Advisory Report on the Tax Laws Amendment (2011 Measures No. 9) Bill 2011

On 8 February 2012, the House of Representatives Standing Committee on Economics (the Committee) released its Advisory Report on the Tax Laws Amendment (2011 Measures No. 9) Bill 2011 (the Report). Tax Laws Amendment (2011 Measures No. 9) Bill 2011 (the Bill) contains a package of measures that are intended to fine tune or improve the tax law. The Committee recommended that the Bill be passed without amendment.

The Institute previously lodged a submission on the Bill to the Committee on 9 December 2011 in relation to the following two aspects:

  • Hire purchase amendments (Part 3, Schedule 3) to intended to remove a tax-induced distortion between chattel mortgage and hire purchase
  • New residential premises - Gloxinia - amendments (Schedule 4) of the Bill.

On Friday 16 December 2011, the Institute (represented by Michael Evans and Donna Bagnall) attended the Committee’s inquiry into the Bill to give evidence on our submission. At the hearing, the Institute reiterated the key concerns that we had raised in our submission, which included:

Hire purchase amendment

  • The drafting relies on the general rules to address a specific transaction, so is unclear and technically deficient in a number of respects, such that the new provisions are left to the Commissioner to administer and the courts to construe 
  • Amendments should be made to the GST law, the GST Regulations, and the Luxury Car Tax legislation to make it clear that there are two separate ‘taxable supplies’, and that the GST payable and input tax credits claimable on entering into the hire purchase agreement are attributed upfront by both parties to the tax period in which any payment is made or an invoice is issued under the contract 
  • Accounting aspects are more complex for small business under the proposed amendment, and risks to the revenue are also greater (where the hirer defaults) 
  • The ‘price’ of a car supplied under a hire purchase agreement for the purposes of Division 69 of the A New Tax System (Goods and Services Tax) Act 1999 GST Act and the A New Tax System (Luxury Car Tax) Act 1999 remains as it currently is.

New residential premises

  • The amendment uses highly detailed and prescriptive drafting to address a problem of a general nature – that GST should be payable on newly constructed premises, so it is likely that many cases will not be covered by the amendment in the future
  • The characterisation of ‘conditions’ in the agreement between the developer and the government entity as a ‘barter’ supply is not consistent with similar arrangements in infrastructure arrangements
  • The example in the Explanatory Memorandum of the ‘barter’ transaction should be omitted, and the law should be amended to clarify that the satisfaction of a condition of this nature is not, of itself, a supply or consideration.

Article last Updated 16 February 2012