Commonwealth Numbered Regulations - Explanatory Statements

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A NEW TAX SYSTEM (GOODS AND SERVICES TAX) AMENDMENT REGULATIONS 2011 (NO. 2) (SLI NO 127 OF 2011)

EXPLANATORY STATEMENT

Select Legislative Instrument 2011 No. 127

Issued by authority of the Assistant Treasurer

A New Tax System (Goods and Services Tax) Act 1999

A New Tax System (Goods and Services Tax) Amendment Regulations 2011 (No. 2)

Section 177-15 of the A New Tax System (Goods and Services Tax) Act 1999 (the Act) provides that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.

The Regulations are a legislative instrument for the purposes of the Legislative Instruments Act 2003.

Subsection 81-10(1) of the Act prescribes that the payment of certain Australian fees and charges is not treated as the provision of consideration for a supply, and therefore is exempt from GST.  Subsection 81-10(2) of the Act allows the payment of certain fees and charges prescribed by regulation to be treated as the provision of consideration for a supply.

When the GST was introduced, the Commonwealth, States and Territories agreed that the GST would apply to the commercial activities of government at all levels and the non-commercial activities of government would be outside the scope of the GST.

Under the Intergovernmental Agreement on Federal Financial Relations (IGA) the Parties agreed that Division 81 of the GST Act will exempt Australian taxes, fees and charges from GST in accordance with the following principles:

•            taxes that are in the nature of a compulsory impost for general purposes and compulsory charges by the way of fines or penalties will be exempt from GST;

•            regulatory charges that do not relate to particular goods or services will be exempt from GST, including:

-          fees and charges levied on specific industries and used to finance particular regulatory or other activities in the government sector; and

-          licences, permits and certifications that are required by government prior to undertaking a general activity.

The Regulations are intended to ensure that the GST treatment of particular goods and services supplied by Australian Government agencies is consistent with the principles contained in the IGA.  The Regulations, in conjunction with the amendment to Division 81, are intended to carry on the GST treatment of particular classes of Australian taxes, fees and charges that are currently provided  under the A New Tax System (Goods and Services Tax)(Exempt taxes, fees and charges) Determination 2011 (No. 1).

The fees and charges specified in the Regulation do not fall within the principles contained in the IGA and are therefore not intended to be exempt from GST.

The Regulations commenced on the same day as the accompanying legislation commenced; on 1 July 2011.

These Regulations have been made in accordance with procedures agreed to by the Commonwealth and the States and Territories, in accordance with the A New Tax System (Managing the GST Rate and Base) Act 1999.

A preliminary assessment of the compliance costs of the Regulations found the expected compliance costs for taxpayers to be low. Accordingly, a Regulation Impact Statement was not required and has not been prepared.

Formal public consultation was undertaken because the Regulations impact on the operation of the GST law. However, the Regulations have no revenue effects.

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