Monday, 21 June 2010
Tax Laws Amendment (2010 GST Administration Measures No. 3) Bill 2010
I rise to speak briefly on the Tax Laws Amendment (2010 GST Administration Measures No. 3) Bill 2010 and I begin by providing a brief outline of this bill. The bill provides three schedules which amend the GST legislation. Schedule 1 amends the GST law to provide that the transport of goods by subcontractors within Australia that forms part of the international transport of those goods by another entity from or to Australia is taxable unless the supply of transport is made to a nonresident that is not in Australia.
Schedule 2 amends the GST law to ensure telecommunications supplies under global roaming arrangements provided to subscribers of nonresident telecommunications suppliers while roaming in Australia remain not subject to GST. The global roaming telecommunications supplies covered by the amendment are mobile telephone global roaming and mobile internet roaming. The amendment makes GST-free the following supplies of global roaming services: the supply made by an Australian resident telecommunications supplier to a nonresident telecommunications supplier of use of its network in Australia and provided to subscribers of the nonresident telecommunications supplier when visiting Australia and the supply by the nonresident telecommunications supplier of global roaming facilities made to its subscribers visiting Australia.
Schedule 3 amends the GST law to ensure that the appropriate amount of goods and services tax is collected and the appropriate amount of input tax credits claimed in situations where there are payments—often referred to as third-party payments—between parties in a supply chain which indirectly alter the price paid or received by the parties for the things supplied but where certain parties in the supply chain are members of the same GST group, GST religious group or GST joint venture. The amendments correct an unintended consequence of recent changes to the GST legislation which created an adjustment to apply in situations where third-party payments are made.
Let me briefly explain each of the schedules. Schedule 1 will reduce GST compliance costs and provide greater certainty for the domestic transport industry by streamlining the application of the GST law to this industry. The changes to the GST treatment of cross-border transport suppliers have been sought by industry and I am sure will be welcome. The changes will reduce nonresident involvement in the Australian GST system, make the GST law consistent for postal and nonpostal goods, and assist subcontracted transport suppliers with tax compliance. This measure is consistent with government initiatives to reduce tax compliance costs particularly for small and medium businesses.
Schedule 2 talks about relief for telecommunication suppliers for global roaming in Australia. Australia is a party to the Melbourne agreement. Article 6.1.3 of the Melbourne agreement provides that tax levied in accordance with the national law of a country on ‘collection charges for international telecommunication services’ can only be collected ‘in respect of international services billed to customers in that country’. This means that international telecommunication supplies made under arrangements for global roaming in Australia provided to subscribers of nonresident telecommunications suppliers’ customers while those subscribers are ‘roaming’ in Australia should not be subject to GST. I understand that up until 14 December 2005 these international telecommunication supplies were not considered to be taxable under the Australian GST law. However the Commissioner of Taxation then determined that these supplies were taxable. Therefore it is necessary to amend the GST law to ensure that the treatment of these supplies remains consistent with the Melbourne agreement.
The type of telecommunication supply provided to the user of a portable device under a global roaming arrangement is not limited by this amendment. Those supplies include transmission of voice, pictures and text messages, email and internet access. A charge that is for the content delivered to a portable device, as distinct from the transmission service to deliver that content, is not covered by this amendment.
Due to the convergence of telecommunication device capabilities in recent years, there are many portable devices which subscribers of non-resident telecommunication suppliers may use to access global roaming in Australia. These include mobile phones, smart phones, personal digital assistants, laptop computers and universal serial bus modems. Global roaming by Australian residents when travelling overseas is not subject to GST as it is not connected with Australia for the purposes of the GST.
Schedule 3 refers to adjustments for third-party payments. The amount of GST paid or input tax credits claimed in a previous tax period may need to be adjusted to ensure that the correct GST outcome is obtained when circumstances change. Adjustments may arise due to, among other things, changes in consideration such as a change in price due to a discount. The law was recently amended to allow a third-party payment adjustment to arise where there is a payment between parties in a supply chain which effectively alters the consideration paid for a thing but which would not have given rise to an adjustment because it would not, ordinarily, alter the consideration for the supply by the payer to its customer, or the consideration paid for the acquisition by the payee from its supplier.
This amendment ensures that an entitlement to a decreasing adjustment will still arise in situations where an entity supplying things to another entity for resale makes a monetary payment to a third party in the supply chain in connection with the third party’s acquisition of something and this payment effectively reduces the price the payer receives for the thing but where the payer and the other entity are members of the same GST group, GST religious group or GST joint venture. The amendment also ensures that an increasing adjustment arises for the recipient of a third-party payment where the payee is registered for GST and has acquired the thing for a creditable purpose but where the payee and the entity from which it acquires the thing are members of the same GST group, GST religious group or GST joint venture. The government has foreshadowed further amendments to the GST legislation to ensure that the appropriate GST outcome is also achieved in situations where the taxable status of a supply which is the subject of a third-party payment changes as it moves through the supply chain.
I make the observation that GST laws and tax laws generally often have unintended consequences as new services become available and as the way services are provided change. There are also unintended consequences as a result of globalisation and international service delivery as both schedules 1 and 2 highlight. As we all know, people are today travelling more often and in greater numbers. With travel comes the need for services, the purchase of goods and the use of communication services and equipment—and we see that on a daily basis around the world today. It does not matter where you are, you will inevitably see people with their iPhones, their normal phones or even laptops carrying on their work, even if they are on the other side of the world. Those services have to be provided by someone from the country from which they are departing originally and then perhaps through the use of other contractors along the way. The use of those services has clearly complicated the GST arrangements in respect of this matter. Not surprisingly, the intent is to try to make the whole process and the transaction much simpler with respect to the application of the GST.
This legislation will simplify Australia’s tax system with respect to the GST, particularly in those areas that I have just spoken about. But the measures are also consistent with other measures that the Rudd government has taken to simplify Australia’s tax systems for all Australians, and particularly for Australian businesses. In the recent budget handed down by the Treasurer, we have seen that there will be a reduction in the company tax rate—from 30 per cent to 28 per cent. That will support some three-quarters of a million businesses here in Australia. By way of making taxation laws much simpler in this country, there will be an asset write-off provision that will be made available to all small businesses in this country, whereby they will be able to write off up to $5,000 of their assets rather than the current $1,000—again, making life for them easier than it was in the past.
In the year 2012-13 we will see standard deductions of $500 for household taxpayers. Again, that will make their life much easier and save them money. I understand that some six million plus household taxpayers would normally use the services of an accountant in order to lodge their tax returns. That figure of $500 will go up to $1,000 in 2013-14. I understand that that will mean that some 8.9 million Australians will find lodging their tax returns much easier and it will save them money because they will not have to, in many cases, engage the use of a tax accountant. For those who do not normally engage the use of a tax accountant, it will simply make their life easier because, if they have a standard deduction of up to $1,000, they will not have to keep a record and track every expenditure they have along the way, as many of them are possibly doing right now.
But I guess the biggest beneficiary of streamlining our tax laws would be small business in this country. The GST measures that I alluded to in this bill would effectively be measures that would be imposed on small businesses—because, along the way, all of the beneficiaries of these measures are small business. I am pleased to see that this is another step in all of the changes made by the Rudd government since coming to office which have assisted small business.
We saw last year, as part of the government’s economic stimulus measures, the 50 per cent tax rebate for capital purchases that applied to small business. I know of many small businesses that took advantage of that. It helped them during a difficult time. We know that the majority of funds in the government’s stimulus packages firstly went to small business in one form or another and then clearly flowed through to the rest of the economy. Again, whether it was the Building the Education Revolution funding, the infrastructure funding or even the direct payments we made to families, who in turn spent those moneys, most of the money went into small businesses in one form or another and enabled them, through those very difficult times, to maintain the staff they had, maintain employment in this country and maintain the viability of their operations. In earlier times, we also put an incredible amount of funding into establishing business enterprise centres around the country, again clearly with an intent of supporting small businesses and providing advice to them. I certainly welcome the money that was put into my own region, both at the Tea Tree Gully Business Enterprise Centre and the Salisbury Business and Export Centre, to assist those two centres with the business advice that they provide to the local community. As I said at the outset, these measures are about simplifying the tax system for Australians, and I have absolutely no doubt that they will be welcomed by individuals and by businesses alike. For those reasons, I commend this bill to the House.