House of Representatives

Explanatory Memorandum

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

Chapter 7 - Amendments relating to the Tradex scheme

Outline of Chapter

7.1 This Chapter explains amendments to the goods and services tax (GST), wholesale sales tax (WST) and wine equalisation tax (WET) legislation to give effect to the Tradex scheme. The Prime Minister announced the Tradex scheme on 7 December 1997 as a key element of the Governments Investing for Growth industry statement. The Tradex scheme will assist importers who bring goods into Australia temporarily for activities such as processing, packaging or warehousing prior to export.

7.2 The Tradex scheme aims to provide relief to businesses that currently pay customs duty and WST on imported goods which are later re-exported or used as inputs to exports. The Tradex scheme will provide the same relief in relation to GST and WET.

Summary of new law

7.3 The measures contained in these amendments will enable goods imported into Australia under the Tradex scheme to be entered free of GST, WST, and WET. The amendments also ensure that if goods imported under the Tradex scheme are not exported or are used contrary to the Tradex rules, the relevant tax will be payable.

Detailed explanation of new law

Changes to WST

7.4 Part 1 of Schedule 7 covers amendments commencing before 1July 2000. These amendments ensure goods can be imported free of WST under the Tradex scheme. This will be achieved by the insertion of a new exemption, item 185A of Schedule 1 to the Sales Tax (Exemptions and Classifications) Act 1992 . [Items 1 to 3, 7 and 8]

7.5 They also ensure that goods imported free of WST under the Tradex scheme will be liable to WST in the event that they are not exported or are otherwise dealt with contrary to the requirements of the Tradex scheme. This will be achieved by inserting a new assessable dealing, LE15, in Table 2 of Schedule 1 to the Sales Tax Assessment Act 1992 . [Item 5 and 6]

7.6 The amendments to the WST law insert new section 10A in the Sales Tax Assessment Act 1992 to ensure that Tradex scheme goods can be liable to WST even though they may have been applied to own use as Tradex goods. [Item 4]

Changes to GST and WET

7.7 Part 2 of the measures contains amendments relating to indirect taxes (GST and WET) commencing on 1 July 2000. These amendments ensure that goods can be imported free of GST or WET under the Tradex scheme. In the case of GST, this will be achieved by inserting a new nontaxable importation, 21A, in sub-section 42-5(1) of A New Tax System (Goods and Services Tax) Act 1999 (GSTA 1999). [Items 9, 10, 11 and 12] Inthe case of WET, this will be achieved by inserting a new exemption, 21A, in subsection 7-15(1) of A New Tax System (Wine Equalisation Tax) Act 1999 . [Item 18]

7.8 Part 2 also ensures that goods imported free of GST or WET under the Tradex scheme will be liable to GST or WET in the event that they are not exported, or are otherwise dealt with contrary to the requirements of the Tradex legislation. In the case of GST, this will be achieved by inserting a new increasing adjustment, Division 141, in Chapter 4 (The Special Rules) in the GST Act. [Item 13] In the case of WET, this will be achieved by inserting a new assessable dealing, LE14A, in the table at subsection 5-30(5) of the WET Act. [Items 13 to 18]