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CONTENTS
Passage History
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details
Financial Management and Accountability Amendment Bill
2000
Date Introduced: 10 May 2000
House: House of Representatives
Portfolio: Finance and Administration
Commencement: On Royal Assent
This Bill amends
the Financial Management and Accountability Act
1997 to provide for a standing appropriation of money for
GST notionally paid by Commonwealth agencies and authorities where
an input tax credit or decreasing adjustment arises.
A New Tax System (Goods and Services Tax)
Act 1999 (the GST law) provides(1) that the
Commonwealth and Commonwealth entities (that is, Commonwealth
agencies and authorities) are not subject to the goods and services
tax (GST). However, GST notionally applies to the Commonwealth and
Commonwealth entities.
The effect of this is that Commonwealth agencies
and authorities that supply goods or services will notionally pay
GST on the inputs required to supply those goods or services (such
as office paper, computer equipment, and consultant's fees).
However, they will be entitled to notional input tax credits from
the Australian Taxation Office for any GST paid, or other
adjustments made under the GST law. Therefore, the net effect of
being notionally subject to GST will in most cases be zero.
However, in some cases, Commonwealth agencies and authorities will
not be entitled to input tax credits, for example if they provide
financial supplies, which are input taxed(2) without a
credit being available. In those circumstances, the Commonwealth
will be liable to pay GST.
Although the Commonwealth and Commonwealth
entities will notionally be subject to the GST, no amount for GST
has been or will be included in the annual and special
appropriations bills. Appropriations made for Commonwealth agencies
and authorities specify the net amount that has been allocated by
Parliament. This is consistent with Australian accounting practice,
which is to record expenses and assets net of GST.
(3)
Although the Commonwealth's practice of not
including GST in appropriations is in accordance with current
accounting practice, it is a constitutional requirement that all
payments by the Commonwealth be made under appropriation made by
law.(4) Accordingly, this Bill amends the Financial
Management and Accountability Act 1997 to provide for a
standing appropriation for GST. GST notionally paid on taxable
supplies or taxable importations and recoverable from the
Australian Taxation Office as an input tax credit or decreasing
adjustment will be covered by the standing appropriation, and the
value of the supplies or importations, net of GST, will be covered
by annual or special appropriations.
The Parliamentary Secretary to the Minister for
Finance and Administration claims that:(5)
'Parliamentary control over, and scrutiny of,
expenditure will not be diminished as a result of the additional
appropriation. The additional appropriation will not have any
budgetary impact, as the part of the payment it represents will be
covered by the Commonwealth agency or department as an input tax
credit.'
Proposed section 30A
appropriates money to pay GST on an acquisition or importation made
by a Commonwealth agency or authority where that body will be
entitled to an input tax credit(6) or decreasing
adjustment(7) in respect of the GST paid.
The GST is appropriated immediately before the
payment for the acquisition or importation is made
(proposed subsections 30A(1) and (4)). If the GST
liability arises later than the payment for the acquisition or
importation, the GST is appropriated at the time the input tax
credit or decreasing adjustment arises (proposed
subsections 30A(2) and (5)). This situation may arise
either because the payment is made before 1 July 2000 and GST is
only payable after that date, or because at the time of payment it
was not envisaged that an input tax credit or decreasing adjustment
for the GST would exist.
The standing appropriation will not cover GST
payable on input taxed activities, such as financial supplies. This
is because no input tax credit is available on input taxed
activities. Accordingly, the Commonwealth agency or authority will
need to include the amount of GST in the annual appropriation
sought in respect of goods and services to be used in input taxed
activities.
The appropriation is limited to the total amount
of GST payable as either an input tax credit or decreasing
adjustment (proposed subsections 30A(3) and (6)).
This means that if the acquisition or importation is paid in
instalments, the full amount of GST is not appropriated each time
an instalment is made.
The definitions of 'acquisition', 'importation',
'input tax credit' and 'decreasing adjustment' are those used in
the GST law (proposed subsections 30A(7)).
The Bill combines the requirements of the
Constitution and Australian accounting practice. It provides for a
standing appropriation of money for GST notionally paid by
Commonwealth agencies and authorities, as required by section 83 of
the Constitution. However, by placing the appropriation in the
Financial Management and Accountability Act 1997,
separate from the annual and special appropriation bills, it
reflects accounting practice that the budgets of Commonwealth
agencies and authorities should not include GST.
The appropriation does not cover all payments of
GST made by Commonwealth agencies and authorities, only those GST
payments on an acquisition or importation of goods and services
where that body which would be entitled to an input tax credit or
decreasing adjustment. Significantly, the appropriation will not
cover GST payable on input taxed activities, such as financial
supplies, provided by a Commonwealth agency or authority.
-
- Section 177.1 of the A New Tax System (Goods and Services
Tax) Act 1999.
- 'Input taxed activities' are activities where no GST is payable
on the end-product supplied, but the supplier must pay GST on goods
or services he or she acquires or uses in supplying the
end-product. The supplier does not get an input tax credit for this
GST. Examples of input-taxed activities are financial services,
residential rent and the sale of residential premises.
- The Australian Accounting and Research Foundation's Urgent
Issues Group Abstract 31 (January 2000) states that revenues,
expenses and assets must be recorded net of GST. The accounting
records show the actual (ultimate) cost, so amounts of GST paid on
supplies which will later be recovered as an input tax credit are
not included in estimates of expenditure. An exception is where the
amount of GST incurred by a purchaser is not recoverable from the
taxation authority (for example, purchases for use in input taxed
activities, or where the purchaser is the ultimate consumer of the
goods or services). In this case, the amount including GST should
be recorded for accounting purposes. Additionally, accounting
entries record GST paid and credited in the receivables and
payables journals. A summary of Urgent Issues Group Abstract 31 can
be obtained from the Department of Finance and Administration's
website:
- http://www.dofa.gov.au/gst/contents/account/acc1.htm.
- Section 83 of the Constitution.
- Peter Slipper, MP, Parliamentary Secretary to the Minister for
Finance and Administration, Second Reading Speech, House of
Representatives, Hansard, p. 15342, 10 May 2000.
- An 'input tax credit' arises where an entity imports or
acquires goods or services, which are then used in carrying on its
business or government activities. The ultimate consumer of the
goods or services supplied by that entity will pay GST. The entity
must also pay GST on the goods or services, but will be entitled to
tax credit for that amount, as GST should be paid only once, by the
consumer.
- A 'decreasing adjustment' arises when an event occurs which
affects the supply or acquisition, or amount of consideration paid
for the supply or acquisition, of a good or service so that a
greater input tax credit is payable than was earlier calculated.
The decreasing adjustment is the difference between the amount of
input tax credit initially calculated and the corrected, larger,
amount.
Katrine Del Villar
24 May 2000
Bills Digest Service
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ISSN 1328-8091
© Commonwealth of Australia 2000
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