Bills Digest No. 97 2002-03
Snowy Hydro Corporatisation Amendment Bill
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Snowy Hydro Corporatisation
Amendment Bill 2002
11 December 2002
House: House of Representatives
Portfolio: Industry, Tourism and
The Bill is taken to
have commenced on 26 July 2001 (ie the date on which Snowy Hydro
Limited was incorporated).
To amend the
Snowy Hydro Corporatisation Act 1997 in order to exempt
certain transactions dealing with the process of corporatisation
from the Goods and Services Tax (GST).
The process of corporatisation of the Snowy
Mountains Scheme has been a long and complex process. Its history
dates back to 1993, when reform efforts gained impetus following
the agreement of the Council of Australian Governments (COAG) to
corporatise the Snowy Mountains Hydro-electric Authority (SMHEA) as
an integral part of the energy market reform
In 1997 the Commonwealth, New South Wales and
Victorian governments agreed to a set of Corporatisation
Principles. These Principles covered:
- the formation, corporate governance and equity holdings for the
new company, Snowy Hydro Limited (SHL)
- water arrangements for SHL
- the establishment of the Snowy Water Inquiry
- the New South Wales regulatory arrangements which were to be
imposed on SHL and
- tax matters arising from corporatisation.
The Corporatisation Principles provided the
framework for Snowy corporatisation as a precursor to
corporatisation legislation. That legislation consisted of the
Snowy Hydro Corporatisation Act 1997 passed by the Federal
Parliament on October 1997 and complementary legislation passed by
both the NSW and Victorian Parliaments at the same
On 27 June 2001 SHL, the corporate entity which
has replaced the SMHEA, was incorporated in preparation for
corporatisation. SMHEA was finally corporatised on 28 June 2002.
Upon that date, the Snowy Mountains Hydro-electric Power Act
1949 was repealed and the assets of the SMHEA were transferred
to SHL. The Commonwealth, New South Wales and Victorian Governments
are shareholders in the new company with shareholdings reflecting
the electricity entitlements of the three Governments -
Commonwealth 13%, New South Wales 58% and Victoria
The original intention, conveyed in section 49
of the Snowy Hydro Corporatisation Act 1997, was that
transactions relating to corporatisation should be exempt from tax.
However this intention was overruled in relation to the GST by the
operation of section 177-5 of the A New Tax System (Goods and
Services Tax) Act 1999.(4)
In the Minister's Second Reading Speech to this
Bill, he states that in order to allow corporatisation of the SMHEA
to proceed, the Commonwealth undertook to introduce a Bill to
exempt certain transactions relating to corporatisation from the
The Minister also states that approval of all
State and Territory Treasurers to the amendment has been obtained
in accordance with the requirements of the A New Tax System
(Commonwealth-State Financial Arrangements) Act 1999 and the
intergovernmental agreement on the reform of Commonwealth-State
The Snowy Hydro Corporatisation Amendment Bill
2002 proposes to implement this exemption.
Subsection 49(1) of the Snowy Hydro
Corporatisation Act 1997 provides that the initial steps
involved in corporatisation are not to be subject to taxation. For
example, the issue or transfer of shares (to the Commonwealth,
Victoria or New South Wales) in the Snowy Hydro Company were to be
exempt from tax. Item 1 inserts an explanatory
note at the end of subsection 49(1) which confirms that this
exemption is overruled in relation to GST matters by virtue of
section 177-5 of the A New Tax System (Goods and Services Tax)
Act 1999. However the note also refers the reader to
new section 49A which deals with supplies that are
GST free under the Act.
Item 2 inserts proposed
section 49A into the Act. Proposed subsection
49A(1) exempts certain aspects of corporatisation from
GST. Exemptions from GST apply to:
- the initial issue of shares to the three
- the transfer of assets and liabilities of the
Authority(7) and the Governments that comprise the Snowy
- the assumption and restructure of the Authority's
- the transfer of employees(10)
- the transfer of Authority records(11), and
- the termination of the Snowy Agreements(12).
Proposed subsection 49A(2)
confirms that the GST exemption only applies to the corporatisation
transaction itself and does not impact on the ongoing operation and
application of the GST Act to Snowy Hydro Ltd.
- Department of Industry, Tourism and Resources, Snowy
- Snowy Hydro Corporatisation Act 1997 (NSW) and the
Snowy Hydro Corporatisation Act 1997 (Vic).
- Snowy Mountains Hydro-electric Authority, Annual Report
2001-2002, p. 17.
- Section 177-5 cancels the effect of a provision of another Act
that would have the effect of exempting a person from liability to
pay GST. The cancellation does not apply if the provision of the
other Act commences after section 177-5 commenced; and it refers
specifically to GST payable under the GST Act.
- House of Representatives, Hansard, 11 December 2002,
- Proposed paragraph 49A(1)(a) of the Bill.
- Division 1 of Part 3 of the Commonwealth Snowy Hydro Act.
- Sections 11 and 12 of the New South Wales and Victorian Snowy
- Division 3 of Part 3 of the Commonwealth Act and sections 13 of
the New South Wales and Victorian Acts.
- Part 4 of the Act and section 16 of the New South Wales and
- Section 56 of the Commonwealth Act.
- Section 60 of the Commonwealth Act and sections 53 and 28 of
the New South Wales and Victorian Acts respectively.
Mary Anne Neilsen
3 February 2003
Bills Digest Service
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