This Digest is prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments.
This Digest was available from 29 August 1996.
Sales Tax Laws Amendment Bill (No. 1) 1996
Date Introduced: 27 June 1996
House: House of representatives
Commencement: 3.15 pm on 11 June 1996
To remove the sales tax exemption for government bodies in
respect of cars and parts and accessories for cars where the
vehicle is provided as part of a remuneration package.
Items 64 and 126 to 130 of Schedule 1 of the Sales Tax
(Exemptions and Classifications) Act 1992 exempt most
government bodies, including State, Territory and local government
bodies, from sales tax so long as the good exempted from the tax is
held for the required time. This is generally the lesser of 2 years
and the effective life of the good.
On 11 June 1996, immediately prior to the 1996 Premier's
Conference, the Treasurer released an offer to the States that
would see real per capita funding maintained but Commonwealth,
State and local governments and bodies becoming subject to sales
tax. It was announced that sales tax would apply immediately to
cars bought by governments and government bodies and that the
exemption for all other goods would be removed in the August
budget. It was estimated that the sales tax on cars would cost
State governments approximately $300 million a year and local
government approximately $50 million per year. The removal of all
exemptions was estimated to cost such bodies approximately $900
million per year.(1)
Reasons given for the proposed changes were to raise revenue as
part of the deficit reduction program, to place government and
private car buyers in the same position as regards sales tax, to
prevent revenue loss due to the increasing use of cars as part of
government salary packages and to prevent the concession being used
by bodies as a revenue raising source by selling the cars at a
profit as soon as the minimum holding period expired.
As may be expected, the Treasurer's proposals were rejected by
the Premiers and Chief Ministers with their attention being focused
on the possible removal of the general sales tax concession, rather
than that relating to cars. In this regard, emphasis was placed on
the effect the removal would have on health care and education and
also noted the differences that would apply between certain private
non-profit institutions, such as schools and hospitals, which would
remain exempt from sales tax, and similar public institutions that
would be subject to sales tax under the proposed arrangements.
Major reaction from the Premiers and Chief Ministers occurred on 12
On 13 June 1996, negotiations proceeded between the Commonwealth
and States and Territories. The result of the negotiations was that
real per capital general funding would be maintained but that the
States and Territories would make contributions to the Commonwealth
of $619 million in 1996-97, $640 million in 1997-98 and $300
million in 1998-99. In relation to sales tax, it was announced that
the exemption would be removed for general purpose road vehicles
used partly or wholly for private use and provided as part of a
remuneration package. The proposal to remove the exemption for
other products was withdrawn.(2)The explanatory memorandum to the
Bill estimates that the measures relating to sales tax on
government cars will raise between $50 million and $100 million in
Item 1 of Schedule 1 of the Bill will amend section 5 of the
Sales Tax Assessment Act 1992 (the Act) to remove
government bodies from the definition of always exempt person (ie.
those not liable to pay sales tax).
Item 3 of Schedule 1 of the Bill will insert a new section 15E
into the Act which will define when a car is received as part of a
remuneration package. This will be where:
- a car is provided as part of a remuneration package and the car
is provided for the benefit of an employee, an associate of the
employee, an employee of an associate or an associate of the last
mentioned employee; or
- parts or accessories are provided for a car used in a
remuneration package as described above.
A car will not be treated as provided as part of a remuneration
package if its availability is exclusively for work related travel
or private usage is minor, infrequent or irregular.
Proposed section 129A provides that the Commonwealth will be
subject to a notional sales tax. The effect of the amendment is to
allow the transfer of amounts within Commonwealth accounts to take
account of the amount of sales tax that would be payable by the
Commonwealth if it were subject to sales tax.
Items 8 to 13 will amend the Sales Tax (Exemptions and
Classifications) Act 1992 to remove the sales tax exemption
for governments and government bodies where goods are provided as
part of a car remuneration package.
(1) The Australian, 12 June 1996.
(2) The Treasurer, Press Release, 14 June 1996.
Chris Field Ph. 06 277 2439
22 August 1996
Bills Digest Service
Parliamentary Research Service
This Digest does not have any official legal status. Other
sources should be consulted to determine whether the Bill has been
enacted and, if so, whether the subsequent Act reflects further
PRS staff are available to discuss the paper's contents
with Senators and Members and their staff but not with members of
© Commonwealth of Australia 1996
Except to the extent of the uses permitted under the
Copyright Act 1968, no part of this publication may be
reproduced or transmitted in any form or by any means, including
information storage and retrieval systems, without the prior
written consent of the Parliamentary Library, other than by Members
of the Australian Parliament in the course of their official
Published by the Department of the Parliamentary Library,
This page was prepared by the Parliamentary Library,
Commonwealth of Australia
Last updated: 23 August 1996
Back to top