Mr SLIPPER (4:55 PM) —I move:

That the bill be now read a second time.

The legislation enacting the new tax system was passed by this parliament in June. Since then, we have seen lower prices for goods such as TVs and stereos, as a result of reductions in wholesale sales tax on these items.

This is just the beginning of the new tax system that will deliver better outcomes for consumers, businesses, families, farmers and the community as a whole.

Since the introduction of the GST legislation, we have been engaged in an extensive consultation process. This process of consultation has involved a broad cross-section of industry and community sector representatives, the states and territories, the tax office and other Commonwealth departments.

Through this process, we have assessed the finetuning required to ensure that the GST is implemented in the most effective way. This bill includes amendments that the government considers are necessary to provide a smooth transition to the new tax system.

Financial services

The government stated last year that it would consult with industry before finalising the approach to the taxation of financial services under the GST.

To this end, the Treasurer circulated a consultation document in August this year, with approximately 80 submissions being received from the financial services sector.

The amendments in this bill and the regulations that have been notified today finetune the tax treatment of financial services without changing the fundamental policy outlined in A New Tax System. The regulations also outline the range of services that will be eligible for a reduced input tax credit.

The regulations contain a substantial list of examples that have been included to promote clarity. The examples demonstrate the government's policy intention in a format to suit the industry. Accordingly, the examples form an important basis on which the industry can plan for and proceed with implementation to be ready for the new tax arrangements on 1 July 2000.

The combination of the reduced input tax credit—a uniquely Australian feature—and the general treatment of financial services means that the government has more comprehensively addressed the bias to insource than any other comparable GST or VAT regime. The reduced input tax credit mechanism will particularly benefit smaller financial service providers, such as credit unions.

The limited scope of input taxation together with the reduced input tax credit mechanism provides some additional benefits by:

. delivering a substantial compliance benefit for a large number of suppliers to the financial sector, who are no longer required to deal with input taxation; and

. improving the competitive position of domestic financial service providers.

The government also proposes a number of amendments relating to the application of GST and state regulated insurance schemes, in particular amendments to simplify the application of GST to workers compensation and compulsory third party insurance.

The government has also included regulation making powers to ensure that statutory compensation and insurance schemes are appropriately treated under the GST. Input tax credits will be denied on compulsory third party insurance for three years, with the result that business will have no GST liability on related payouts. This bill also proposes an amendment removing the value of any state stamp duty from the calculation of GST on insurance premiums.

Separate from the financial services sector measures, this bill makes a number of minor amendments that will finetune the GST legislation. These amendments include several technical refinements and some consequential amendments to other Commonwealth legislation.

Imported telecommunications services

With the substantial growth in the availability of telecommunications products, this bill proposes an amendment to ensure that the GST captures all telecommunications services that are used in Australia, irrespective of where the supplier is based. This amendment makes sure that the domestic industry is not put at a competitive disadvantage.

This bill also clarifies the way in which GST registration, branching and grouping arrangements apply to government entities. As such, amendments are proposed to allow each government to be able to decide which of their subentities will be treated as separate branches for GST purposes, and will be able to group as they choose.

In relation to second-hand goods, this bill proposes changes that will better achieve the original policy intent of the second-hand goods provisions. We are clarifying the treatment of goods that are acquired whole and then broken down for sale, such as in the case of motor vehicle dismantlers, or goods acquired collectively and sold separately, such as goods purchased in lots at auction. We are eliminating much of the administrative burden associated with small items. We are proposing an antiavoidance measure to require substantiation of the price of second-hand goods from the unregistered sector. We are excluding animals and livestock from the definition of second-hand goods.

This bill also contains amendments to remove GST from the calculation of the tax base of the petroleum resource rate tax. This is a consequential taxation issue, reinforcing the government's intention not to increase the revenue received from other Commonwealth taxes as a result of the GST. This bill also amends the A New Tax System (Commonwealth-State Financial Arrangements) Act 1999 to ensure that GST revenues paid to the states and territories are not reduced by credits or other offsets associated with the wine equalisation tax and the luxury car tax. The amendments will also ensure that states and territories will receive the general interest charges collected on unpaid GST. Full details of the measures in the bill are contained in the explanatory memorandum. I commend the bill to the House.

Debate (on motion by Mr Thomson) adjourned.