Senate

Revised Explanatory Memorandum

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

Chapter 15 - Wool tax amendment

Outline of Chapter

15.1 This Chapter explains the amendment to wool tax as a consequence of the introduction of GST. The amendment will be inserted in Schedule 8 to this Bill.

Context of Reform

15.2 Liability to wool tax is generally based on the sale price of wool. From 1 July 2000 supplies of wool will be subject to GST, other than those exported by the supplier (which will be GST-free). The sale price of wool will include a GST component. This amendment will exclude the GST component from the tax base for wool tax.

Detailed explanation of the amendment

15.3 Wool tax is imposed at a prescribed rate (currently 4%) on the sale value of shorn wool. Section 10 of the WTAA 1964 defines the sale value of shorn wool. In situations where liability attaches to sale of the wool, the sale value is based on the price of the wool.

15.4 Section 9-75 of the GST Act defines 'price' as a GST inclusive amount. Consistent with this meaning, new subsection 177-12(1) to be inserted by this Bill attributes a GST inclusive meaning to references to 'price' in other Commonwealth Acts. In the absence of any contrary intention, the reference to 'price' in the WTAA 1964 would have adopted a GST inclusive meaning.

15.5 An amendment of the WTAA 1964 will expressly provide that the 'price' of wool for the purpose of calculating wool tax is to exclude the 'net GST' payable by the supplying entity. It will override the meaning attributed to 'price' by new subsection 177-12(1) . [Item 23, new subsection 10(5)]

15.6 Net GST is to be defined in section 195-1 of the GST Act as the amount of GST net of any increasing adjustments or decreasing adjustments that relate to the supply. Increasing adjustments reflect increased GST liability (e.g. if the sale consideration is adjusted upwards) and decreasing adjustments reflect reduced GST liability (e.g. if there is a subsequent reduction in the sale consideration). [Item 141 of Schedule 1, definition of 'net GST']

15.7 Expressions used in new subsection 10(5) , such as 'supply' and 'entity', have the same meaning as those terms have in the GST Act. [New subsection 10(6)]

15.8 The sale value of shorn wool under paragraph 10(1)(d) of the WTAA 1964 is determined by reference to the 'value' of the wool. In accordance with proposed new subsection 177-12(3) , 'value' is to be taken to exclude an amount corresponding to any GST that would be payable if there were a supply of the wool at that time.

Application provision

15.9 The amendment will apply from 1 July 2000, the commencement of GST. [Subclause 2(8)]