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Wednesday, 22 August 1984
Page: 181

(Question No. 765)

Senator Maguire asked the Minister representing the Treasurer, upon notice, on 29 March 1984:

(1) Is there a limit below which businesses do not pay sales tax in Australia; if so, what is that limit?

(2) Are there limits below which businesses do not pay similar taxes in Canada and New Zealand; if so, what are those limits?

(3) Would the viability of local, small business improve if the Australian limit was raised to levels applying in Canada and New Zealand?

(4) What would be the cost to revenue in a full year of raising the Australian limit as in (3)?

Senator Walsh —The Treasurer has provided the following answer to the honourable senator's question:

(1) The Commissioner of Taxation has stated that there are provisions in the sales tax law which exempt otherwise taxable goods where the manufacturer has a relatively small turnover or is liable to pay only a small amount of tax per year.

Item 100 (1) in the First Schedule to the Sales Tax (Exemptions and Classifications) Act exempts goods manufactured and sold by a person if the Commissioner is of the opinion that the average annual value of sales of all goods is not, or would not be, in excess of $12,000.

Item 103 in the First Schedule exempts goods manufactured by a person where the amount of sales tax that would otherwise be payable is not, or would not, exceed $250 per annum. Because of the various rates of tax applying to different types of goods, the application of this item depends on the kinds of goods produced by individual manufacturers. For example, a manufacturer with a large turnover of mainly exempt goods and small quantities of taxable goods could be covered by this item and be relieved from collecting a small amount of tax.

The Commissioner emphasised that items 100 (1) and 103 apply only to manufacturers of taxable goods and not to other classes of businesses, such as wholesalers who purchase or import goods for sale to retailers, or to those who import goods for sale to users.

The intention of items 100 (1) and 103 is not to confer a special sales tax advantage on a select group of manufacturers but rather to eliminate the necessity for manufacturers with small turnovers to become registered for sales tax purposes and to collect and remit small amounts of tax on monthly returns. It also has the important effect of reducing the costs of sales tax collection.

(2) There are wide differences in the forms of taxation on goods and commodities of various countries, that is, the scope of the tax, the transactions on which tax is applicable, rates of tax applied and exemptions available. Any comparison of particular aspects of Australian sales tax with legislation covering similar taxes imposed in other countries needs, therefore, to be approached with caution.

Broadly, it is correct to say that there are similar provisions to items 100 (1 ) and 103 in the laws relating to commodity taxes in Canada and New Zealand. In Canada, sales tax is not payable unless annual sales exceed $C50,000. In New Zealand sales tax may not be payable in some cases unless annual sales exceed $ NZ5,000 although special provisions exist for certain industries under which the threshold is $NZ50,000.

(3) Proposals to increase the exemption limits in items 100 (1) and 103 are not new. The levels were last raised in 1979. Similar proposals were considered in connection with the preparation of the August 1983 Budget but it was not found practicable to do so in the prevailing circumstances. Taxpayers whose manufacturing and other businesses are such that their products do not enjoy the benefits of items 100 (1) and 103, but whose goods compete in the market place with goods exempted by these items claim that the present limits are too high and that, in the interest of equity and unbiased market conditions, tax should apply to all similar goods in the same manner.

(4) On the basis of available data it is not practicable to provide a reliable estimate of such a raising of the limit.