Andrew Leigh (Fenner, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

Since at least 2011, Australia has seen a scam taking place in the gold market. That scam trades on the fact that the Goods and Services Tax applies to scrap gold but not to gold bullion. Exploiting this loophole, there have been gold dealers who, in an unscrupulous manner, have turned gold bullion into scrap. Through a sale, the seller is then able to pocket the Goods and Services Tax and the buyer is able to claim a GST input credit. Since there is no licence required to trade in gold, and transactions below $5,000 do not require the production of identification, it has been possible for unscrupulous dealers to claim a tax benefit through this. Because bullion can be turned into scrap and then back into bullion, the same gold, in certain instances, has simply been on a carousel, allowing unscrupulous dealers to make considerable amounts of money. This was estimated to come at a cost of $65 million in 2013, an estimate that was revised up to $550 million in 2016—and might now involve some $700 million of tax being lost in 2017. That would be consistent with the increased turnover in the scrap gold market, which rose from $150 million in 2011 to $1.8 billion last year. A more than tenfold increase in the scrap gold market is a clear mark of problems going on.

If this were to be a cost of some $700 million to the taxpayer, it would make it one of Australia's biggest ever tax scams. I commend the work of the Australian Taxation Office and the Australian Federal Police through Operation Nosean and subsequent actions. Labor also extends its bipartisan support to changing the GST laws to close this particular loophole.

This bill amends the A New Tax System (Goods and Services Tax) Act 1999 to introduce a reverse charge for business-to-business transactions between suppliers and purchasers of gold, silver and platinum to remove the opportunity for a supplier to avoid paying GST to the Commissioner of Taxation by liquidating. The amendments also clarify the law to ensure that entities cannot exploit the special GST treatment for second-hand goods to claim input tax credits by changing the form of a precious metal they acquire. These amendments will apply in relation to supplies made on or after 1 April 2017, having been announced by the Minister for Revenue and Financial Services the previous day, 31 March 2017.

The bill creates a new division—division 86-Valuable metals—within the GST act. As I have said, that consists of gold, silver and platinum. Division 86 provides that, generally, the GST on such taxable supplies is reverse charged, such that the recipient of a supply is liable for the GST on the supply in place of the supplier. The amendments also establish a framework for parties to voluntarily reverse charge their supplies of valuable metals, whether or not the mandatory reverse charge applies to the supply. The bill also amends the definition of second-hand goods in section 195-1 to clarify that, generally, goods, to the extent that they consist of gold, silver or platinum, are not second-hand goods. Labor will, therefore, be supporting the bill.

May I also use this opportunity to make a brief remark in relation to an earlier bill that was before the House—the Treasury Laws Amendment (Medicare Levy and Medicare Levy Surcharge) Bill 2017. The minister, in summing up, corrected two erroneous examples that had been made in the ministerial second reading speech. May I also use the opportunity to correct a remark that I made in my second reading speech yesterday. I referred at one point to changes in the bill as an increase in the Medicare levy on middle-income Australians. Of course what I intended to say was that changes in the budget affected the Medicare levy on middle-income Australians. The bill itself simply implements an uncontroversial change to the threshold at which the Medicare levy applies.

Josh Frydenberg (Kooyong, Liberal Party, Minister for the Environment and Energy) Share this | Link to this | Hansard source

Firstly I would like to thank those members who have contributed to this debate. The Treasury Laws Amendment (GST Integrity) Bill 2017 amends the GST law to give effect to changes that were announced on 31 March 2017 by the Minister for Revenue and Financial Services, the Hon. Kelly O'Dwyer MP, and which apply from 1 April 2017.

The bill provides that entities buying gold, silver and platinum that have been supplied as a taxable supply for GST purposes will be required to apply a reverse charge. This means that the purchasers of these goods will remit the GST to the ATO instead of the seller. The bill further clarifies that precious metals are not second-hand goods. The bill is targeted to address the mischief of tax avoidance and fraud and contains provisions and protections to ensure that the effect on business activity is minimised. By making these changes to the GST treatment of precious metals the government is securing additional funding for states and territories, which provide the crucial services, such as hospitals and schools, that Australians rely on. I commend this bill to the House.

Question agreed to.

Bill read a second time.

Rob Mitchell (McEwen, Australian Labor Party) Share this | Link to this | Hansard source

I have received a message from His Excellency the Governor General, recommending in accordance with section 56 of the Constitution an appropriation for the purpose of this bill.