House of Representatives

Explanatory Memorandum

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

Chapter 1 - Administration arrangements

Overview

1.1 The Transition Bill contains several operative provisions for administrative requirements of both the Transition Bill and the GST Act. These include the effective start date for the GST and a last date for assessable dealings and their associated returns under the WST system.

References

1.2 A summary of the provisions in the Transition Bill and the relevant references in the EM are set out in the following table:

Date of commencement

1.3 The Transition Bill commences from the day after the day that the last of the Acts implementing the GST, as listed in subsection 2(2) , receives Royal Assent. [Section 2]

1.4 If you are a party to a transaction occurring prior to that date, and which spans the date of implementation of the GST, you may be affected by the transitional arrangements.

Definitions

1.5 Expressions used in the Transition Bill have the same meaning as in the GST Act. Additional terms defined in other Acts are listed in the Transition Bill. [Section 5]

Transitional time of supply rule

1.6 The time of supply or acquisition is defined, providing a special rule for determining when a supply or acquisition is made for the purposes of the Transition Bill only. [Section 6]

1.7 This rule is referred to as the time of supply rule throughout this EM, though the rule is also relevant to acquisitions, in determining when an entitlement to input tax credits arises.

When is a supply or acquisition made?

1.8 The rules concerning when a supply or acquisition is made are contained in section 6 and are summarised in the following table:

1.9 Section 11 provides a variation on this rule for supplies of things other than goods and real property, which are made on a periodic or progressive basis. Section 18 also varies the rule for certain major construction agreements.

1.10 Note that goods is defined at section 195-1 of the GST Act to be personal tangible property. This could include live plants and animals.

Examples

1. As part of a contract for the sale of goods, NJC Pty Ltd removes from its warehouse and places on a truck on 29 June 2000 goods that are then transported from Melbourne to Perth. They arrive at the purchasers premises on 2 July 2000. For the purposes of the Transition Bill, the time of the supply and the assessable dealing take place on 29 June 2000, regardless of the terms of trade, which may include a Romalpa clause and/or delivery being on a free-into-store basis. The sale of the goods is not subject to the GST law.

2. In the case of the trucking company transporting the goods, the service is performed when the delivery service is completed. The service of delivering the goods is subject to the GST law.

Start of GST on 1 July 2000

1.11 Generally you are liable for GST on a supply or importation to the extent that it is made on or after 1 July 2000. [Subsection 7(1)]

However, section 6 contains specific timing rules for determining when a supply is made for the purposes of the transitional arrangements. [Section 6]

1.12 The GST or WST liability for an importation of goods arises at the time of entry for home consumption or some other relevant act by the Australian Customs Service (Customs).

1.13 Entitlements to input tax credits are also determined according to when the acquisition or importation is made. [Subsection 7(2)] Section 6 provides the rules for determining when an acquisition is made, for the purposes of this provision.

Diesel fuel credits

1.14 Subsection 7(3) provides a commencement date for the claiming of diesel fuel credits under Division 123 of the GST Act.

1.15 Under this subsection, an entitlement to a diesel fuel credit only arises on an acquisition of diesel or like fuel to the extent that it is made on or after 1 July 2000.

1.16 Section 6 provides the rules for determining when an acquisition is made.

1.17 An importation of diesel or like fuel is made when it is entered for home consumption.

Effect on sales tax on and after 1 July 2000

1.18 Sections 6, 7 and 8 provide the rules for determining into which taxing system a supply or acquisition of WST assessable goods will fall.

1.19 Section 8 recognises that the time of a WST assessable dealing with WST assessable goods may not necessarily coincide with removal (that is, when the supply is made).

1.20 In effect, subsection 8(1) and the GST transitional rule on the time of supply, described at paragraph 2.7, is applied to these goods, such that:

•

any part of a supply, or an importation, made on or after 1 July 2000 will fall under the GST system; and

•

any part of a supply, or an importation, made before 1 July 2000 will fall under the WST system.

1.21 The A New Tax System (End of Sales Tax) Act 1998 provides that WST will not be payable on an assessable dealing made on or after 1 July 2000.

1.22 Subsection 8(2) and the time of supply rule in section 6 mean that an assessable dealing on or after 1 July 2000, in respect of a supply or importation made before that date, is taken back to immediately before the end of sales tax.

1.23 As no WST liability can arise for any period starting on or after 1 July 2000, WST returns will not be necessary for periods after 30 June 2000.

1.24 Paragraphs 2.19 to 2.30 provide more details on attributing transactions involving assessable dealings to the correct taxing system.

Registration before 1 July 2000

1.25 If you expect to satisfy the requirements to be registered for GST at 1 July 2000 you must apply before 1 June 2000 to be registered. [Section 9]

The registration requirements in the GST Act, in particular Parts 2-5 and 4-5 , provide the details on registration requirements. The information on annual turnover thresholds in Division 188 of the GST Act will also assist you in determining whether you are required to be registered.

1.26 In summary, you are required to be registered if:

•

you are carrying on an enterprise; and

•

your annual turnover meets the registration turnover thresholds, which are:

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$100,000 for non-profit bodies; and

-

$50,000 for other enterprises.

1.27 You must also comply with the registration requirement if your situation changes such that you become required to be registered, for example, if you revise your estimates of annual turnover and you expect to exceed the threshold at 1 July 2000.

1.28 You will be able to register well in advance of 1 June 2000, and the Commissioner of Taxation will make it known when the appropriate forms are available.

1.29 The registration provisions in the GST Act allow you 21 days, from the date of being required to do so, in which to apply for registration. If you only become required to be registered in the 21 days prior to 1 June, you will still have 21 days to register, through the normal operation of section 25-1 of the GST Act.

Examples

1. You are carrying on an enterprise, and on 20 April 2000 your annual turnover exceeds the turnover threshold, and you expect to continue to exceed the threshold. You can apply to be registered anytime before 1 June 2000, but you must apply before 1 June 2000.

2. You commence an enterprise on 2 June 2000, and you estimate your annual turnover will exceed the threshold. You must apply by 23 June 2000 to be registered.

1.30 Failure to register within the required time will incur penalties, which are prescribed in the A New Tax System (Goods and Services Tax Administration) Act 1998 .