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Tuesday, 15 November 1983
Page: 2741

Question No. 145


Dr Everingham asked the Treasurer, upon notice, on 17 May 1983:

(1) Has the Government broken its pre-election promise not to apply sales tax to tyre retreads.

(2) Will the Government pay the costs of legal action by school bus drivers and other rural owner-driver organisations to establish whether retreading is manufacture and therefore subject to sales tax.


Mr Keating —The answer to the honourable member's question is as follows:

(1) In the course of the recent Federal election campaign the Government, then the Opposition, had been persuaded that a 20 per cent sales tax on the wholesale value of retreaded tyres produced in Australia was undesirable. However, it is now clear that the Government's position in Opposition was not based on the full range of information available.

The following factors caused the Government to adopt its recently announced position:

(a) Where a customer supplies a tyre casing to be retreaded, sales tax will be payable at 20 per cent on the retreading charge only which is, for example, about one-third of the price of a comparable new truck tyre.

(b) Partly offsetting the impact of the sales tax on retreaded tyres, retreaders will no longer be liable for sales tax at 20 per cent on materials such as rubber used for the production of the retread, and at 7.5 per cent on machinery and implements used in the retreading of tyres.

(c) There will continue to be a significant price advantage in respect of retreaded tyres compared with prices of new tyres of the same or similar specifications. In the majority of cases the further tax payable will be the difference between the tax payable on the wholesale value of the retreaded tyre and the tax previously payable on the rubber and other taxable materials used in the retreading process.

(2) Where Legal proceedings are taken against a decision of the Commissioner of Taxation, it is the general practice in the courts for costs to be awarded against the unsuccessful party. It is not the Commissioners's practice to undertake to pay the costs of taxpayers who take proceedings against him in the event that the taxpayer is unsuccessful. The Government is not of the view that the practice should be varied in this instance.