While the Federal Government has made it clear that GST will not be included in the tax reform review of State and Federal taxes, the following GST measures were announced:
GST and the sale of real property – integrity measure
The Federal Government will not proceed with the tax integrity measure originally announced in the 2005-06 Federal Budget and then deferred in the 2006-07 Federal Budget. This measure was initially designed to prevent the interaction of the margin scheme with the GST-free going concern and the GST-free farmland provisions from inappropriately reducing GST revenue.
Instead, the Federal Government will proceed with a measure to ensure that the interactions between a number of provisions in the GST law do not allow real property transactions to be structured to reduce the GST liability. In particular, this measure provides that, where the margin scheme is used after a GST-free or non-taxable supply, the value added by the registered entity which made that supply is included in determining the GST subsequently payable under the margin scheme. The measure will also strengthen the GST anti-avoidance provisions to ensure that they can apply to contrived arrangements entered into to avoid GST.
Legislation is expected to be introduced in Winter 2008, and will take effect from the date of Royal Assent of the enabling legislation.
GST and international telecommunications – mobile telephone global roaming
The Federal Government will amend the previously announced measure in relation to the GST-free supply of certain telecommunications services to limit it to mobile telephone global roaming services. Consistent with Australia’s obligations under the International Telecommunications Regulations (the ‘Melbourne Agreement’), supplies of mobile global roaming services provided to visitors to Australia will remain GST-free with effect from 1 July 2000. Legislation is expected to be introduced in Spring 2008.
Status of previously announced GST measures
The Federal Government has confirmed that it will not proceed with the following measures announced, but not enacted, by the previous Government:
- GST relief for charities and not-for-profit organisations
- amendments to the Tourist Refund Scheme to allow private providers to refund GST and wine equalisation tax to travellers departing from Australia (although various minor proposals to enhance the Tourist Refund Scheme will proceed, with legislation not expected to be introduced before 2009), and
- the integrity measure regarding interaction of the margin scheme with the GST-free going concern and the GST-free farmland provisions – although see above for details of the related integrity measure which has been announced.
A final decision has not yet been reached on whether to proceed with previously announced measures to clarify the obligations for representatives of incapacitated entities.
GST revenue forecast
GST revenue for 2007-08 is expected to be $840 million higher than forecast. This reflects the stronger than expected growth in consumption which is subject to GST.
For 2008-09, the increase in estimated revenue of $250 million incorporates GST refunds of around $500 million which are expected to be paid following the Federal Court decision in KAP Motors Pty Ltd v Commissioner of Taxation, as well as slower growth in consumption which is subject to GST and private dwelling investment, relative to the estimates.
