From Chotais, Chartered Accountants

NEWSLETTER No. 99-8                   August 1999

GST Supplement

GST Has Arrived

Amendments

Sales Tax Rate Changes

ACCC Guidelines Now Complete

ATO Activity

What Food will be GST-Free?

GST Has Arrived

After many years in the making a Goods and Services Tax is now a part of the taxation system of Australia.

The legislation was passed prior to 30 June of this year and Royal Assent was given on 8 July 1999.

The passage for the Bills however has not been smooth and following an initial series of amendments, over 140 in all, a second series of amendments was introduced by the Government after negotiation with the Democrats in order to have the Bills passed through the Senate.

Whilst the amendments do not change the basic thrust of the GST legislation, they are important in the day to day workings of the Legislation.

The amendments have introduced another level of complexity to an already rather complex regime. There are now many classification and definitional issues associated with the legislation.

Amendments

Some of the amendments introduced into the legislation include changes in the following areas:

· a clarification of the input tax credits treatment for luxury cars;

· changes as to how a GST applies to insurance transactions;

· a limitation to the application of the anti-avoidance rules;

· the grouping provisions have been extended to include certain partnerships and trusts;

· to allow input credits for expense payment reimbursements to employees, agents and other parties;

· to ensure that certain foods for human consumption are treated as being GST- free;

· to broaden the GST-free treatment of the health exemptions;

· the GST treatment of some education exemptions will change;

· allowing input tax credits for certain financial supplies;

· removal of the diesel fuel rebate system from the GST legislation. Note: this rebate will be dealt with in separate legislation between now and 1 July 2000.

The amendments to the legislation are extensive and do increase the compliance complexities.

Sales Tax Rate Changes

On 28 July 1999 the rate of sales tax for many goods decreased from 32% down to 22%.

Goods included in these categories include televisions, radios, cameras, watches, binoculars etc. However furs and most jewellery do not gain the benefit of a tax decrease.

Refunds of sales tax will be available to many businesses which hold tax paid stock at 28 July where those goods are subject to the rate change.

ACCC Guidelines Now Complete

The Australian Competition Consumer Commission (the ACCC) has now released it final guidelines of the anti profiteering provisions of the Trade Practices Act J974.

These guidelines will be applicable until 1 July 2002.

The guidelines are an important consideration in any pricing decisions to be made by businesses as a result of the introduction of a GST.

In addition to the guidelines the ACCC also has a compliance strategy which will include:

· a citizen’s hotline number;

· monitoring the reduction in the wholesale sales tax in 112 cities and regional centres across Australia;

· the issue of further guidelines;

· the issue of a publication known as ‘News for Business’ on misleading pricing claims; and

· other measures including a strategy to take action against anybody taking advantage of the introduction of a GST.

Further the ACCC will invite many of Australia’s businesses to give a verifiable, public commitment not to engage in price exploitation.

ATO Activity

The Australian Taxation Office (ATO) is calling for matters upon which there is an urgent need to issue public rulings.

The ATO has also indicated that it takes the view that GST was never meant to apply to the supply of benefits to employees.

We await the ATO’s public ruling with interest. However, if is likely that there will need to be further amendment to the legislation to accommodate this.

There are a substantial number of areas where the ATO will also have to state its attitude in relation to a number of technical aspects of the GST legislation.

Areas such as the receipt of deposits from purchasers, the timing of GST payable on contracts which have consideration paid in instalments and clarification in relation to areas of financial supplies.

These are only some of the areas that will need attention by the ATO which is operating in what are uncharted waters.

In the meantime however, businesses will need to begin the implementation process in the absence of a comprehensive set of rulings.

The time limits are now very tight and all businesses should have commenced a review of their operations.

What Food will be GST-Free?

All ‘basic food’ items will be GST-free, whilst any food considered to be ‘non-basic’ will be subject to GST.

‘Basic food’ items include:

· food for human consumption;

· ingredients for food for human consumption;

· beverages (including water);

· ingredients for beverages;

· any food item that will be mixed or added to food for human consumption (for example, seasonings, spices, condiments, flavourings and sweetening agents); and

· fats and oils used for culinary purposes.

Examples of ‘non basic’ food items that will be subject to GST include:

· snack foods;

· alcoholic beverages, soft drinks and similar beverages like flavoured milk;

· confectionery;

· ice cream and related frozen products like frozen yogurt;

· biscuits; and

· food provided in the course of catering including takeaway food and fully prepared meals sold in supermarkets.

Send mail to webmaster@chotais.com.au with questions or comments about this web site.
Copyright © 1999 Chotais, Chartered Accountants
Last modified: August 11, 1999