Bills Digest no. 102 2011–12
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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.
Law and Bills Digest Section
8 February 2012
Date introduced: 23 November 2011
House: House of Representatives
Portfolio: Home Affairs
Commencement: Sections 1 to 3, Schedule 1, items 1 to 10 and items 13 to 15 commence on Royal Assent. Schedule 1, items 11 and 12 commence immediately after items 26 and 27 of Schedule 1 to the Excise Amendment (Reducing Business Compliance Burden) Act 2011 commence.
Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill's home page, or through http://www.aph.gov.au/bills/. When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the ComLaw website at http://www.comlaw.gov.au/.
The Customs Amendment (Reducing Business Compliance Burden) Bill 2011 (the Bill) amends the Customs Act 1901 and the Income Tax Assessment Act 1997 to allow small business entities to defer the settlement of excise and excise-equivalent customs duties from a weekly cycle to a monthly cycle. The Bill also clarifies the administrative arrangements for periodic settlement permissions.
The Explanatory Memorandum refers to the fact that this proposal was announced in a joint press release by the Treasurer and the then Assistant treasurer in 2008. This press release dealt with a number of tax measures announced by the previous Coalition Government but not enacted at the time when Parliament was prorogued on 15 October 2007. One of the measures was as follows:
Codifying the deferred settlement of excise and excise-equivalent goods
The Government will proceed to codify the existing weekly deferred settlement arrangements for excise and excise-equivalent goods, with an exception to allow small businesses to settle on a monthly cycle. The measure will reduce small business compliance costs under the excise and customs systems.
This measure was originally announced by the then Minister for Revenue and the Assistant Treasurer, Peter Dutton MP in May of 2007 when he noted:
The Government will implement two measures that will reduce compliance costs for businesses that are licensed excise manufacturers or importers of equivalent products. Excisable products include fuel, alcohol (other than wine) and tobacco.
The Government will implement changes to:
Allow small business with deferred settlement permissions to settle their excise and excise-equivalent customs duties on a monthly cycle. The measure is targeted specifically to assist small business and accordingly, eligibility will be linked to the Government’s Small Business Alignment Framework announced by the Treasurer and Minister for Small Business and Tourism on 13 November 2006.
Excisable (Australian-manufactured) or excise equivalent (imported) goods are the following goods on which excise or customs duty has not been paid:
- alcohol or alcoholic products (excluding domestic wine)
- fuel and petroleum products, and
- tobacco products.
Fuel and petroleum products, means goods such as:
- crude oil and condensate
- petroleum fuels – such as petrol, diesel
- bio-fuels – such as biodiesel, ethanol
- solvents – such as white spirits, mineral turpentine
- lubricants – such as oils and greases, and
- gaseous fuels – such as liquefied petroleum gas (LPG), liquefied natural gas (LNG) and compressed natural gas (CNG).
In October 2011, Treasury released draft legislation in relation to the deferred settlement of excise and excise-equivalent customs duties. A number of submissions were received from stakeholders. The Treasury website noted that the draft legislation intended:
to provide businesses with greater flexibility in managing their settlement of excise and excise-equivalent customs duties.
The draft legislation will allow eligible small business entities to apply for a permission to defer their settlement of excise and excise equivalent customs duties to a monthly reporting cycle, as opposed to the existing standard seven day arrangement. Therefore small business entities will be required to lodge 12 returns per year, as opposed to 52 returns per year under the current arrangements.
The draft legislation will also allow eligible producers of goods prescribed by regulations to apply for a permission to defer their settlement of excise and excise-equivalent customs duties to a monthly cycle. The regulations are designed to ensure that existing monthly settlement arrangements for producers of certain petroleum products remain unchanged.
All businesses operating under the existing standard seven day settlement period, beginning Monday and ending Sunday, will become eligible to apply for a new weekly period, to begin on their preferred day. If a business’s permission relates to gaseous fuel, the proposed changes will allow that business to give the Collector a return, on or before the sixth business day following the end of each 7 day period.
The Committee resolved at its meeting on 24 November 2011 that the Bill not be referred to a Committee.
Generally, stakeholders welcomed the proposals contained in the draft legislation to defer settlement of excise and excise-equivalent customs duties. However, enterprises that do not fit the small business entity definition could “see no legitimate reason to make this distinction between small, medium and large entities”. Other submissions from larger entities had similar comments to make. For example the Corporate Tax Association of Australia noted the following:
Although we support these initiatives, we feel that the policy supporting these administrative concessions can be equally applied to large payers of excise who, due to increasing rates of excise and continuing pressure on working capital, would derive the same administrative benefits from such changes.
The compliance costs associated with remitting excise on a weekly basis are not limited to the remitting process itself. As the rates of excise have increased, so too has the necessity for many large remitters to fund excise out of working capital, as the funds are often not recovered from customers for several weeks, if not months. This mismatch has an immediate impact on investment in business operations and raises additional challenges in managing the flow of working capital for those businesses impacted.
In relation to the lodgement process, excise payers also have the connection between the Business Activity Statement (BAS) (for fuel tax credits) and the excise accounting period to manage. The significant misalignment between the BAS and excise accounting periods can often lead to the need to amend the BAS, creating yet another compliance cost to manage.
Several of the submissions were concerned about the effects on competition in the marketplace. The Australian Institute of Petroleum stated categorically that they are “strongly opposed to excise administration arrangements that confer commercial advantage on some businesses within a competitive market but not others, as both of these proposals do”. Diageo Australia noted the following in similar vein:
In the context of the creation of a level playing field for all market players, we note that the market for alcohol products is an extremely competitive one. There are a variety of different enterprise sizes within the industry with the effect that, as currently drafted, the draft Bill would result in some of our competitors enjoying the benefits of increased cash flow and reduced compliance costs while we would not. It is our submission that this would create an unfair competitive advantage for these competitors who would have additional resource to direct to innovation, capital expenditure and advertising and marketing of products. We strongly submit that there is no legitimate reason to provide market participants with such advantages simply on the grounds of their size.
The Explanatory Memorandum outlines the financial impact of the Bill and the Excise Amendment (Reducing Business Compliance Burden) Bill 2011. In particular, a table indicates the financial impact on the Australian Taxation office, the Customs and Border Protection Service and the impact on fiscal balance. It also notes that the ‘measure is expected to result in a small one-off transitional compliance cost with an ongoing, medium reduction in compliance costs for small business entities and gaseous fuel distributors’.
Customs Act 1901
Item 4 repeals existing section 69 and substitutes proposed section 69 which deals with ‘like customable goods and excise-equivalent goods’. Proposed 69(1) provides that a person may apply to the Collector of Customs for permission to deliver into home consumption ‘like customable goods or excise‑equivalent goods’ which are specified in the application and that are goods to which section 68 (entry of imported goods) applies. The person can apply for a seven day period or a calendar month if the person is a small business entity or included in a class prescribed in the regulations; or the ‘like customable goods or excise-equivalent goods’ are of a kind prescribed by the regulations for the purposes of this subparagraph.
Proposed subsection 69(5) provides that the Collector may, on receipt of an application under subsection 69(1) or an advice under subsections 69(13) or (14), give permission to deliver like customable or excise-equivalent goods to which section 68 applies into home consumption from a place specified in the permission and to which the application relates without entering them for that purpose; or refuse permission setting out the reasons in the notice. Proposed subsection 69(7) provides that if a permission applies for a calendar month, the month must be specified in the notice.
Proposed subsection 69(8) sets out the conditions which apply to a permission given under subsection 69(5). In subsection 69(8) reference is made to subsection (4) but the correct reference is to subsection (5). The conditions are as follows:
- a person must give the Collector a return providing particulars by way of a document or electronically if the person’s permission applies to a seven day period and specifies goods but not gaseous fuel in accordance with sections 71K or 71L (communicating with Customs by document or electronically) (proposed subparagraph (8)(a))
- if the permission relates to gaseous fuel, the person must give a return providing particulars to the Collector on or before the seventh day following the end of each seven day period (proposed subparagraph (8)(b))
- if the permission applies to a calendar month and the person is a small business entity, a return must be given to the Collector on or before the 21st day of each calendar month (proposed subparagraph (8)(c))
- if a person’s permission applies to a calendar month and the person is part of a class mentioned in subparagraph (1)(d)(i) or has permission to enter like customable goods or excise-equivalent goods of a kind prescribed in the regulations under subparagraph (1)(d)(ii), is subject to any condition prescribed by the regulations (proposed subparagraph (8)(d))
- a person who ceases to be a small business entity, must advise the Collector in writing as soon as practicable (proposed subparagraph (8)(e))
- a person must advise the Collector in writing if the person ceases to be part of a class mentioned in subparagraph (1)(d)(i) as soon as practicable (proposed subparagraph (8)(f))
- in any case goods imported to which the permission relates must be entered for warehousing before they are delivered for home consumption (proposed subparagraph (8)(g))
- when a return is given to the Collector, the person pays any duty owing at the applicable rate when the goods were delivered for home consumption (proposed subparagraph (8)(h)), and
- any other conditions in the permission which the Collector considers to be appropriate (proposed subparagraph (8)(i)).
The Collector may determine that different conditions apply if subsections (13) or (14) apply (proposed subsection 69(9)). Proposed subsection 69(13) provides that if a person advises the Collector that they have ceased to be a small business entity or included in a class mentioned in subparagraph (1)(d)(i) and the permission relates to a calendar month, the Collector must by a notice in writing revoke the permission from the day specified and give another permission under subsection (5) for a seven day period. Also a person may advise the Collector that they wish to change the seven day period to which their permission applies. The Collector may then revoke, by notice in writing, the existing permission and give another permission under subsection (5) for another seven day period (proposed subsection 69 (14)).
The penalty for not complying with any condition in a permission given under subsection (5) is 50 penalty units or $5500 (proposed subsection 69(10)). It is an offence of strict liability (see section 6.1 of the Criminal Code) (proposed subsection 69(11)). The Collector may revoke the permission by notice in writing, if the person fails to comply with conditions in the permission while it remains in force. Reasons for revoking the permission are to be set out in the notice (proposed subsection 69(12))
Section 273GA lists decisions where an application may be made to the Administrative Appeals Tribunal (AAT) for review of the decision. Item 10 inserts proposed subparagraph (aaba) to specify that a decision under section 69 to impose a condition in relation to a permission is a reviewable decision.
Income Tax Assessment Act 1997
Items 11 to 14 make minor technical amendments.
Members, Senators and Parliamentary staff can obtain further information from the Parliamentary Library on (02) 6277 2442.
. Explanatory Memorandum, Excise Amendment (Reducing Business Compliance Burden) Bill 2011; Customs Amendment (Reducing Business Compliance Burden) Bill 2011, p. 3.
. Corporate Tax Association of Australia Inc., Submission to the public consultation, ibid.
. Australian Institute of Petroleum, Submission to the public consultation, ibid; Caltex Australia, Submission to the public consultation, ibid, 17 October 2011.
. Diageo Australia, Submission to the public consultation, op. cit.
. Explanatory Memorandum, op. cit., p. 3.
. Home consumption is when goods are delivered into the domestic market, including those goods consumed within a licensed site.
. Section 68 of the Customs Act 1901 (the Act) requires certain imported goods to be entered for home consumption or warehousing unless a specific concession exists. An entry for home consumption can be made by submitting an import declaration in respect of the goods, to the Australian Customs and Border Protection Service
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