Bills Digest no. 87 2009–10
Tax Laws Amendment (2009 GST Administration Measures)
Bill 2009
WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Passage history
Purpose
Background
Financial implications
Main provisions
Contact officer & copyright details
Passage history
Tax Laws Amendment (2009 GST Administration
Measures) Bill 2009
Date introduced: 25 November 2009
House: House of
Representatives
Portfolio: Treasury
Commencement: The formal provisions of the Bill, together with
Schedules 1 and 3–6, commence on Royal
Assent; Schedule 2 (items 1 and 2) and
Schedule 2 (items 5 to 23) commence on 1 July
2010; and Schedule 2 (items 3 and 4) commences on
the later of Royal Assent or 1 July 2010.
Links: The
relevant links to the Bill, Explanatory Memorandum and second
reading speech can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
at http://www.comlaw.gov.au/.
The Bill amends various tax Acts
to reduce costs associated with the administration of the Goods and
Services Tax (GST). Otherwise it streamlines the GST administration
framework by correcting some current anomalies.
On 11 June 2008, Chris Bowen MP (then Assistant Treasurer)
announced that the Board of Taxation (‘the Board’)
would undertake a review of the legal framework for the
administration of the GST.[1] The focus of the review was on:
- streamlining and improving the operation of the GST;
- reducing compliance costs; and
- removing anomalies.[2]
Mr Bowen indicated that the review was intended to save time and
money for business, particularly small business. However, he also
emphasised that the review would not examine the rate of the GST
nor the scope of goods and services which attract GST. Instead the
review was asked to include the following issues in its
examination:
- the application of the GST to the rulings process
- the period of review
- the application of the general interest charge for overpaid tax
refunds, and
- the Government’s proposal to simplify business activity
statements (known as ‘BAS Easy’).[3]
The Board was urged to consult widely with business and tax
practitioners, and with the states and territories. It was asked to
report to the Government by the end of December 2008.[4]
On 12 May 2009, the then Assistant Treasurer announced the
release of the Board’s report.[5] At the same time, he also announced the
Government’s response to the Board’s 46
recommendations, of which the Government agreed to implement 41.
The current Bill gives effect to some of those recommendations (see
below).
On 6 October 2009, the current Assistant Treasurer, Senator Nick
Sherry, released a draft Bill.[6] Interested parties were invited to comment on all
or some of the exposure draft material by 28 October 2009. Treasury
received nine submissions, of which two were confidential. The
current Bill is almost identical to the exposure draft, with the
main exception of proposed Division 93 of the
A New Tax System (Goods and Services Tax) Act 1999
(‘the GST Act’) and proposed Division
47 of the Fuel Tax Act 2006 (‘the Fuel Tax
Act’), which impose the four-year time limit on entitlements
to input tax and fuel tax credits. The content of those proposed
Divisions is not dissimilar to that in the exposure draft, but
instead of there being only one single section in each Division,
the material is now contained in two or three separate sections and
is much easier to understand. Further details about these
provisions are set out below.
The Bill deals with six main issues, as summarised below.
Schedule 1 imposes a four-year time limit on a
taxpayer’s ability to claim input tax credits and fuel tax
credits.[7] It gives
effect to Recommendation 20 of the Board’s report, which
states:
The law should be amended to limit claims for
input tax credits to a four-year period in line with the time limit
on refunds and credits provision in the Taxation Administration
Act 1953 [for indirect tax liabilities and entitlements] and
to clarify that a taxpayer can defer input tax credit claims
(within these limits) even if they held a tax invoice at the end of
the period to which the credit would otherwise be
attributable.[8]
Currently, the Taxation Administration Act 1953
(‘TAA 1953’) sets a four-year limitation period for the
claiming of indirect tax liabilities and entitlements (including
input tax credits and fuel tax credits). The limitation period
starts from the end of the tax period to which the relevant credit
is attributable.[9]
However, the attribution rules in the GST Act and the Fuel Tax Act
allow the taxpayer to defer the attribution of credits until a
later tax period, thereby diluting the effectiveness of
establishing the time limit in the first place.[10]
The amendments in Schedule 1 strengthen the
effectiveness of the current limitation period by disentitling a
taxpayer to claim an input tax credit or a fuel tax credit if the
credit has not been claimed within four years of the date to which
the credit would have been attributable under the attribution
rules. There are, however, some exceptions to the application of
the amendments, such as where:
- the credit arises as a result of the taxpayer becoming entitled
to a refund,[11]
or
- the Commissioner of Taxation is satisfied that the taxpayer was
engaged in GST- or fuel tax-related fraud or evasion giving rise to
a credit.
A taxpayer’s entitlement to the credits will not cease in
these circumstances unless the taxpayer ‘has not borne tax on
the acquisition to which the credit relates’.[12]
Schedule 2 allows residents of
Australia’s external territories (such as Norfolk Island and
Christmas Island) to claim refunds of GST and (in some
circumstances, refunds of wine equalisation tax) under the tourist
refund scheme if they can prove the goods were exported to the
territory within the required time after the goods were acquired.
Schedule 2 amends:
- Division 168 of the GST Act (which deals with the tourist
refund scheme)
- Subdivision 38-E of the GST Act (which provides that exports
and other goods that are supplied for consumption outside Australia
are exempt from the GST), and
- Division 25 of the A New Tax System (Wine Equalisation Tax)
Act 1999 (‘WET Act’) (which also deals with the
tourist refund scheme).
In summary, the tourist refund scheme (original emphasis):
... enables you to claim a refund, subject to
certain conditions, of the goods and services tax (GST) and wine
equalisation tax (WET) that you pay on goods you buy in
Australia.
To claim a refund you must:
- Spend $300 (GST inclusive) or more in the one store and get a
single tax invoice
- Buy goods no more than 30 days before departure
- Wear or carry the goods on board the aircraft or ship and
present them along with your original tax invoice, passport and
international boarding pass to a Customs Officer at a TRS
facility
...
The refund only applies to goods you take with
you as hand luggage or wear (unless aviation
security measures, effective from 31 March 2007, in regard to
liquids, aerosols and gels prevent you from doing so) onto
the aircraft or ship when you leave Australia. It does not
apply to services or goods consumed or partly consumed in
Australia, such as wine, chocolate or perfume. However, unlike
other tourist shopping schemes, most of the goods, such as clothing
and cameras, can be used in Australia before departure.
The TRS is open to all overseas visitors and
Australian residents, except operating air and sea
crew.
The GST refund is calculated by dividing the
total amount of the purchase by 11. The WET refund is 14.5 percent
of the price paid for wine. For example, if you buy goods for a
GST-inclusive price of $660 you will receive a refund of $60. If
the $660 is made up of a camera ($460) and wine ($200), you will
receive a total refund of $89 (total GST refund of $60 plus $29 WET
refund on the wine).[13]
Schedule 2 gives effect to Recommendation 31 of
the Board’s report, which states:
A system should be introduced under which
residents of Australia’s External Territories (Norfolk, Cocos
& Keeling, and Christmas Islands) can claim refunds under the
Tourist Refund Scheme if they can show proof of shipping of
exported goods to their External Territory.[14]
Schedule 3 increases the range of entities that
are entitled to act as a principal for GST purposes (and thus have
access to simplified accounting rules). It amends
Subdivision 153-B of the GST Act, which deals with principals
and agents as separate suppliers or acquirers of goods and services
that are subject to the GST.
Currently, only agents (or intermediaries) that are
‘common law agents’ are entitled to enter into
agreements with principals for the supply or acquisition of goods
and services.[15]
Some of these acquisitions and supplies may be treated for GST
purposes as ‘taxable supplies’ and ‘creditable
acquisitions’ made by the agent to or from the
principal.[16]
Under the amendments, the arrangements in Subdivision 153-B will
not be restricted to intermediaries who are common law agents. For
example, they will be able to be used by intermediaries (such as
travel agents) who facilitate supplies or acquisitions to
or from third parties but who do not actually make those
supplies or acquisitions on the principal’s behalf.
The Explanatory Memorandum states that the amendments will
reduce the compliance costs of GST accounting where intermediaries
are used by an entity. For example, intermediaries will be able
‘to issue tax invoices for, and be liable for GST payable on
taxable supplies they are taken to make to a third party’.
Intermediaries will be entitled to input tax credits for creditable
acquisitions they are taken to make from a third party, and will
record these on their own Business Activity Statement. Principals
will also be taken to make or acquire a supply to or from the
intermediary.[17]
Schedule 3 gives effect to Recommendation 40 of
the Board’s report, which states:
The scope of the domestic agency provisions
should be broadened to include representatives that operate in a
similar way to, but do not amount to, common law agents, such as
invoicing and commission agents, and consider simplification of the
underlying principles.[18]
Schedule 4 amends Division 126 of the GST Act
to clarify how a gambling operator’s margin is calculated
where the supplies made by the operator are GST-free.
GST is calculated on the basis of the ‘gambling
operator’s margin’, which is the difference between the
bets received by the operator (‘total amounts wagered’)
and the monetary prizes paid to successful gamblers (‘total
monetary prizes’). It is not calculated on individual bets or
prizes, because it would be ‘administratively
complex’.[19]
Instead, GST is applied at the rate of 1/11th of the gambling
operator’s margin.[20] As the Board of Taxation explains, this approach
‘is intended to have the same net result as applying GST to
individual wagers and allowing tax input credits on prizes paid
out’.[21]
However, there is some confusion under the existing law as to
whether prize money paid to entities outside Australia should be
excluded from the calculation of the operator’s total
monetary prizes. This is because when an operator pays prize money
to an entity outside Australia, the supply is GST-free and it
should therefore be excluded from the operator’s total
monetary prizes.[22] Schedule 4 makes it clear that the
phrase ‘total monetary prizes’ in existing
subsection 126-10(1) of the GST Act excludes prize money
payable in relation to GST-free supplies.[23] It gives effect to Recommendation 41
of the Board’s report, which states: ‘The GST law
should be amended to confirm the application of the rules about
gambling to non-resident entities’.[24]
Schedule 5 provides that an overpaid refund (in
relation to GST, luxury car tax or fuel tax) is treated as an
amount due and payable from the date of the overpayment.
The current law does not specify when the overpayment becomes
due and payable, creating a discrepancy in the way in which refunds
and underpayments of liabilities are treated. Currently, the
Commissioner of Taxation is able to impose a general interest
charge (sometimes called the ‘GIC’) on the underpayment
of a liability but he or she is only able to treat an overpaid
refund as an administrative overpayment and apply the general
interest charge from the date of the incorrect refund.[25] However, the Board
notes that ‘a recent court decision has raised doubts about
the Commissioner’s current practice in the recovery of
administrative overpayments’.[26]
Accordingly, Schedule 5 amends the GST Act, the
A New Tax System (Luxury Car Tax) Act 1999 (‘the
Luxury Car Tax Act’) and the Fuel Tax Act to ensure
overclaimed refunds and underpayments of liabilities are treated
consistently, with the result that the general interest charge will
also be applied consistently. It gives effect to Recommendation 44
of the Board’s report, which stated: ‘The law should be
amended to allow over claimed refunds to be treated as an amount of
tax which becomes payable when either refunded to the taxpayer or
applied against a tax debt’.[27]
Schedule 6 ensures that the GST treatment of a
supply to an associate without consideration (that is, payment of
some kind) is to be treated in the same way as an input taxed
supply, a GST-free supply or a financial supply (as appropriate in
the circumstances).[28] Also, where the supply to an associate would otherwise
be a sale for consideration, the supply is taken for GST purposes
to be a supply for consideration and the supply will be taxed as
such.
Under the current law, supplies between associates are treated
in a variety of ways. Ordinarily, for a supply to be a
‘taxable supply’, there must be consideration.[29] However, more often
than not, a supply is made to an associate without consideration
(or for consideration that is less than the market value of the
supply). If a supply is made to an associate without consideration,
the associate is not entitled to a full input tax credit, but the
supply is still regarded as a taxable supply.[30] If the taxable supply is made to
an associate for consideration of less than market value, and the
associate is not entitled to a full input tax credit, GST is
charged on the market value of the supply.[31] Where the associate pays no
consideration (or pays consideration that is less than market
value), the associate is entitled to an input tax credit to the
extent the acquisition is for a creditable purpose.
Schedule 6 gives effect to Recommendation 46 in
the Board’s report, which states: ‘The GST law should
be amended to remedy the interaction of the associate provisions
and other provisions such as those relating to input taxed and
GST-free supplies’.[32]
At the time of writing, the Bill has not been referred to any
committee.
There has been no media comment on the current Bill to date.
However, as mentioned above, the Government released an exposure
draft of the Bill on 6 October 2009 and invited submissions from
the public (see above). Treasury received nine submissions, of
which it published seven on its website. The submissions (from both
large associations such as the Corporate Tax Association of
Australia and CPA Australia and smaller accounting firms) were
largely in favour of the exposure draft. They made suggestions for
the improvement of the imposition of the four-year time limit on
entitlements to input tax and fuel tax credits which are reflected
in the expanded and revised provisions on this issue now contained
in the current Bill. They also made relatively minor suggestions
for the revision of certain draft provisions, including the
application dates for certain of the new provisions. The
Administration of Norfolk Island welcomed the proposed changes to
the tourist refund scheme but made some suggestions to improve the
logistical operation of the scheme for its residents.[33]
There was also some media coverage of the position of other
interest groups at the time of the draft legislation. For example,
Kevin O’Rourke, GST partner at PricewaterhouseCoopers, was
reported as saying that the proposed legislation is ‘a
“grab bag” of issues that had accumulated since the GST
was introduced in 2000. ... It’s related to the housekeeping
of GST and tidying up all the cobwebs that have accumulated over
the past nine years’. He criticised the draft Bill and
explanatory material for being difficult to understand ‘even
by the normal standards of tax law’. Mr O’Rourke is
reported as saying: ‘A diligent suburban accountant or lawyer
would find the wording impenetrable ... It’s been written by
a GST expert for GST experts’.[34]
Craig Whatman, tax partner at Pitcher Partners, would seem to
support the expansion of the agency provisions. He is reported as
saying: ‘Tourism and telecommunications use a lot of
intermediaries and the expansion allows them to get access to the
simplified accounting rules’. However, he went on to say that
the amendments do not go far enough, ‘because [they do not]
generally allow those intermediaries to issue tax invoices on
behalf of the principals, which is a common problem we find in the
property industry’.[35]
The impact of each of the measures contained in the Bill is said
to be unquantifiable.[36] Most of the amounts are expected to be small or
negligible.[37]
Part 1—Amendments relating to
input tax credits
Item 7 of Schedule
1 inserts proposed Division 93 into the
GST Act. It deals with the time limit on entitlements to input tax
credits. Particularly, proposed subsection 93-5(1)
provides that a taxpayer ceases to be entitled to an input tax
credit for a creditable acquisition to the extent the taxpayer has
not taken it into account in working out the taxpayer’s
‘net amount’ for:
(a) the tax period
to which the input tax credit would be attributable under
subsection 29-10(1) or (2); or
(b) any other tax
period for which [the taxpayer gives] to the Commissioner a GST
return during the period of 4 years after the day on which [the
taxpayer was] required to give to the Commissioner a GST return for
the tax period referred to in paragraph (a).[38]
However, proposed section
93-10 sets out three exceptions to the four-year time
limit on a taxpayer’s entitlement to an input tax
credit.[39] In
summary, a taxpayer does not cease to be entitled to an input tax
credit at the expiration of the four-year time limit in
proposed section 93-5 if:
- within the four-year period, the Commissioner of Taxation has
issued a notice to the taxpayer under section 105-50 or 105-55
in Schedule 1 to the TAA 1953 in relation to a refund for
overpayment (or an additional tax liability), and the credit arose
from the circumstances of the taxpayer’s refund or
liability[40]
- the Commissioner of Taxation is satisfied that the taxpayer was
engaged in GST-related fraud or tax evasion, and the credit arose
in those circumstances,[41] or
- within the four-year period, the taxpayer has given a notice to
the Commissioner of Taxation under section 105-55 in Schedule 1 to
the TAA 1953.[42]
Further, in some circumstances, entitlement
to an input tax credit will not be preserved even if one of the
exceptions in proposed section 93-10 exists. These
circumstances are set out in proposed section
93-15 and are summarised in the Explanatory Memorandum as
follows:
- The Commissioner is no longer able to obtain payment of the GST
from the supplier of the taxable supply which relates to the
recipient’s input tax credits sought to be claimed; and
- A tax invoice was not issued for the supply within four
years.[43]
Item 11 of
Schedule 1 to the Bill inserts proposed
Division 133 of the GST Act, dealing with the providing of
additional consideration under contractual ‘gross-up’
clauses.[44]
Particularly, proposed subsection 133-5(1)
provides that a taxpayer may have a ‘decreasing
adjustment’ for additional consideration provided to a
supplier under a contractual ‘gross-up clause’ if:
- the acquisition was originally made on the basis that it was
not a ‘creditable acquisition’ because the supply of
the acquisition was not a ‘taxable supply’ or it was
only partly creditable because the supply was only partly a
‘taxable supply’,[45] and
- to take account of a GST liability that the supplier is
subsequently found to have, the taxpayer provides additional
consideration to the supplier (in compliance with a contractual
obligation) at a time when GST on the supply has not ceased to be
payable but at a time when the taxpayer can no longer claim an
input tax credit.[46]
Proposed section 133-10
states that if a taxpayer has a decreasing adjustment under
proposed Division 19, and the circumstances that
gave rise to the adjustment also constitute an ‘adjustment
event’, then the taxpayer does not have a decreasing
adjustment under section 19-70 of the GST Act for the
acquisition.[47]
Part 2—Amendments relating to
fuel tax credits
Item 17 of
Schedule 1 to the Bill inserts proposed
Division 47 into the Fuel Tax Act, which sets a time limit
on entitlements to fuel tax credits. It is in largely the same
terms as proposed Division 93 of the GST Act (see item 7 of
Schedule 1 to the Bill, discussed above). Proposed section
47-5 provides that a taxpayer’s entitlement to fuel
tax credits cease unless the taxpayer includes them in his/her/its
net fuel amounts within four years. Proposed section
47-10 sets out the three exceptions to the time limit on
entitlements to fuel tax credits (which are the same exceptions
contained in proposed section 93-10 in relation to input tax
credits).
Part 3—Application of
Amendments
Item 19 of
Schedule 1 to the Bill states that the amendments
contained in Part 1 of Schedule 1
apply (and are taken to have applied) in relation to acquisitions
and adjustments that are taken into account in GST returns given to
the Commissioner of Taxation under the GST Act after 7.30pm AEST on
12 May 2009.[48]
The amendments also apply to assessments made by the Commissioner
under Subdivision 105-A in Schedule 1 to the TAA after that time,
and to amendments of the GST returns and assessments just
mentioned.
Item 20 of
Schedule 1 to the Bill provides that the
amendments made by Part 2 of Schedule
1 apply (and are taken to have applied) in relation to
‘acquisitions, manufacturing, importations and
adjustments’ that are taken into account in returns given to
the Commissioner of Taxation under section 61-15 of the Fuel Tax
Act on or after 1 July 2010 (being the start of the
forthcoming financial year) or amendments of such returns.[49]
Items 1–4 of
Schedule 2 to the Bill amend existing
section 38-185 of the GST Act, which sets out when the
export of goods from Australia is GST-free. These amendments are
largely consequential to the amendments made elsewhere in Schedule
2 (see below) and make it clear that where a refund of GST has not
been sought under section 168-5 of the GST Act or section 25-5 of
the WET Act, then the supplier of goods is treated as having
exported the goods from Australia.[50]
Items 5–11 amend
Division 168 of the GST Act, which currently deals with refunds of
GST payable on the supply of goods where the taxpayer takes goods
overseas as accompanied baggage. They expand the operation of the
division to cover residents of Australian external territories who
send goods home.
Item 7 inserts
proposed subsection 168-5(1A), which provides that
if:
- a taxpayer acquires goods, the supply of which is a taxable
supply
- the acquisition is of a kind specified in the regulations
- at the time of the acquisition the taxpayer is an individual
who resides or is domiciled in an external territory, or has
actually been in an external territory continuously or
intermittently during more than half of the last 12 months
- the taxpayer was not registered (or required to be registered)
in relation to the GST at the time of the acquisition, and
- the taxpayer leaves Australia and exports the goods to the
external territory other than as accompanied baggage (in the
circumstances specified in the regulations) or in other
circumstances specified in the regulations,
then the Commissioner of Taxation must (on
behalf of the Commonwealth) pay to the taxpayer an amount equal to
the amount of the GST payable on the taxable supply or such
proportion of that amount of GST as is specified in the
regulations. Under existing subsection 168-5(2)
(as only slightly modified by item 9), the refund
is payable within the period and in the manner specified in the
regulations.[51]
Item 11 inserts
proposed section 168-10, which deals with the
situation where a taxpayer is paid a refund under proposed
subsection 168-5(1A) for a supply, but the supply is or
later becomes a GST-free supply. In that situation, the taxpayer
becomes liable to repay the amount of the refund (known as
‘the recoverable amount’) to the Commonwealth on the
later of the following days:
- the day the taxpayer was paid the recoverable amount, or
- the day the supply becomes a GST-free supply.
The taxpayer is also liable to pay the
general interest charge on the whole or any part of the recoverable
amount that remains unpaid after the due day for amounts that
remain unpaid from the date of the due day until the end of the
last day when either the recoverable amount or the general interest
charge on the recoverable amount remains unpaid.[52]
Items 12–18 amend
Division 25 of the WET Act, which deals with a
taxpayer’s entitlement to a refund of wine tax
‘borne’ by the taxpayer/purchaser where the taxpayer
takes the wine overseas as accompanied baggage.[53] The amendments extend the
entitlement to residents of Australian external territories who
send wine home.
In order for the external territory
resident/taxpayer to be entitled to the refund, the taxpayer must
meet the requirements in proposed subsection
25-5(1A), which are that:
- the taxpayer must have borne wine tax on wine that he or she
purchased
- the purchase must be of a kind specified in the regulations,
and
- an amount is payable by the taxpayer under subsection 168-5(1A)
of the GST Act for the taxable supply corresponding to the
purchase[54]
then the Commissioner of Taxation must (on
behalf of the Commonwealth) pay to the taxpayer an amount equal to
the amount of wine tax that the taxpayer has borne on the wine or
such proportion of that amount of wine tax as is specified in the
regulations.[55]
Items 15 and 16 make very
minor amendments to existing subsections 25-5(2) and
25-5(3), which respectively provide that:
- the regulations may specify how amounts of wine tax borne are
to be worked out, and
- an amount payable under section 25-5 is payable within the
period and in the manner specified in the regulations.
Item 18 inserts
proposed section 25-10 into the WET Act and deals
with the situation where a taxpayer is paid a refund in relation to
wine tax borne on wine purchased by a resident of an Australian
external territory who sent the wine home but where the purchase is
later found to be a GST-free supply.[56] In that situation, the taxpayer
becomes liable to repay the amount of the refund (known as
‘the recoverable amount’) to the Commonwealth on the
later of the following days:
- the day the taxpayer was paid the recoverable amount, or
- the day the supply becomes a GST-free supply.
The taxpayer is also liable to pay the
general interest charge on the whole or any part of the recoverable
amount that remains unpaid after the due day for amounts that
remain unpaid from the date of the due day until the end of the
last day when either the recoverable amount or the general interest
charge on the recoverable amount remains unpaid.[57]
Items 19–22 amend
the TAA 1953. Specifically, items 19 and 20
amend the table in existing subsection 8AAB(5) to
include proposed section 168-10 of the GST Act and
proposed section 25-10 of the WET Act.[58]
Items 21–22 amend
the table in existing subsection 250-10(2) in
Schedule 1 to the TAA 1953 to include proposed section
168-10 of the GST Act and proposed section
25-10 of the WET Act. As mentioned elsewhere in this
Digest, the table in existing
subsection 250-10(2) in Schedule 1 to the TAA 1953 sets out an
index of each tax-related liability under provisions of tax Acts
other than the Income Tax Assessment Act 1936 (‘ITAA
1936’).[59]
Item 23 provides that the
amendments in Schedule 2 to the Bill apply in
relation to goods acquired and wine purchased on or after 1 July
2010 (being the start of the forthcoming financial year). However,
if the proposed Act does not receive Royal Assent on or before that
date, the amendments made by items 3 and 4 of this
Schedule apply in relation to goods acquired and wine purchased on
or after the day the proposed Act receives Royal Assent.[60]
Items 1–28 of
Schedule 3 to the Bill amend existing
Division 153 of the GST Act.
Currently the division sets out the
arrangements under which ‘agents’ are treated (in place
of a principal entity) as suppliers or acquirers of goods and
services for the purposes of the GST. The amendments expand the
range of entities entitled to act as a principal for GST accounting
purposes, primarily by replacing the word ‘agent’ with
the more general term, ‘intermediary’.[61]
Similarly, item 30 amends
existing subsection 382-5(5) in Schedule 1 to the
TAA 1953 to replace the word ‘agent’ with the word
‘intermediary’.[62]
Item 31 provides that the
amendments made by Schedule 3 to the Bill apply in
relation to supplies and acquisitions made on or after 1 July
2010.
Item 1 amends
existing subsection 126-10(3) of the GST Act by
omitting the reference to section 38-270. Existing section
126-10 sets out the formula for calculating a
taxpayer’s ‘global GST amount’ for a particular
tax period, where the taxpayer is a gambling
operator/supplier.[63] Specifically, existing subsection
126-10(3) states that in working out the ‘total
monetary prizes’ component of the formula, one should
disregard any ‘monetary prizes’ the taxpayer is liable
to pay during the tax period ‘that relate to supplies that
are GST-free under section 38-270’.[64]
As a result of the proposed omission of the
current reference to section 38-270 from existing
subsection 126-10(3), in calculating the taxpayer’s
‘total monetary prizes’ one will disregard any
‘monetary prizes’ the taxpayer is liable to pay during
the tax period ‘that relate to supplies that are
GST-free’. In other words, any prize money that a gambling
operator taxpayer is liable to pay to entities outside Australia
will be excluded from the calculation of the taxpayer’s total
monetary prizes (and thus also from the calculation of the
taxpayer’s global GST amount).
Item 2 states that the
amendment made by Schedule 4 to the Bill applies
in relation to monetary prizes a taxpayer becomes liable to pay on
or after the first day of the first quarterly tax period that
starts on or after the commencement of Schedule 4 (being the day
the proposed Act receives Royal Assent), regardless of whether
quarterly tax periods are the tax periods that apply to the
taxpayer in question.
Items 1 and 2 of
Schedule 5 to the Bill amend existing
section 35-5 of the GST Act. Item 1
renames the existing section as ‘subsection 35-5(1)’,
and item 2 inserts proposed subsection
35-5(2).
Existing section 35-5 is
located in Division 35 of the GST Act, which deals with refunds. It
is found in Chapter 2 of that Act, which sets out the basic rules
for the GST. Specifically, section 35-5 states that if a
taxpayer’s net amount for a tax period is less than zero, the
Commissioner ‘must, on behalf of the Commonwealth, pay that
amount (expressed as a positive amount)’ to the taxpayer. If
the Commissioner is late in refunding the amount, interest is
payable under the Taxation (Interest on Overpayments and Early
Payments) Act 1983.
Proposed subsection
35-5(2) provides that if the amount refunded under
proposed subsection 35-5(1) (being existing
section 35-5) has been overpaid, the overpayment is treated as if
it were GST that became due and payable by the taxpayer from the
time the amount was paid to the taxpayer or was applied against a
tax debt. The general interest charge applies to the overpayment
from the date of the overpayment (or refund).
Item 3 states that the
amendment made by item 2 (proposed
subsection 35-5(2)) applies for tax periods starting on or
after the commencement of Schedule 5 (being the day the proposed
Act receives Royal Assent).
Item 4 amends the Luxury
Car Tax Act by inserting proposed section 17-15 to
provide that an overpaid refund of luxury car tax credits must be
repaid. Specifically, it provides that if the amount of a credit
claimed by a taxpayer exceeds the amount to which the taxpayer is
properly entitled under existing section 17-5, the
excess is to be treated as if it were luxury car tax that became
due and payable at the time when the credit was paid to the
taxpayer or applied to reduce a tax debt.[65]
Item 5 states that the
amendment made by item 4 applies in relation to
claims made on or after the commencement of Schedule
5 (being the day the proposed Act receives Royal
Assent).
Item 6 amends
existing section 61-5 of the Fuel Tax Act by
inserting proposed subsection 61-5(3) to provide
that an overpaid refund of fuel tax credits must be repaid.
Existing subsection 61-5(1) sets out a taxpayer’s
entitlement to a refund if the taxpayer’s net fuel amount for
a tax period (or fuel tax return period) is less than zero, and
existing subsection 61-5(2) states that the
entitlement to be paid an amount under
subsection 61-5(1) arises when the taxpayer gives the Commissioner
of Taxation a fuel tax return for the relevant tax period.
Proposed subsection 61-5(3) states that if the
amount (refund) paid to the taxpayer (or applied to a tax debt
under the TAA 1953) is subsequently reduced by the Commissioner,
the amount by which the overpaid refund has been reduced is treated
as if it were a net fuel amount that became due and payable from
the time the refund was paid or applied against a tax debt.
Item 7 states that the
amendment made by item 6 applies in relation to
amounts payable under subsection 61-5 of the Fuel Tax Act for tax
periods (or fuel tax return periods, if the taxpayer is not
registered, nor required to be registered, for GST), starting on or
after the commencement of Schedule 5 (being the
day the proposed Act receives Royal Assent).
Items 8–10 amend the
table in existing subsection 250-10(2) in Schedule
1 to the TAA 1953 to include reference to proposed
subsection 35-5(2) of the GST Act (item 2
of Schedule 5 above), proposed section
17-15 of the Luxury Car Tax Act (item 4
of Schedule 5 above), and existing section
17-25 of the WET Act (which deals with excess wine tax
credits but is not affected by the current Bill).[66]
Item 11 amends existing
table item 36 in existing subsection 250-10(2) in
Schedule 1 to the TAA 1953 to include reference to proposed
subsection 61-5(3) of the Fuel Tax Act (item
6 of Schedule 5 above) alongside the
existing reference to section 61-10 of that Act.
Items 1 and 2 of
Schedule 6 amend existing section
38-185 of the GST Act, which sets out when the export of
goods from Australia is GST-free.[67] The amendments ensure that a supply to an
associate without consideration is treated for GST purposes as
either an input taxed supply; a GST-free supply; or a financial
supply (whichever is appropriate in the circumstances of the
supply).[68] If the
goods are reimported into Australia, the supply is not GST-free,
unless the reimportation is a ‘taxable
importation’.[69]
Item 3 amends
existing Subdivision 72-A of the GST Act to insert
proposed section 72-20 (Supplies and acquisitions
that would otherwise be sales etc) and proposed section
72-25 (Supplies that would otherwise be GST-free, input
taxed or financial supplies). Existing Subdivision
72-A deals with supplies without consideration, and
currently comprises sections 72-5 (Taxable
supplies without consideration), 72-10 (The value
of taxable supplies without consideration) and
72-15 (Attributing the GST to tax periods). It is
located in Division 72, which deals generally with
associates.
Proposed subsection
72-20(1) provides that if, apart from a lack of
consideration, a supply by a taxpayer to an associate (or a
supply to the taxpayer from an associate) would be a sale (or some
other kind of supply), the supply is taken to be a supply of that
kind for the purposes of the GST law.[70] Similarly, proposed
subsection 72-20(2) provides that if, apart from a
lack of consideration, an acquisition by a taxpayer’s
associate from the taxpayer (or an acquisition by the taxpayer from
the associate) would be by sale or some other means, the
acquisition is taken to be an acquisition by that means for the
purposes of the GST law.
Proposed section 72-25
provides that the fact that a supply to or from a taxpayer’s
associate is without consideration does not stop the supply from
being (for the purposes of the GST law) a GST-free supply; a supply
that is input taxed; or a financial supply.
Item 4 states that the
amendments made by Schedule 6 apply in relation to
supplies and acquisitions made on or after the commencement of
Schedule 6 (being the day the proposed Act
receives Royal Assent).
C
Bowen MP (then Assistant Treasurer), Government Acts to Reduce
GST Compliance Costs for Business, media release, No. 41, 11
June 2008, viewed 19 January 2010,
http://assistant.treasurer.gov.au/DisplayDocs.aspx?doc=pressreleases/2008/041.htm&pageID=003&min=ceb&Year=&DocType=
[2].
Ibid.
[3].
Ibid.
[4].
Ibid.
[5].
C Bowen MP (then Assistant
Treasurer), Government Response to Board of Taxation Review of
GST Administration, media release, No. 42, 12 May 2009, viewed
19 January 2010,
http://assistant.treasurer.gov.au/DisplayDocs.aspx?doc=pressreleases/2009/042.htm&pageID=003&min=ceb&Year=&DocType=0
See also Board of Taxation, ‘Review of the legal framework
for the administration of the GST’, Board of Taxation
website, 2009, viewed 19 January 2010, http://www.taxboard.gov.au/content/gst_administration_review.asp
The report is available at Board of Taxation, Review of the
Legal Framework for the Administration of the Goods and Services
Tax — a report to the Assistant Treasurer and Minister for
Competition Policy and Consumer Affairs, report, December
2008, viewed 19 January
2010,
http://www.taxboard.gov.au/content/GST_administration_review/report/index.asp
[6].
Treasury, ‘GST Administration
Draft Legislation and Exposure Draft’, website, 6
October 2009, viewed 25 January 2010,
http://www.treasury.gov.au/contentitem.asp?NavId=037&ContentID=1631
[7].
An ‘input tax credit’ is
a taxpayer’s entitlement arising out of a ‘creditable
acquisition’ (section 11-20 of the GST Act) or a
‘creditable importation’ (section 15-15 of the GST
Act). For example, under section 11-20 of the GST, a taxpayer makes
a ‘creditable acquisition’ if:
(a) he or she
acquires anything solely or partly for the carrying on of his or
her enterprise and not to make input taxed or private supplies
(b) the
supply to the taxpayer is a taxable supply
(c) the
taxpayer provides (or is liable to provide) consideration (that is,
payment of some kind), and
(d) the
taxpayer is registered, or required to be registered for GST.
In these
circumstances, the taxpayer is entitled to claim an input tax
credit of one-eleventh of the consideration the taxpayer pays or is
liable to pay for the acquisition.
[8].
Board of Taxation, Review of the
Legal Framework for the Administration of the Goods and Services
Tax (report), op. cit., p. 86.
[9].
Section 105–55 in Schedule 1
to the TAA 1953.
[10].
Sections 29–10 of the GST Act (input tax
credits) and section 65–5 of the Fuel Tax Act (fuel tax
credits).
[11].
Sections 105–50 and 105–55 in
Schedule 1 to the TAA 1953.
[12].
Explanatory Memorandum, Tax Laws Amendment (2009
GST Administration Measures) Bill 2009, p. 13.
[13].
Australian Customs and Border Protection
Service, ‘Advice for travellers: About the Tourist Refund
Scheme’, website, viewed 23 January
2010,
http://www.customs.gov.au/site/page4366.asp#e1157
[14].
Board of Taxation, Review of the Legal
Framework for the Administration of the Goods and Services Tax
(report), op. cit., p. 119.
[15].
The term ‘common law agent’ is not
defined in the GST Act. The Explanatory Memorandum explains (at p.
39, paragraph 3.6) that the term means an entity that is authorised
under the common law ‘to act on behalf of the principal so as
to create or affect legal relations between the principal and third
parties’. Representatives of the principal who are not common
law agents (such as billing agents and commissioning agents) are
not covered by Subdivision 153-B of the GST Act. Existing section
153-50 of the GST Act currently sets out the roles of both the
principal and the agent in an arrangement under which the agent is
treated as the supplier or acquirer of the goods or services for
GST purposes in place of the principal.
[16].
The term ‘creditable acquisition’ is
discussed in footnote 7 above. Essentially the term ‘taxable
supply’ is defined in the GST Act a similar way to the term
‘creditable acquisition’. Section 9-5 makes it clear
that a supply is not a ‘taxable supply’ to the
extent it is GST-free or input taxed.
[17].
Explanatory Memorandum, p. 40.
[18].
Board of Taxation, Review of the Legal
Framework for the Administration of the Goods and Services Tax
(report), op. cit., p. 158.
[19].
Ibid., p. 159.
[20].
Subsection 126-10(1) of the GST Act.
[21].
Board of Taxation, Review of the Legal
Framework for the Administration of the Goods and Services Tax
(report), op. cit., p. 159, paragraph 8.1.8.
[22].
Items 2 and 3 in subsection 38-190(1) of the GST
Act.
[23].
Section 38-270 of the GST Act provides that
prize money payable on raffles and bingo competitions run by a
charitable institution, a trustee of a charitable fund, a
gift-deductible entity or a government school is GST-free.
[24].
Board of Taxation, Review of the Legal
Framework for the Administration of the Goods and Services Tax
(report), op. cit., p. 160.
[25].
See sections 8AAZN and 8AAZF of the TAA
1953.
[26].
Board of Taxation, Review of the Legal
Framework for the Administration of the Goods and Services Tax
(report), op. cit., p. 162. While the Board provides no details of
the case, it is reasonably likely to be the decision of the
District Court of South Australia in Deputy Commissioner of
Taxation v De Angelis [2008] SADC 103 (Shaw J, 14 August
2008), viewed 27 January 2010, http://www.austlii.edu.au/au/cases/sa/SADC/2008/103.html,
where the taxpayer’s challenge to the Commissioner’s
practice was upheld (allowed) by the Court. Note, however, that the
same issue was the subject of the decision of the District Court of
New South Wales in Deputy Commissioner of Taxation v Smith
[2008] NSWDC 219 (Truss DCJ, 19 September 2008), viewed
27 January 2010,
http://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/nsw/NSWDC/2008/219.html,
where the taxpayer’s challenge to the Commissioner’s
practice was dismissed.
[27].
Board of Taxation, Review of the Legal
Framework for the Administration of the Goods and Services Tax
(report), op. cit., p. 162.
[28].
Subsection 9-30(1) of the GST Act states that a
supply is GST-free if it is GST-free under Division 38 of
the GST Act (which deals with GST-free supplies) or under a
provision of another Act, or it is a supply of a right to receive a
supply that would be GST-free. Subsection 9-30(2) of the GST
Act states that a supply is input taxed if it is input
taxed under Division 40 of the GST Act (which deals with input
taxed supplies) or under a provision of another Act, or it is a
supply of a right to receive a supply that would be input taxed.
Under section 40-5 of the GST Act, a ‘financial supply’
is input taxed and has the meaning given by the regulations.
Regulation 40-5.08 of the A New Tax System (Goods and Services Tax)
Regulations 1999 sets out when a supply may be a ‘financial
supply’. It provides that a supply is a ‘financial
supply’ if the supply is mentioned as a financial supply in
regulation 40-5.09 or an incidental financial supply in regulation
40-5.10. However, if a supply is mentioned in regulations 40-5.09
and 40-5.12, the supply is not a financial supply. It is not
possible to summarise regulations 40-5.09, 40-5.10 and 40-4.12 here
in any meaningful way.
[29].
Section 9-5 of the GST Act, discussed in
footnote 16 above.
[30].
Section 72-5 of the GST Act.
[31].
Section 72-10 of the GST Act.
[32].
Board of Taxation, Review of the Legal
Framework for the Administration of the Goods and Services Tax
(report), op. cit., p. 166.
[33].
Treasury, ‘Submissions—GST
Administration Draft Legislation and Exposure Draft’,
website, 25 November 2009, viewed 25 January 2010,
http://www.treasury.gov.au/contentitem.asp?ContentID=1671&NavID=037
[34].
J Kehoe and F Anderson, ‘Less red tape for
agents’, Australian Financial Review, 8 October
2009, p. 8, viewed 24 January
2010,
http://parlinfo.aph.gov.au/parlInfo/download/media/pressclp/1CVU6/upload_binary/1cvu60.pdf;fileType=application/pdf#search=%22Review%20of%20the%20Legal%20Framework%22
[35].
Ibid.
[36].
Explanatory Memorandum, pp. 7–10.
[37].
Ibid.
[38].
Section 29-10 of the GST Act sets out the rule
for attributing input tax credits to a taxpayer’s creditable
acquisitions.
[39].
The Explanatory Memorandum provides some useful
examples to illustrate the intended operation of the new law. See
Explanatory Memorandum, pp. 17–20.
[40].
Proposed subsection 93-10(1) of
the GST Act.
[41].
Proposed subsection 93-10(2) of
the GST Act.
[42].
Proposed subsection 93-10(3) of
the GST Act
[43].
Explanatory Memorandum, p. 22, paragraph
1.44.
[44].
The phrase ‘gross-up clause’ refers
to a contractual term requiring the payment of additional
consideration.
[45].
Proposed paragraph 133-5(1)(a).
See the definition of ‘creditable acquisition’ and
‘taxable supply’ in footnotes 7 and 16 above.
[46].
Proposed paragraphs
133-5(b)–(d).
[47].
Section 19-70 of the GST Act deals with
adjustments for acquisitions arising out of ‘adjustment
events’. That term is defined in section 195-1 to have the
meaning given by sections 19-10 and 69-50. Those provisions
respectively set out the general characteristics of adjustment
events, and adjustment events involving elections for GST purposes
relating to meal entertainment and entertainment facilities.
[48].
This date is the date of the then Assistant
Treasurer’s media release setting out the Rudd
Government’s response to the Board of Taxations review of the
legal framework for the administration of the GST. See C Bowen MP
(then Assistant Treasurer), Government response to Board of
Taxation Review of GST Administration, op. cit.
[49].
Section 61-15 of the Fuel Tax Act sets out when
a taxpayer must give the Commissioner of Taxation a return.
[50].
Both sections 168-5 of the GST Act and 25-5 of
the WET Act are the subject of amendment by Schedule
2.
[51].
The regulations would be subject to
parliamentary disallowance under Part 5 of the Legislative
Instruments Act 2003.
[52].
Proposed subsection 168-10(2)
of the GST Act.
[53].
The phrase ‘borne wine tax’ is
defined in section 33-1 of the WET Act to have the meaning given by
Subdivision 31-C of that Act. Subsection 31-10(2) provides that an
entity is taken to have ‘borne wine tax’ on wine if the
entity has become liable to wine tax on an assessable dealing with
the wine. However, the wine tax for which the entity has become
liable is not counted to the extent to which it has been the basis
of a wine tax credit entitlement. Subsection 31-10(3) also provides
that an entity is taken to have ‘borne wine tax’ on
wine if the entity purchased the wine for a price that included
wine tax. However, the amount of wine tax borne is to be reduced by
any amount of the wine tax included in that price that has been
refunded or wine tax credited to the entity.
[54].
Proposed subsection 168-5(1A)
is to be inserted by item 7 of Schedule
2 to the current Bill. See discussion above.
[55].
The regulations would be subject to
parliamentary disallowance under Part 5 of the Legislative
Instruments Act 2003.
[56].
Proposed section 25-10 of the
WET Act is similar to proposed section 168-10 of
the GST Act—see item 11 of Schedule
2 above.
[57].
Proposed subsection 25-10(2) of
the WET Act. The period of time for which the general interest
charge is payable includes both the start and end dates mentioned
above.
[58].
Section 8AAB of the TAA 1953 sets out when the
general interest charge applies. The table in subsection 8AAB(5) is
an index of the provisions of Acts other than the Income Tax
Assessment Act 1936 that deal with liability to pay the
charge.
[59].
The tax-related liability provisions of the ITAA
1936 are set out in a table in
subsection 250-10(1) in Schedule 1 to the TAA 1953.
[60].
Items 3 and 4 of
Schedule 2 to the Bill contain amendments to
existing
subsection 38-185(4) of the GST Act. They relate to
associates covered by proposed paragraph
168-5(1A)(c) of the GST Act—see item
7 of Schedule 2 above, specifically the
residence and domicile requirements that must be satisfied by a
taxpayer wishing to claim a refund in relation to the supply of
goods sent home to an external territory.
[61].
See, for example, items
4–28, which amend existing sections
153-50 (Arrangements under which agents are treated as
suppliers or acquirers), 153-55 (the effect of
these arrangements on suppliers), 153-60 (The
effect of these arrangements on acquisitions) and
153-65 (Determinations that supplies or
acquisitions are taken to be under these arrangements). All
references to ‘agent’ in these provisions are replaced
with the word ‘intermediary’.
[62].
Section 382-5 in Schedule 1 to the TAA currently
requires a record of the arrangement between the intermediary and
the principal to be kept by the principal. Item 30
makes it clear that the intermediary does not need to keep a record
too.
[63].
Existing section 126-10 of the GST Act is
located in existing Division 126, which sets out the special GST
rules that apply to gambling.
[64].
The term ‘monetary prize’ is defined
in section 195-1 of the GST Act to mean any prize, or part of a
prize, in the form of money; or if the prize is given at a
casino—any prize, or part of a prize, in the form of money or
in the form of gambling chips that may be redeemed for money.
[65].
Division 17 of the Luxury Car
Tax Act provides that in some circumstances a taxpayer may be able
to claim a credit for luxury car tax paid by the taxpayer or by the
supplier of the luxury car. Credits are only available to taxpayers
who are not entitled to an adjustment for the circumstance.
Existing section 17-5 sets out the circumstances
when a taxpayer is entitled to a credit for tax borne, and
existing section 17-10 states that the taxpayer
must claim the credit within 4 years of becoming entitled to the
credit, and that a claim for a credit must be made in the approved
form.
[66].
Existing section 250-10 in Schedule 1 to the TAA
1953 sets out a summary of tax-related liabilities under various
provisions of Australian tax law.
[67].
Schedules 1 and 2 to the Bill
also amend existing section 38-185 of the GST Act.
[68].
See footnote 28 above.
[69].
Proposed subsection 38-185(4)
of the GST Act.
[70].
The term ‘GST law’ is defined in
section 195-1 of the GST Act to mean a number of related tax laws
including the GST Act; any Act that imposes GST; the A New Tax
System (Goods and Services Tax Transition) Act 1999; the TAA
1953 (so far as it relates to the three Acts just mentioned); and
regulations made under these or another relevant Act.
Morag Donaldson
29 January 2010
Bills Digest Service
Parliamentary Library
Members, Senators and Parliamentary staff can obtain further
information from the Parliamentary Library on (02) 6277 2795.
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