| Sales Tax Bulletin
Number 39 - Message about the New Tax System Reduction of sales tax rate for some goods taxed at 32% Valid from 08 July 1999 |
Australian Taxation Office |
About this bulletin
Which goods are affected?
When will the rate be
reduced?
How will the reduction in rate
affect me?
Am I entitled to claim the
credit?
How do I calculate the credit?
Do you need more information?
Appendix A
Appendix B
About this bulletin
Under the new tax system, from 1 July 2000 sales tax will be replaced by the goods and services tax (GST). Goods that have been taxed under sales tax for some time at 32% will be taxed at 10% under GST.
As this difference between the rate of sales tax and GST may lead retailers and customers to delay purchases, the sales tax rate has been reduced to 22% from 29 July 1999 for all goods previously taxed at 32%, except fur skin goods, jewellery and precious stones.
This bulletin explains which goods are affected by the reduction in rate and how retailers can claim a credit for tax-paid goods they hold in stock.
This bulletin is a public ruling for the purposes of section 77 of the Sales Tax Assessment Act 1992 and may be relied upon by any person to whom it applies. It is current as at 8 July 1999.
Back to contents
Which goods are affected?
Goods covered by Items 4 to 14 in Schedule 5 to the Sales Tax (Exemptions and Classifications) Act 1992 will have their rate of tax reduced to 22% from 29 July 1999. The goods covered are:
 | studs, tie bars, tie pins and cuff links; |
| precious metal goods and plated ware; |
| watches, clocks, watch bands; |
| binoculars and opera glasses; |
| cameras, including video cameras (but not film); |
| photographic enlargers; |
| film and slide projectors, viewers and screens; |
| tape recorders, video recorders, radios, televisions and stereo players; |
| picture tubes for television receivers; |
| slot machines for gambling and amusement operated by coins or tokens; and |
| parts for many of these goods. |
For a more detailed list of the goods affected see Appendix A.
For the purposes of this bulletin we will refer to these goods as ‘32% goods’. However, you should remember that furs, jewellery and precious stones are not included.
Back to contents
When will the rate be reduced?
The 32% rate on affected goods will be reduced to 22% on 29 July 1999.
Back to contents
How will the reduction in rate affect me?
If you are a manufacturer or a wholesaler, and you deal in any of the goods listed in Appendix A, you should charge sales tax at the rate of 22% on those goods from 29 July 1999.
If you are a retailer and you have been charged tax on your stock of 32% goods that you hold for sale on that date, you may be entitled to a credit for the difference between the amount of tax that was charged to you on purchase or importation and the amount you would have been charged had the rate been 22%. You should ensure that the reduced rate of tax is reflected in your selling price from 29 July 1999.
Back to contents
Am I entitled to claim the credit?
You can claim a credit for the difference between the sales tax calculated at 32% on the goods and the sales tax calculated at 22% on the goods if:
| you were charged sales tax when you bought or imported the 32% goods; |
| you haven’t used the goods either in your business or privately; and |
| you are holding the goods for sale and not for hire or lease on 29 July 1999. |
Back to contents
How do I calculate the credit?
There are three steps to calculating the credit. Those steps are:
| Step 1 | Work out the quantity of 32% goods you hold for sale at 29 July 1999. |
| Step 2 | Work out the difference between the sales tax you were charged at 32% and the sales tax you would have been charged at 22% on each article or groups of articles identified in Step 1. |
| Step 3 | If you haven’t already done so, make adjustments to this figure to allow for discounts, rebates and other variations made by your suppliers to the price charged. |
Step 1 – Work out the quantity of 32% goods you hold for sale
Do I have to do a stocktake?
Many people will need to do a stocktake on 29 July 1999. You can’t work out the quantity of goods held for sale by guessing, or by estimating it based on a previous stocktake. However, you do not need to do a physical stocktake on 29 July 1999 if:
| you keep a continuous, accurate record of your stock on hand by recording all stock movements such as sales, purchases, returns, spoilage or breakages; |
| you complete regular stocktakes throughout the year so that all items are counted at least once; and |
| you apply proper adjustments to your records for any shortages identified by the stocktakes. |
Not all the 32% goods that you have in your business are eligible for the rate reduction credit. The credit can only be claimed for new goods that you hold for sale. You cannot include goods that are second-hand, goods that you have used or goods that are for use in your business.
Can I include spare parts used for repairs?
You cannot claim a credit for 32% goods that will be used in carrying out service contracts, such as repairs. This is because, under the sales tax law these goods are used by you rather than being sold.
For example, parts used in the repair of a camera are used in carrying out a service contract, so you cannot include those goods in your credit claim. On the other hand, the supply and fitting of watch batteries, watch bands and safety chains is a sale rather than a service contract, so you can include these goods in your credit claim.
Can I include my demonstration stock?
Goods that you have set aside for demonstration and that you will sell as second-hand goods, have been used by you and cannot be included in your credit claim. However, if you’re holding goods for sale that you also use for occasional demonstration purposes, you can include these in your credit claim only if you will sell them as new goods with full warranty.
For example, you can claim the rate reduction credit on floor stock of shop-soiled television sets.
Can I include goods put aside on lay-by?
Yes, these goods are held for sale and can be included in your claim. However, if you do include these goods, you will need to adjust their selling price to reflect the reduction in the sales tax.
What if I have stock on ‘sale or return’ from my supplier?
You may hold goods for sale even though they are actually owned by your supplier, for example, goods on consignment, approval or sale or return. As you have not yet been charged sales tax on these goods, you cannot include them in your credit claim.
What if my supplier has a ‘retention of title’ clause in our contract?
Some retailers and suppliers deal with each other under terms which mean that the retailer does not own title in the goods until payment is made to the supplier. If your supplier operates in this way, you may find that you are only charged tax at the 22% rate if payment is made after 29 July 1999 even though you received the goods before that date. Where this happens, your supplier should issue a credit note to tell you that you have been charged tax at the reduced rate of 22%. You must not include these goods in your calculations for the credit. If you have any doubt that you have been charged the 32% rate you should seek confirmation from your supplier.
What if my customers return 32% goods to me?
As a retailer, you may have a policy of allowing a full credit to customers for returns of unused goods. Where 32% goods sold before 29 July 1999 are returned to you for credit after 29 July 1999 and you place them back into your stock for sale, you can treat them as being on hand at 29 July 1999 and include them in your credit claim. You will need to keep evidence of the original sale to your customer and the return to you in case we want to check your claim.
Can I include goods in transit?
Provided you own them, you can include in your credit claim any 32% goods that you’ve bought tax-inclusive even though they have not been delivered to you on 29 July 1999.
What if I return 32% goods to my supplier after 29 July 1999?
You should not include in your rate reduction credit claim, 32% goods that you have returned to your supplier for a credit of the full purchase price. Even though you held them for sale on 29 July 1999, the tax you paid on them will be credited to you by your supplier. If you return the 32% goods after you have claimed your rate reduction credit, you may need to adjust your claim. If this occurs, you should notify us by calling the hotline on 1800 634 905.
Step 2 – Work out the difference between the 32% tax and the 22% tax
You need to work out the amount of sales tax you were charged on each article or group of articles identified in Step 1 and deduct from that, the tax you would have been charged if the rate had been 22%. Alternatively, you can apply a simple formula to the tax charged to calculate the amount of credit you can claim.
Note:- If you hold stocks of single use cameras, you cannot use this simple formula to calculate your credit for those goods. This is because single use cameras include film which is taxed at a different rate to the camera. The method to use is explained at the end of Step 2 (
see ‘Special composite rates of sales tax’ on page 6).(A) Goods bought in Australia
The most accurate way to identify the amount of tax you were charged on your stock is to refer to the purchase invoices. If this is not practicable but your stock records show the actual amount of sales tax charged on each article, you can use that figure.
To calculate how much of this amount to claim as a credit you can apply the following formula:
| Formula 1 | Rate reduction credit = 10/32 of the tax charged to you |
What if my stock system doesn’t show a separate amount for sales tax?
If your stock system only shows a tax-inclusive cost, you can apply the following formula to that amount to work out how much tax you were charged:
| Formula 2 | Tax charged to you = 32/132 of the tax-inclusive cost |
You must then apply Formula 1 to work out your rate reduction credit.
Note: If your stock system includes costs which have not been taxed, these costs should be excluded before applying the formula. For example:
| inward freight; |
| optional warranties; |
| finance charges; |
| insurance; |
| the value of exempt goods such as instruction manuals and electrical adaptors supplied with the main goods; or |
| the value of certain computer programs embedded in goods, such as in digital cameras. |
What if my system shows the average cost?
In many businesses it is not practical to record the actual cost of each article of stock on hand. If your system shows a value for each line of stock which is an average of the cost of each article of stock on hand, you may use that cost to calculate your rate reduction credit.
However, if your system doesn’t show the actual or average cost and uses another method to calculate the cost of each article, you should check with your professional adviser or contact us by phoning our hotline on 1800 634 905 to make sure your system will give you information that is as close as possible to the actual amount you paid for the goods.
What if my system doesn’t give the costs of each line of stock?
You may have a system that only records the current retail selling price for each line of stock. With this kind of system, the cost of stock on hand for your whole business or for each trading department or product group, is usually calculated by reducing the total retail value of the stock by the gross profit margin.
When this kind of system is operated so that it produces a result that is equal to the amount for which you purchased the goods on hand at 29 July 1999, it is an acceptable way to work out the cost of your stock for the rate reduction credit. Provided you are able to separate the 32% goods from goods taxed at other rates, you can calculate the amount of sales tax charged to you by using Formula 2.
The value your stock system gives for your cost of stock will generally not be sufficiently accurate to calculate your rate reduction credit if:
| your system relies on a simple gross profit margin(s) which is the difference between your most recent cost and retail selling prices; or |
| the gross profit margin(s) is not adjusted for mark-downs in retail prices; or |
| you have stocks of goods which have been on hand for a considerable time and there have been significant price rises for that product. |
You will have to make adjustments so that the cost figure is equal to the actual price that you paid for your stock rather than a value that approximates the price for which you could currently purchase it.
If you have any reason to believe that your stock valuation system gives a cost figure which is greater than the amount for which you purchased the goods, you should contact your professional adviser or call the hotline on 1800 634 905 to help you identify appropriate adjustments to make to obtain a correct result.
(B) Goods you have imported
The best way to calculate the credit for goods you have imported, is to take the amount of tax paid from each line entry on the Customs Entry for Home Consumption document, and to apply Formula 1.
You cannot use Formula 2 to work out the amount of tax charged to you, as that will give an incorrect answer.
Where the goods you imported have been subject to Customs Duty at the zero rate, you can apply the following formula provided:
| your tax-inclusive cost is based on the amount which Customs assessed as the customs value; and |
| it doesn’t include any costs which have not been taxed, such as agents’ fees, wharf charges, overseas and local transport costs or any of the costs listed after Formula 2 on page 5. |
If any of these costs are included in your cost, you will need to exclude them before applying the formula.
| Formula 3 | Tax paid to Customs = 27.75% of tax-inclusive cost |
You must then apply Formula 1 to calculate the rate reduction credit.
If Customs Duty has been levied on the goods you have imported, you may apply this formula, but it will give an answer that is slightly less than the amount of tax you paid to Customs.
Special ‘composite’ rates of sales tax
Some 32% goods such as single use cameras also include goods such as photographic film which are taxed at the 22% rate. Rather than charge two separate amounts, each with sales tax added, your supplier may have charged you a single price with a single amount of tax. In the case of single use cameras, this may be approximately 25% to 28%.
To work out your rate reduction credit, you will need to find out the amount of tax charged for each stock item (or groups of products which have the same composite rate applied to them) and also work out the amount of tax that you would have been charged if both the camera and film were taxed at 22%.
The following example explains how this is done:
A retailer has a stock of ten single use cameras
| Tax-inclusive purchase price (excluding any un-taxed costs) | $126.40 |
| Sales tax charged to the retailer on the invoice | $ 26.40 |
| The taxable value of the cameras (purchase price less tax) | $100.00 |
| Sales tax on $100 at 22% is | $ 22.00 |
| Rate reduction credit (tax charged on purchase less tax at 22%) | $ 4.40 |
Step 3 – Make adjustments to allow for discounts, rebates and other
variations made by your suppliers
After you have bought goods, a number of things can happen that can affect your purchase price. Discounts for prompt payment, volume rebates and certain trade incentive rebates are examples of adjustments that reduce your purchase price and the amount of sales tax that is charged to you on the goods.
If you are aware that you have received any of these discounts or rebates, you must adjust your calculation of the amount of tax charged to you before finalising your credit claim. If, after claiming the rate reduction credit, you receive any discounts or rebates which you did not allow for in your calculations, you may need to adjust your claim. If this occurs you should notify us by calling the hotline on 1800 634 905.
If you know that you will receive any of these rebates or discounts after you have lodged your credit claim, we recommend that you allow for them when calculating your claim to avoid having to make an adjustment to it after it has been lodged.
When can I claim the credit?
You can send in your application for the credit at any time from 29 July 1999 and you are encouraged to apply as soon as possible after that date. However, we can only accept your credit claim for up to three years from that date.
Do I have to claim the full credit when I send in the form, or can I make progressive claims?
We would prefer you to claim the full credit when you send in the form. We have put special procedures in place so we can process these claims and issue refunds in the shortest possible time. Those procedures will only be in place for a short time, so we may not be able to process progressive claims as quickly.
How do I claim the credit?
You can only claim the credit from the Tax Office. You can do this by filling out an Application for Refund of Sales Tax form and sending it to:
Private Bag 9808
Dandenong DC
Victoria 3175.
An Application for Refund of Sales Tax form is available from this site or from the Tax Office. Phone our hotline on 1800 634 905 for help.
If you lodge regular sales tax returns, you can offset the credit against your current sales tax liability. However, we have put special procedures in place to enable us to process rate reduction credit claims and to issue refunds in the shortest possible time. We encourage you to use this service rather than making your claim in conjunction with your current sales tax return.
Should I send in a summary of how I calculated my credit claim?
Yes. To help us process your claim as quickly as possible, we recommend that you prepare a summary sheet and send it in with your claim. (An example of a summary sheet is attached at Appendix B.)
Will the Tax Office audit my credit claim?
We intend to check quite a number of credit claims. You should make sure you keep satisfactory records of how you calculated your rate reduction credit.
If we decide to check your claim we will contact you and ask you to verify the amount you have claimed.
Back to contents
Do you need more information?
If you need more information about the reduction in the sales tax rate for relevant 32% goods, please call our hotline on 1800 634 905.
For general sales tax enquiries, please contact the Tax Office:
| by phone on our national enquiry number 13 28 66 – you can ring this number from anywhere in Australia for the cost of a local call; |
| in person by visiting the enquiry counter at certain Tax Offices – Tax Office addresses are listed in TaxPack, and in your White Pages telephone directory; |
| by A Fax from Tax, our 24 hour fax information service – simply call 13 28 60 (local call cost) on your phone or fax and follow the voice prompts; or |
| at this site, ATOassist www.ato.gov.au |
Produced by the Small Business Line of the Australian Taxation Office
NAT2902-7.99
Back to contents
Appendix A
Goods affected by the phase-out of the 32% sales tax rate
Item |
Description of goods |
| 4 | Studs, sleeve links, tie pins, tie chains, tie clips, collar pins, gold or silver safety pins and chains for those pins. |
| 5(1) | Goods consisting principally of a precious metal or precious
metals, but not including:
|
| 5(2) | Plated ware plated with precious metal (other than silver). |
| 5(3) | Goods made of rolled gold. |
| 5(4) | Gold-filled goods. |
| 5(5) | Subitems (2) to (4) do not apply to:
|
| 6(1) | Watches |
| 6(2) | Goods marketed principally as movements or parts for watches. |
| 6(3) | Watch chains and watch bands. |
| 6(4) | Straps and clasps for wristwatches. |
| 7(1) | Clocks, but not including time-recording apparatus, or clock systems, of a kind ordinarily used for business or industrial purposes. |
| 7(2) | Goods marketed principally as movements, parts or keys for clocks covered by subitem (1). |
| 8 | Binoculars and opera glasses, and cases for those goods. |
| 9(1) | Cameras (including cinematograph and stereo cameras), automatic photo booths and other equipment for taking photographs, but not including cameras or equipment of a kind ordinarily used in reproducing documents, drawings and plans. |
9(2) |
Goods marketed principally as parts or accessories for goods covered by subitem (1). |
10(1) |
Photographic enlarging and reducing apparatus, but not including apparatus of a kind ordinarily used in reproducing documents, drawings and plans. |
| 10(2) | Goods marketed principally as parts or accessories for goods covered by subitem (1). |
| 11(1) | Appliances of a kind ordinarily used for the projection of cinematograph films, film strips or photographic slides. |
| 11(2) | Screens of a kind ordinarily used in connection with appliances covered by subitem (1). |
| 11(3) | Appliances of a kind ordinarily used for viewing film strips or photographic slides. |
| 11(4) | Subitems (1) to (3) do not apply to appliances or screens of a kind ordinarily used for business or industrial purposes. |
| 11(5) | Goods marketed principally as parts or accessories for goods covered by subitem (1), (2) or (3). |
| 12(1) | Appliances of a kind ordinarily used for one or more
sound/vision functions, but not including:
|
| 12(2) | Goods of a kind marketed principally as components of, or
auxiliaries to:
|
| 12(3) | Goods that incorporate one or more sound/vision components. This subitem does not apply if the taxable value of the taxable dealing concerned is at least double the amount that it would have been if it had been a dealing only with those components. |
| 12(4) | Goods (other than batteries) marketed principally as parts or accessories for goods covered by subitems (1) to (3). |
| 12(5) | In this Item: "sound/vision component" means any component of goods that (either of itself or with the aid of other components ) allows the goods to be used for a sound/vision function; "sound/vision function" means any of the following:
|
13 |
Cathode ray tubes of a kind ordinarily used in television receivers. |
14(1) |
Goods of a kind ordinarily used for gambling, entertainment or amusement, if the operation of the goods is designed to depend on the insertion of money or tokens in the goods or in other connected or associated goods. |
14(2) |
Coin or token operated goods of a kind ordinarily used while connected to, or associated with, goods covered by subitem (1). |
14(3) |
Goods marketed principally as parts or accessories for goods covered by subitem (1) or (2). |
Back to contents
Appendix B
Calculation Summary for Sales Tax Rate Reduction Credit
General Description of Goods E.g. Clocks (all types) |
Quantity held for sale as at 29/07/99 |
Sales Tax inclusive Cost Price |
Sales Tax Charged (if known, otherwise use Formula 2 or 3) |
Rate Reduction Credit (use Formula 1)
|
Credit to be claimed |
Sales Tax Rate Reduction Credit calculations:
Formula 1 Rate Reduction Credit = 10/32 of Sales Tax Charged to You
Formula 2 Sales Tax Charged to You = 32/132 of Sales Tax Inclusive Cost
Formula 3 Sales Tax Charged by Customs = 27.75% of Tax Inclusive Cost
Back to contents