Senate

Supplementary Explanatory Memorandum

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

3. Untaxed goods

A. Summary of changes

3.1 The liability to be imposed on the retail sale or application to own use (AOU) of untaxed goods by a retailer or other person is to be deleted if the goods are sourced from a supplier covered by the small business exemption (SBE). If a person acquires goods from an SBE supplier, the person will not be liable on any subsequent retail sale or AOU of the goods solely on the basis that they are untaxed goods. The change will, however, not remove any other liability that a retailer may have in relation to the goods under any other assessable dealing.

B. Background

3.2 The existing law assumes that a person will be liable to tax on goods not previously taxed, either because the person has manufactured them or has purchased them under quote. If the goods are acquired tax-free in other ways, such as a transfer of goods by court order, and the goods do not pass through a normal taxing point such as a wholesale sale, then the goods are not liable to tax. The new law will close this gap by imposing a liability on a retail sale or AOU of goods that have not previously passed through a taxing point [existing clause 21 of the Assessment Bill] .

3.3 The effect of the new law is that, if a retailer purchases goods from a person covered by the SBE, then those goods will be untaxed goods and a retailer will be liable to pay tax on them when they are sold or applied to own use.

C. Explanation of the changes

3.4 In response to difficulties identified by retailers in identifying, at the point of retail sale, goods previously covered by the SBE, the untaxed goods assessable dealing will be amended so that it does not apply to such goods. The amendments will apply to both retail sales and applications to own use of untaxed goods.