Sales Tax Determination

STD 95/8

Title : Classification of modular garden edging

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FOI status:

may be releasedFOI number: I 1014566

Background

Modular garden edging is produced from a variety of materials including pre-cast concrete, timber, plastic, metal, or a combination of these materials, and is marketed in the form of rolls, lengths, sections or shapes.

Usually, a number of individual garden edging modules or units are joined together, or installed, to construct a fixed garden arrangement. Although the different types of garden edging modules may be fixed in place in a number of ways, they are generally fixed to the ground so as to remain in place either permanently or for a substantial period.

This determination sets out the ATO view on the classification of modular garden edging including goods described as lawn mower strips and tree surrounds .

Issue

What is the sales tax classification of modular garden edging?

Decision

Modular garden edging, made from any combination of materials, is exempt from sales tax under paragraph 39(1)(a) in Schedule 1 to the Sales Tax (Exemptions and Classifications) Act 1992 .

If tax has been paid on modular garden edging of a kind that is exempted by this determination, tax will have been overpaid within the meaning of the credit provisions in both the current and previous Sales Tax legislation. Entitlement to a credit would be subject to a claimant satisfying the normal requirements of the relevant credit provisions.

Note that there is no sales tax liability on garden edging that is constructed or formed in situ from products that are exempt in their own right such as concrete, bricks or timber sleepers.

Date of effect

This determination is effective immediately.

Reasons

We have based our decision on the following legislative provisions:

Sales Tax Assessment Act 1992, subsection 7(2);

Sales Tax (Exemptions and Classifications) Act 1992 Schedule 1, Items 39 and 42

and case law:

Australian Provincial Insurance Co Ltd v. Coroneo (1938) 38 SR (NSW) 700

FC of T v Chubb Australia Ltd 95 ATC 4186, 128 ALR 489.

Under subitem 39(1)(a) , structural building units or architectural building units... are exempt from sales tax if they are of a kind ordinarily used as raw materials in the construction ...of...structures .

The expressions, structural building units or architectural building units and structures , are not defined in the legislation. Therefore the words take their ordinary meaning.

In the context of subitem 39(1)(a) , building units refers to the individual components and parts that are used as materials in the process of constructing a building, fixture or structure. The adjectives structural and architectural refer, respectively, to the essential elements of a building, and to the design and decorative aspects of the building.

Structure refers to something built or constructed (Macquarie Dictionary ). Therefore, a garden edging arrangement that has been built or constructed from a number of individual modules and designed to be fixed in place permanently or for a substantial period of time, would be a structure.

Under subsection 7(2) of the Sales Tax Assessment Act 1992 , goods are taken to be used as raw materials in constructing or repairing property if, and only if, the goods are dealt with in such a way in constructing or repairing property that the goods, or some essential element of the goods, become an integral part of the property.

The garden edging modules have no effective function or operation until they are installed as part of the structure. When installed, they lose their identity as goods, becoming an integral part of the property to which they are attached. Like bricks used in constructing a wall, they are modules or units that are used as raw materials in constructing the garden edging arrangement.

Therefore, garden edging modules fall within the description ...structural building units or architectural building units . They are goods of a kind ordinarily used as raw materials in constructing a garden edging arrangement, which is a structure. They are exempt under subitem 39(1)(a) .

Sales Tax Ruling ST 2029 previously provided exemption for modular timber garden edging on the basis of the classification of its' individual components. This determination, whilst retaining exemption for this type of garden edging, alters the basis for the exemption and therefore ST 2029 is withdrawn.

Communication of the Decision

This determination has been made available for publication by the sales tax publishing houses and will be mailed directly to sellers of these goods that are registered as sales taxpayers with the ATO.

Commissioner of Taxation
30 August 1995

References

ATO references:
NO NAT 95/6460-8

Related Rulings/Determinations:

The determination withdraws ST 2029

Subject References:
modular garden edging;
sales tax exemptions

Legislative References:
Sales Tax (Exemptions and Classifications) Act 1992 Schedule 1, Items 39 and 42
Sales Tax Assessment Act 1992 section 7(2)

Case References:
Australian Provincial Insurance Co Ltd v. Coroneo
(1938) 38 SR (NSW) 700

FC of T v. Chubb Australia Ltd
95 ATC 4186
128 ALR 489