House of Representatives

Explanatory Memorandum

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

Chapter 2 - Customs Act 1901

Outline of Chapter

2.1 This Chapter explains the amendments to the Customs Act 1901 (Customs Act) as a result of the introduction of the goods and services tax (GST).

2.2 The amendments to the Customs Act, and of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) and the A New Tax System (Luxury Car Tax) Act 1999 (LCT Act), ensure corresponding concessions apply, in relation to the GST and LCT, to goods that are temporarily imported in circumstances where the goods would be exempt from Customs duty.

2.3 The amendments to the Customs Act also insert new definitions and make consequential amendments to that Act as a result of the GST.

Context of Reform

2.4 The amendments relating to the Customs law are consequential to the introduction of the GST.

Summary of the amendments

2.5 The amendments will:

•

insert new definitions into subsection 4(1) of the Customs Act;

•

amend section 71F of the Customs Act to allow Customs to remove from the COMPILE computer system an import entry that has been lodged, but not acted upon, where the entry covers goods that attract any duty, fee, charge or tax;

•

amend section 162A of the Customs Act to ensure that the regulations will allow a security or an undertaking to be given in relation to goods that are imported on a temporary basis and which would otherwise be subject to GST or LCT;

•

make consequential amendments to the Customs Act;

•

amend section 71F of the Customs Act to ensure that an import entry is deemed to have been withdrawn if, in relation to the goods covered by the import entry, a fee, charge or tax that is payable remains unpaid; and

•

amend the GST Act and LCT Act to allow an importer to delay payment of GST and LCT where the goods are imported on a temporary basis.

Detailed explanation of the amendments

2.6 A detailed explanation of the amendments has been divided into the following parts:

A.

Amendments commencing on Royal Assent;

B.

Amendments commencing immediately after the GST Act commences;

C.

Amendments commencing after Schedule 2 to the Customs Legislation Amendment Act (No. 2) 1999 ;

D.

Amendments of the GST Act; and

E.

Amendments of the LCT Act.

A. Amendments commencing on Royal Assent

2.7 Amendments commencing on Royal Assent are contained in Part1 of Schedule 2 .

Definitions

2.8 New definitions of GST, GST Act, LCT and LCT Act are inserted into subsection 4(1) of the Customs Act [items 1, 2, 3 and 4] .

Removal from COMPILE computer system of certain entries

2.9 At present, if an import entry has been lodged with Customs but not acted upon, the entry is deemed, under subsection 71F(6) of the Customs Act, to have been withdrawn and may be removed from the COMPILE computer system. At present, subsection 71F(6) does not cover goods described in an entry that are duty-free but that attract a sales tax liability. Such entries cannot be removed from COMPILE. Where imported goods attract GST, Customs will not be able to remove from the COMPILE system any such entry lodged but not acted upon. Items 5 and6 will amend paragraphs 71F(6)(b), (c) and (d) to allow Customs to also remove such an entry where the amount payable is duty, fee, charge or tax.

2.10 The amendments of subsection 71F(6), effected by items 5 and 6 , apply only in relation to entries communicated to Customs after the commencement of Part 1 of Schedule 2. [Item 7]

Temporary importation concessions

2.11 Sections 162 and 162A of the Customs Act allow the Collector to give permission to an importer to take delivery of goods being temporarily imported into Australia, if the importer gives a security or undertaking for the payment of duty on the imported goods. Regulations 124 and 125B of the Customs Regulations prescribe the circumstances in which the sections can be utilised. The duty is not payable if the conditions set out in the regulations are complied with and the goods are re-exported within a specified period. Otherwise, the security may be enforced or, if an undertaking was given, the amount of the duty may be recovered in a court of competent jurisdiction.

2.12 Section 162 requires the importer of the goods subject of the permission to give the required security or undertaking to the Collector. Section 162A allows the Collector to give permission to the importer for temporary importation if the Chief Executive Officer (CEO) of Customs has accepted a security or undertaking for payment of duty in relation to a defined class of goods specified in the regulations.

2.13 It is intended that if goods are temporarily imported in circumstances that would make them exempt from the payment of Customs duty under section 162 or 162A, or would make them exempt if Customs duty were payable, corresponding concessions should apply in relation to the GST and the LCT.

2.14 These amendments to section 162A authorise the making of regulations to exempt goods from GST or LCT if the goods are imported on a temporary basis [item 8] and to enable the CEO to accept a security or an undertaking to pay any duty, GST or LCT on goods covered by regulations made under subsection 162A(1). The amendments also provide that if the security or undertaking is accepted, a Collector may permit the person who imports some or all of the goods to take delivery of the goods without payment of duty, GST or LCT [item 10 repeals subsection 162A(2) and substitutes new subsection (2), item 12 adds a note] .

2.15 If security such as money or a deposit of an instrument transferable by delivery is given under section 162A, the money or instrument is not to be returned until no duty, GST or LCT is, or could become, payable [item 13] . The amendments also ensure that where an undertaking was given to pay any duty, GST or LCT, the amount is recoverable, if necessary, in a court of competent jurisdiction [item 14 repeals subsection 162A(8) and substitutes new subsection (8)] .

2.16 Regulations that are in force under subsection 162A(1) immediately before the commencement of the amendment effected by item 8 are saved [item 9] . Likewise, permissions given under subsection 162A(2) that are in force immediately before the commencement of the amendments of section 162A effected by Part 1 of Schedule 2 are saved [item 11] . Amendments of section 162A effected by Part 1 of Schedule 2 apply only in relation to the delivery of goods after the commencement of the GST Act [item 15] .

B. Amendments commencing immediately after the GST Act commences

2.17 Amendments commencing on 1 July 2000 are contained in Part2 of Schedule2 .

Definitions

2.18 New definitions of wine tax and Wine Tax Act are inserted into subsection 4(1) of the Customs Act. [Items 16 and 17]

Consequential amendments

2.19 Part 2 of Schedule 2 contains a number of changes consequential on the introduction of the GST. For example, references to sales tax are omitted and, where necessary, references to GST, LCT and wine tax are inserted. Provisions of the Customs Act that are amended are paragraphs 70(7)(b), 77D(5)(b) and 77E(5)(b) and section 71B [items 18, 20, 23 and 25] . A new subsection 71B(4B) is inserted [item 21] .

2.20 Amendments of paragraph 70(7)(b), section 71B and paragraph 77E(5)(b) made by this Part of Schedule 2 apply only in relation to goods delivered or entered for home consumption after the commencement of this Part of Schedule 2 [items 19, 22 and 26] . The amendment of section 77D of the Customs Act applies only to goods taken into home consumption under a permission granted under section 77D after the commencement of this Part [item 24] .

2.21 The remaining amendments in Part 2 of Schedule 2 also contain amendments consequential on the introduction of the GST. These will ensure GST and LCT are covered by section 162 (section 162 is explained at paragraphs 2.5, 2.6 and 2.7) [items 27, 28, 29 and 30] .

C. Amendments commencing after Schedule 2 to the Customs Legislation Amendment Act (No.2) 1999

2.22 Amendments commencing after Schedule 2 to the Customs Legislation Amendment Act (No. 2) 1999 are contained in Part 3 of Schedule 2 .

2.23 Part 3 of Schedule 2 will amend paragraph 71F(6)(b) (dealing with withdrawal of import entries) to ensure that an import entry is deemed to have been withdrawn if, in relation to the goods covered by the import entry, any duty, fee, charge or tax that is payable remains unpaid. At present, paragraph 71F(6)(b) covers only goods in relation to which duty is payable. This amendment only applies to import entries communicated to Customs after this Part commences. [Items 31 and 32]

D. Amendment of the GST Act

Security given for temporary importation

2.24 In circumstances where goods are imported on a temporary basis (the goods are imported with the intention to take them out of Australia again), customs duty may be delayed if the importer gives a security or an undertaking to Customs for payment of the duty (refer to temporary importation concessions, paragraph 2.12 to 2.16). If the goods that are imported on a temporary basis are also subject to GST, this amendment will allow the importer to delay payment of GST. [Item 122 of Schedule 1 repeals subsection 171-5(1) and substitutes new subsections (1) and (1A)]

E. Amendment of the LCT Act

Security given for temporary importation

2.25 In circumstances where a car is imported on a temporary basis (the car is imported with the intention to take it out of Australia again), customs duty may be delayed if the importer gives a security or an undertaking to Customs for payment of the duty. If the car is subject to LCT, this amendment will also allow the importer to delay payment of LCT. [Item 178 of Schedule 1 repeals subsection 13-25(1) and substitutes new subsections (1) and (1A)]

Commencement

2.26 Part 1 of Schedule 2 , other than item 5, commences on Royal Assent. Item 5 commences on the day on which this Bill receives Royal Assent if, and only if, this Bill receives Royal Assent before the day on which Schedule 2 to the Customs Legislation Amendment Act (No. 2) 1999 commences.

2.27 Part 2 of Schedule 2 commences immediately after the GST Act commences.

2.28 Part 3 of Schedule 2 commences on the day on which this Bill receives Royal Assent, or immediately after the commencement of Schedule 2 to the Customs Legislation Amendment Act (No. 2) 1999 if that Schedule has not commenced before the day on which this Bill receives Royal Assent.