Sussan Ley (Farrer, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

I am pleased to speak on the Tax Laws Amendment (2010 GST Administration Measures No. 1) Bill 2010. The bill was introduced into the House on 10 February and implements some of the 46 recommendations made by the Board of Taxation from its review of the legal framework for the administration of the GST. Legislation implementing some other recommendations from the Board of Taxation’s review, the Tax Laws Amendment (2009 GST Administration Measures) Bill 2009, passed through the House in an earlier sitting week this year. As I did with the earlier bill, I would like to say at the outset that the coalition will be supporting the passage of this bill through the House and the other place.

Schedule 1 implements recommendation 6 of the board’s report by amending the law to provide for adjustments when payments are made between a payer and a third party. The amendments will mean that, where an entity makes a payment to a third-party consumer, both entities will be able to apply adjustments to reflect the actual amount received and the actual amount paid. This change ensures that the correct amount of GST is remitted by the supplying entity and by the third-party consumer. The amendments in Schedule 1 take effect from 1 July 2010.

Schedule 2 implements recommendation 10 of the board’s report by clarifying the law regarding the attribution of input tax credits to tax periods. Schedule 2 clarifies the law to reflect the Commissioner of Taxation’s current approach. The changes in Schedule 2 will also apply from 1 July 2010. The coalition supports the measures of this bill and I commend the bill to the House.

Shayne Neumann (Blair, Australian Labor Party) Share this | Link to this | Hansard source

I speak in support of the Tax Laws Amendment (2010 GST Administration Measures No. 1) Bill 2010. This bill amends, by way of schedule, the legislation which is known as A New Tax System (Goods and Services Tax) Act 1999. It relates to adjustments for third-party payments and it deals with the attribution of input tax credits. The legislation is important in the sense that it improves the operation of business, gives flexibility and reduces the burdens on business, particularly with respect to the second schedule. The first schedule improves accuracy in arriving at the appropriate amount of GST payable. It also assists with the business arrangements between parties in a supply chain. As the previous speaker said, the first schedule and second schedule arise from recommendations of the Board of Taxation’s review of GST administration.

The first schedule deals with the circumstances where there is a taxpayer at the top, a retailer below that and then a third party below that. Where the first party, the taxpayer, provides some sort of incentive or monetary assistance—say, a manufacturer’s rebate—to the third party, this impacts on the price. As a consequence of these circumstances, business is presented with administrative challenges and difficulties in determining the appropriate amount of GST payable. The Board of Taxation recommended the law be amended in relation to manufacturers’ rebates, which, in effect, adjust the price. For example, if the third party is given a monetary incentive, assistance or a rebate, this will generally be reflected in a reduced price at a lower level in the chain. The law needs to be amended to result in adjustments for the payer and the third party to reflect the actual financial outcome of the transaction and to reflect the business and economic situation emerging between the parties.

Schedule 1, as I said, deals with an important change because it assists in the operation and the integrity of the tax system. Anyone who has been in business knows that it is often the case that parties deal with each other in a supply chain. A manufacturer deals with the ultimate receiver of the goods, but it is not always the case that this situation operates vertically downwards. The changes we are seeking to make here are important and they apply where the price is indirectly altered or when a party receives something for a thing which is supplied. The amount of GST payable or an input tax credit claimed in a previous tax period may need to be adjusted to ensure the correct GST is obtained. As I mentioned before, it is more likely to occur in circumstances where there is a discounted price. The amendment creates an entitlement to a decrease in adjustments in certain situations where an entity, the payer, supplying things to another entity for resale makes a monetary payment to a third party in the chain. I think the amendment is therefore worthy of support.

The second schedule deals with the attribution of input tax credits. Businesses pay GST and they are entitled to credits, otherwise they would have to pass on the GST in the price to consumers. This would obviously have an impact on inflation and on the purchasing power of consumers, so businesses are entitled to claim input tax credits. This prevents GST costs of acquisitions from being incorporated in the taxed price of the goods and services supplied, again effectively reflecting commercial reality. GST input tax credits are generally claimed in the period in which a taxpayer provides that consideration. When they are not claimed at that time, there are compliance, administrative and other regulatory costs associated with amending past tax returns and that puts a burden on business which is unnecessary. To minimise those costs, GST law is intended to allow the business to claim what could be described as an old input tax credit in the current year.

The amendment in this bill, which applies from 1 July 2010, clarifies the law to remove even a shred of doubt or ambiguity that the flexible attribution should apply. The proposed amendment will benefit taxpayers who have what could be described as ‘poor tax compliance’ by allowing one unrelated failure—namely, neglecting to claim input tax credits on time and offset those. In other words, you do not have to go back and re-do your tax returns yet again, with all the costs and administrative burden. You are able to simply claim, in circumstances, the old credit in the current year. It is pretty technical but it does allow flexibility for business. Allowing input tax credits to be attributed to the current period reduces the cost for business and the compliance costs and reduces the complexity. In the circumstances it ought to be supported, and I commend the legislation to the House.

Alan Griffin (Bruce, Australian Labor Party, Minister for Veterans' Affairs) Share this | Link to this | Hansard source

In summing up, firstly I would like to thank those members who participated in this debate on the Tax Laws Amendment (2010 GST Administration Measures No. 1) Bill 2010. The amendments in the bill implement several government measures developed in response to the recommendations of the Board of Taxation in its review of GST administration. The review identified ways to reduce compliance costs, streamline and improve the operation of the GST and remove anomalies.

Schedule 1 addresses concerns raised in submissions to the Board of Taxation’s review of the legal framework for the administration of the GST. Concern was expressed that the adjustment provisions failed to reflect the commercial reality of transactions by not considering related payments to third parties that effectively alter the consideration provided for the supply. The amendments address these concerns by ensuring that adjustments are required in situations in which a payment is made which indirectly alters the price paid or received by the parties for the thing supplied.

Schedule 2 addresses taxpayer concerns about the operation of the present GST law. The amendment clarifies the GST input tax credit attribution rules so that it is clear that it is always possible for taxpayers to claim input tax credits in the current tax period rather than needing to amend prior returns. I commend this bill to the House.

Question agreed to.

Bill read a second time.

Message from the Governor-General recommending appropriation announced.