Bills Digest 23 1996-97 Sales Tax Laws Amendment Bill (No. 1) 1996

Numerical Index | Alphabetical Index

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.


Passage History

Sales Tax Laws Amendment Bill (No. 1) 1996

Date Introduced: 27 June 1996
House: House of representatives
Portfolio: Treasury
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 June 1996.

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 1996-97.

Main Provisions

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.

Contact Officer and Copyright Details

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 amendments.

PRS staff are available to discuss the paper's contents with Senators and Members and their staff but not with members of the public.

ISSN 1323-9032
© Commonwealth of Australia 1996

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Published by the Department of the Parliamentary Library, 1996.

This page was prepared by the Parliamentary Library, Commonwealth of Australia
Last updated: 23 August 1996

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