OUTLINE OF SALES TAX

Sales Tax will cease as from 1st July 2000 when GST commences in Australia.

Sales tax is a federal tax imposed on goods imported into Australia and goods which are manufactured and go into consumption in Australia. The tax extends to transactions other than sales. However, it does not extend to land or to services unattached to goods or to dealings with choses in action or intangible property which have no connection with goods.

The principal feature of the legislation is that tax is imposed on the last wholesale sale of goods that have not previously been used in Australia. To the extent that goods are not the subject of a wholesale sale, then the law seeks to impose tax on a retail sale, if any, or on the use of the goods. Tax is imposed on the wholesale selling price of the goods or an equivalent notional wholesale alternative. The general rate of tax is 22%, unless goods are specifically listed as being exempt or taxable at some other rate.

A GST will commence operation on 1 July 2000. The Government will repeal wholesale sales tax from this date.

When the GST is introduced, many businesses will be holding inventories of new goods for sale on which sales tax will have been paid. To prevent double taxation, businesses may claim a credit of the sales tax paid against their GST liability.

The Government has also reduced the 32% sales tax rate (applying to ''luxury goods'' to the standard 22% on 29th July 1999. This is to prevent consumers holding off from buying these goods until after the implementation date (when the price is expected to fall). This will not, however, apply to furs and jewellery.

Pay-roll tax is a State and Territory (''State'' ) impost controlled by eight separate legislatures. Accordingly, the requirements, liabilities and rates of tax vary from State to State so that, for example, a particular allowance or benefit that is subject to pay-roll tax in Victoria may well be exempt under the terms of the Queensland pay-roll tax legislation (and vice versa). As a consequence of the variations in the pay-roll tax legislation, and the interpretations of the legislation by the tax authorities, an employer diligently following guidelines laid down in one State may find that this is in breach of the legislation in another State.

The legislation in each State broadly provides for pay-roll tax to be levied on ''wages'' , in cash or in kind, provided by employers to their employees. However, factors determining an employer's liability, which may differ from State to State, include: the definition of the term ''wages'' ; the tax-exempt wage level threshold; any allowable deduction applying to the pay-roll tax threshold; and the applicable rate of tax.

New South Wales, Victoria, Tasmania and South Australia have standardised the administrative provisions relating to pay-roll tax. The changes provide for a common approach to the administration of revenue collection among the participating States (which also includes the Australian Capital Territory (the ''ACT'' )). Western Australia has also standardised its administrative processes.

Pay-roll tax is a tax on wages paid or payable by an employer to an employee. Most employer/employee relationships are readily identifiable. However, there are occasions where the issue is not clear cut and the various legislatures operate to deem certain relationships to be that of an employer/employee so that payments are subject to pay-roll tax. For example, where independent contractors provide services in performance of a work-related contract, the relationship between the two parties may effectively be deemed to be of an employer/ employee nature. On the other hand, where services are provided to end-users by agency-supplied personnel, the liability to pay-roll tax varies from State to State.

Stamp duty is a State and Territory (''State'' ) tax controlled by eight separate legislatures and imposed either at a fixed rate or at an ''ad valorem'' rate on the value of the transaction involved. It applies to land transactions, shares, trust interests, business acquisitions, hiring, renting or leasing agreements nd many other instruments and transactions. The extent of the tax is compounded by the complexity of the legislation, the extra-territorial operation of the legislation of the different States and the lack of harmony between the various State Acts.

A project to overcome these difficulties by rewriting the stamp duties legislation was undertaken as a joint exercise by New South Wales, Victoria, South Australia, Tasmania and the ACT in 1996. At the time, Queensland, Western Australia and the Northern Territory indicated that they would retain their existing legislation.

However, it does not appear that the project will proceed at the present time. As part of its Tax Reform Plan, the federal Government has proposed that the States eliminate some stamp duties by 1 July 2001. In return, the States will receive funding from the GST, which will commence on 1 July 2000 . As a result, the rewrite has been effectively abandoned for the time being. The only State to enact the new legislation was NSW, where it took effect on 1 July 1998. The ACT is also expected to adopt the legislation during the course of 1999.