempt from customs duty.

Goods incorporating tax-advantaged computer equipment

10.4 A tax-advantaged computer program is:

•

any program that is not embodied in a microchip; or

•

a program for entertainment or educational use, that is embodied in a microchip and enclosed by a cartridge, to use in a personal computer or home electronic device.

10.5 These computer programs will have a tax advantage because their taxable value is reduced by the value of the intelligence contained on that disc or cartridge, which is to be treated as an exempt part. Computer programs are discussed in more detail in Chapter 22. This measure will be the same as under the existing law. [clause 45]

Goods incorporating videotex equipment

10.6 There will be an exemption from sales tax for videotex equipment for a person who is certified as being profoundly deaf (exemption Item 95). If that videotex equipment is incorporated in a television set and the television is then purchased by a person who is profoundly deaf, then the taxable value of the television set will be reduced by the value of the videotex equipment.

10.7 Under the existing law, an eligible person is only entitled to claim an exemption every three years. This restriction will not apply under the new law. [clause 46]

Goods incorporating solar panels

10.8 There will be an exemption from sales tax for solar panels for collecting, absorbing or concentrating solar rays in order to produce heat (exemption Item 171). If these solar panels are incorporated in other goods then the taxable value of those goods will be reduced by the value of the solar panels.

10.9 The treatment of these goods will be the same as under the existing law. [clause 47]

Goods incorporating milk tanks

10.10 There will be a sales tax exemption for tanks for bulk milk tankers that are used to collect milk from farms (exemption Item 5). If these tanks are attached to a road vehicle and the complete vehicle is regarded as taxable, then the value of the vehicle will be reduced by the value of the tank when calculating a taxable value for the vehicle.

10.11 These goods will be treated in the same way as they are under the existing law. [clause 48]

Luxury motor vehicle for a disabled person

10.12 There is a sales tax exemption that allows certain disabled persons to purchase motor vehicles free of tax if the vehicle is for use for a particular purpose (exemption Items 96 or 97). The tax exemption is only available for vehicles with a taxable value at or below the luxury motor vehicle threshold. This threshold is the wholesale value, on which tax is calculated, that is equivalent to the retail price motor vehicle depreciation limit determined under section 57AF of the Income Tax Assessment Act 1936. For the 1992-93 year the wholesale value is $31,725 and the depreciation limit is a retail price of $47,280.

10.13 A person who qualifies for an exemption under the above items and wishes to purchase a vehicle that has a taxable value above the threshold amount may do so at a reduced taxable value. The taxable value of the motor vehicle will be reduced by 44.733% of the motor vehicle depreciation limit that applies for the financial year in which the dealing occurs. [clause 49]

10.14 This treatment does not vary from that of the existing law.

Example:

The luxury vehicle depreciation limit for 1992-93 is $47,280 which results in a taxable value threshold of $31,725.

If a motor vehicle has a retail purchase price of $58,000, then the equivalent wholesale value on which the tax is calculated is $36,471

Result: The taxable value of the $36,471 is reduced by the exempt part which is 44.733% of $47,280 or $21,150.

Note:

The exempt part is the same amount for all motor vehicles that are subject to tax at 30%

The taxable value on which tax is payable is $15,321 ($36,471 - 21,150). Tax is payable on this amount at the rate of 30% = $4,596.

Goods partly exempt from Customs duty

10.15 An eligible Australian traveller who, as a passenger on a plane or ship, imports personal goods into Australia is entitled to bring in $400 worth of new taxable goods tax free. Therefore, taxable value for any new goods imported into Australia by an eligible Australian traveller will be reduced by $400. These goods may have been purchased either overseas or tax-free in Australia prior to departure. If that traveller's new goods exceed the $400 limit, then both customs duty (if applicable) and sales tax are payable on the balance of the value of the goods. This represents no change from the existing law. [clause 50]

C. Summary of Main Change