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Sales Tax Assessment Bill 1992

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Explanatory Memorandum

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

Quoting - Grounds

A. Introduction

15.1 This chapter describes the general grounds on which a person may quote in respect of an assessable dealing. The grounds for quoting are dealt with in Part 7 of the Sales Tax Assessment Bill 1992. This chapter includes the grounds for quoting a registration number , and the grounds for quoting an exemption declaration .

B. Explanation and Commentary

Different types of quotation

15.2 There will be 2 types of quoting under the new law:

(i)
quote of a registration number by a registered person;
(ii)
quote of an exemption declaration by an unregistered person.

There will be different grounds for each type of quoting.

Grounds for quoting a registration number

15.3 There will be 8 general grounds for quoting a registration number. The grounds will apply if the quoter intends to:

Ground 1: sell the goods by wholesale or indirect marketing sale
Ground 2: sell the goods by any kind of sale, and the quoter is mainly a wholesaler
Ground 3: sell the goods to any registered person who quotes
Ground 4: sell the goods to a particular unregistered person who quotes an exemption declaration
Ground 5: sell the goods, and the goods will be exported
Ground 6: lease the goods in exempt circumstances
Ground 7: use the goods so as to satisfy an exemption Item
Ground 8: use the goods as a container for goods to be exported [clause 82]

15.4 Quotation Ground 1: The quoter intends to sell the goods by wholesale or indirect marketing sale. [paragraph 82(1)(a)]

Coverage: This ground will apply to any person who wishes to acquire goods for wholesale sale or indirect marketing sale, regardless of whether they sell goods mainly by wholesale or retail. As the wholesale sale will be an assessable dealing the purpose of the ground is to defer sales tax to that point.
Change: No substantive change. Under the existing law indirect marketing sales are deemed to be wholesale sales, and indirect marketers are deemed to have quoted their certificate in certain circumstances. This ensures that the taxing point is not pushed back to a point prior to the indirect marketing sale. This quoting ground merely reflects the fact that, under the new law indirect marketing sales will be a separate registrable activity and a separate assessable dealing. This is discussed further at paragraphs 7.19-7.20 and paragraph 13.11.

Note 1 :
This ground will apply only to goods that are definitely intended for wholesale or indirect marketing sale. The ground will not apply to allow a person to quote in respect of a mixed stock of goods where some are for wholesale sale and others are not (and they cannot be separately identified).
Note 2:
The activities giving rise to this quotation ground will also entitle the quoter to registration.

15.5 Quotation Ground 2: The quoter intends to sell the goods by wholesale or retail, and the quoter is mainly a wholesaler. [paragraph 82(1)(b)]

Coverage: A person will be 'mainly a wholesaler' if they make wholesale sales or indirect marketing sales (or both) and those sales account for more than 50% in value of all the persons sales. The person will have the option of determining whether this test is met over the 12 months before the time of the quotation, or is reasonably likely to be met over the next 12 months. The value of the goods will be the amount for which they are sold. [subclause 82(2)]
Change: No change.

Note:
The activity giving rise to this quotation ground will also entitle the quoter to registration. [paragraph 78(1)(b)]

15.6 Quotation Ground 3: The quoter intends to sell the goods to any registered person who quotes. [paragraph 82(1)(c)]

Change: No direct change. This ground will not extend the circumstances in which a registered person can quote for goods for retail sale to another registered person. However, under the existing law, the second registered person can only quote for goods for use as aids to manufacture, auxiliaries to aids to manufacture and eligible business goods. Proposed Quoting Ground 6 will extend the second registered person's quoting ground to include any situation where the quoter intends to satisfy an exemption Item in respect of the goods.

Note:
The activity giving rise to the quotation ground (i.e. retail sale to a quoting registered person) will not give rise to a registration entitlement. This ground can therefore only be used by persons who are entitled to registration for another reason.

15.7 Quoting Ground 4: The quoter intends to sell the goods to a particular unregistered person who quotes an exemption declaration. [paragraph 82(1)(d)]

Coverage: The purpose of this quotation ground is to allow (registered) persons to acquire goods tax-free for sale to persons who will use them in circumstances which will satisfy an exemption Item. But for this ground, a person would not be entitled to quote in respect of specific goods for retail sale to an unregistered exempt end-user, such as a Government department.
Change: This is a new quoting ground in that the existing law does not allow for the quoting of exemption declarations (i.e. quoting by unregistered persons).

Note:
As with quoting ground 3 the activity giving rise to the entitlement to quote does not give rise to a registration entitlement.

15.8 Quoting Ground 5: The quoter intends to sell the goods, and the goods will be exported. [paragraph 82(1)(e)]

Coverage: This ground will allow a person to quote for goods, if those goods are intended for sale in circumstances that will qualify the goods for exemption under the export exemptions in clause 30. That is if the goods are intended for sale and:

(i)
the contract of sale requires the seller to export them;
(ii)
the purchaser intends to export the goods; or
(iii)
the sale is in accordance with the prescribed rules for export sales.

Note 1:
The prescribed rules for export sales will be set out in regulations to be made under the Sales Tax Assessment Bill 1992.
Note 2:
Making sales to eligible international travellers in accordance with the prescribed rules for export sales will be a registrable activity. However, making export sales will not be a registrable activity. [clause 78(1)(c)].

15.9 Quoting Ground 6: The quoter intends to lease the goods in exempt circumstances. [paragraph 82(1)(g)]

Coverage: This quoting ground will ensure that a lessor who will be leasing goods in circumstances that would qualify the lease AOU for exemption, will be able to quote on those goods (see paragraphs 8.14-8.16, 8.44 and Chapter 19). The quoter must intend that the goods will be leased under an eligible long-term lease, or that they will be exported by the lessor or the lessee before they are used.

Note 1:
Leasing goods in these circumstances will not give rise to a registration ground.
Note 2:
The existing law allows a registered person to quote on the purchase of goods for lease as aids to manufacture etc. Under the new law that entitlement will continue only if the first lease is an eligible long-term lease. There will be no entitlement to quote on goods for short term lease as aids to manufacture etc.

15.10 Quoting Ground 7: The quoter intends to use the goods so as to satisfy an exemption Item that is in force at the time of quoting. [paragraph 82(1)(f)]

Coverage: The quoter must intend that the goods will be dealt with by the quoter so as to satisfy an exemption Item in force at the time of the dealing. As explained in Chapter 8 (Exemptions), quotation on the basis of this ground will only be allowed if:

(i)
the quoter has the intention to satisfy the exemption Item throughout the statutory period (see paragraphs 8.10-8.11); and
(ii)
it will be the quoter's use, and not the use of some other person, which will satisfy the exemption.

Note 1:
This quoting ground will mean that registered persons can quote in respect of any exemption Item that they intend to satisfy. They will not be restricted to the business input exemption Items (i.e. exemption [R] Items).
Note 2:
This activity will not give rise to a registration ground, unless the activity would satisfy an exemption [R] Item if done by a registered person. [clause 78(1)(d)]

Example:

Z is part of a company group that comprises companies X, Y and Z . There is an exemption Item for machinery for use for the bulk handling of grain. Z quotes on goods that will be used exclusively by X, Y and Z in equal proportions for the bulk handling of grain throughout the statutory period.
Result: Z is not entitled to quote and will be liable to tax on the first AOU of the goods. The exemption requires that more than 50% of the use is by the quoter, Z.

15.11 Quoting Ground 8: The quoter intends to use the goods as a container for goods to be exported. [paragraph 82(3)(b)]

Coverage: The quoter must have the intention to use the goods as a container for assessable goods that will be exported in the container. In situations where the contents are owned by another person, the packer must have an expectation (rather than an intention) that the goods will be exported. A typical example would be a contract packer.

Comparison of new and existing quoting grounds for registered persons

15.12 The new grounds for quoting a registration number will cover the existing quoting grounds contained in Sales Tax Regulations 12(1)(a)-(ea), 12(3)-(5) and 14(1). The remaining existing quoting grounds that are not covered by the new registration quoting grounds are noted below. The reasons they are not covered by the new quoting grounds are also given.

15.13 Regulation 12(1)(f): This regulation was introduced to operate with previous exemption item 132 which has since been omitted. It has no significant application in the existing law.

Reason: This quoting ground is obsolete.

15.14 Regulation 12(1)(g): This regulation applies to goods for use as raw materials by persons who are manufacturers but who, because they manufactured goods from materials supplied by a customer who requires them for resale, are deemed not to be manufacturers.

Reason: Under the new law, those persons will be treated as manufacturers and will be able to quote under the several rules for manufacturers.

15.15 Regulation 12(1)(h): This regulation covers goods for sale by persons who are 'deemed manufacturers' under the existing law.

Reason: As a consequence of the change to the deemed manufacturers provisions in the existing law, this ground is no longer necessary.

15.16 Regulation 12(2): Regulation 12(2) covers containers for goods for which a person has quoted.

Reason: There will be a different mechanism under the new law for taxing containers. Consequently, there will be new quotation and exemption grounds. [subclauses 82(3), 83(2) and clauses 30, 31]

15.17 Regulation 14(2): Under Regulation 14(2) the Commissioner of Taxation has a discretion to permit a person to quote in certain circumstances.

Reason: Under the new law, the Commissioner will be given a wider discretion to permit a person to quote in special circumstances in which the person would not otherwise be entitled to quote [clause 84]

Grounds for quoting an exemption declaration

15.18 There will be 5 general grounds for quoting an exemption declaration. The grounds will apply if the quoter intends to:

Ground 1: use the goods so as to satisfy an exemption Item
Ground 2: sell the goods to a purchaser who will quote on the purchase
Ground 3: sell the goods, and the goods will be exported
Ground 4: lease the goods in exempt circumstances
Ground 5: use the goods as a container for assessable goods which will be exported [clause 83]

15.19 Quoting Ground 1: The quoter must intend that the goods will be dealt with by the quoter so as to satisfy an exemption Item in force at the time of the dealing. This is the same as Quoting Ground 7 for registered persons (paragraph 15.10). However, unregistered persons will not be permitted to quote for business input exemption Items marked [R]. [paragraph 83(1)(a)]

15.20 Quoting Ground 2: The quoter must have the intention of selling the goods to a particular person who will quote in respect of the sale. It will not be sufficient for the quoter merely to intend to hold the stock tax-free for sale only to quoting purchasers. The quoter must, at the quoting time, intend to sell only to a particular purchaser who is identified at that time. The purchaser can either be a registered person quoting a registration number or an unregistered person giving an exemption declaration. [paragraph 83(1)(b)]

Note:
This ground will be similar in effect to the giving of a Certificate B under the existing administrative conditional exemption system.

15.21 Quoting ground 3: The quoter intends to sell the goods, and the goods will be exported. This ground will also require that it be a term of the contract of sale that the seller export the goods while they are still assessable goods. [paragraph 83(1)(d)]

15.22 Quoting Ground 4: The quoter intends to lease the goods in exempt circumstances. This quoting ground will ensure that a lessor who will be leasing goods in circumstances that would qualify the lease AOU for exemption, will be able to quote on those goods (see paragraphs 8.14-8.16, 8.44 and Chapter 19). The quoter must intend that the goods will be leased under an eligible long-term lease, or that they will be exported by the lessor or the lessee before they are used. [clause 83(1)(c)]

15.23 Quoting Ground 5: The quoter must have the intention to use the goods as a container for assessable goods that will be exported in the container. [subclause 83(2)]

Note 1:
The quoter must have the intention to use the goods as a container for assessable goods that will be exported in the container.
Note 2:
In situations where the contents are owned by another person, the packer must have an expectation (rather than an intention) that the goods will be exported.

Containers

15.24 Once goods have been applied to own use (AOU) as a container they are no longer assessable goods. However, there is an exception to this. The packing of goods in bond does not result in the container being applied to own use. After packing the container is still assessable goods. If this occurs a quote made for the contents will also apply to the container. Containers are discussed in more detail in Chapter 20. [clause 5, definition of 'application to own use' paragraph (h) and clause 90]

Additional quoting ground

15.25 A person may also quote in circumstances that fall outside the quoting grounds discussed above if the person has received special authorisation from the Commissioner.

15.26 The Commissioner will have a discretion to allow quoting in 'special circumstances'. The discretion allows the Commissioner to authorise a registered person to quote a registration number, or an unregistered person to quote an exemption declaration, in special circumstances in which the person would not otherwise be entitled to quote. [clause 84]

Note:
This discretion will cover cases covered by the existing subregulation 14(2), but is wider (as the subregulation specifically identifies the circumstances in which the discretion can be exercised). A more general approach was considered appropriate for the new law.

Monthly quoting

15.27 The Commissioner will have a discretion to allow a registered person to quote monthly for purchases that the registered person proposes to make from another registered person. The Commissioner's approval must be obtained in writing. The approval allows a person to quote once, on or before the first day of the month, and they will thereafter be taken to have quoted in respect of all purchases from the supplier during that month, unless they notify the supplier otherwise. [clause 85]

Note:
This provision replaces the existing Regulation 19.

C. Summary of Main Changes

15.28 The main changes proposed to the existing law which are discussed in this chapter are:

CHANGE REASON
1. Registered persons will be able to quote for all goods for wholesale or retail sale to registered persons who quote - they will also be able to quote for goods for sale to particular unregistered persons who quote exemption declarations. To reduce the number of cases where the vendor will have to seek a credit when goods are sold tax-free under quote from tax-paid stock.
2. Goods for indirect marketing sale will be covered by a separate quoting ground. Consequence of treating indirect marketing sales as a separate registrable activity and dealing.
3. Registered persons will be able to quote a registration number for all goods for their use which are covered by Schedule exemptions. To enable registered persons to purchase all exempt goods for their use by quoting a registration number.
4. There will be a quoting ground for goods for sale to eligible travellers in accordance with the prescribed rules for export. To accommodate the prescribed rules for export.
5. Unregistered persons will be able to quote an exemption declaration for goods for retail sale to particular persons who quote. To provide a legislative basis for current administrative arrangements.
6. Unregistered persons will be able to quote an exemption declaration for all goods for their use which are covered by exemption Items. To provide a legislative basis for current administrative arrangements.
7. Unregistered persons will be able to quote an exemption declaration for goods to be used as containers to export assessable goods. To provide a legislative basis for current administrative arrangements.

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