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Thursday, 5 May 1994
Page: 283

Senator WATSON (9.42 a.m.) —I move:

  That this bill be now read a second time.

I seek leave to have the second reading speech incorporated in Hansard.

  Leave granted

  The speech read as follows

The Bill amends the Sales Tax (Exemptions and Classifications) Act 1992 (the Principal Act).

The purpose of my private members bill is to correct an existing sales tax anomaly. The effect of the anomaly is that two wheel drive vehicles attract sales tax of 21% whilst four wheel drive vehicles with the same body type and used for the same purposes are sales tax exempt.

Under the current laws primary producers are able to buy certain motor vehicles free of sales tax in two situations.

In the first situation, any kind of general purpose motor vehicle (except two wheel drive "luxury" vehicles) for use mainly in carrying out a primary production business can be purchased free of sales tax. Vehicles bought under this category must be used exclusively within the primary production premises [Item 2(3)(b) of the First Schedule of the Principal Act].

A farmer may decide to buy a two wheel drive utility that will be used mainly to carry fodder around the farm. However, if the farmer also intends to use the vehicle to collect agricultural goods from his supplier or to transport his family to school the farmer could not purchase the vehicle free of sales tax because it would not be for use exclusively on his primary production premises.

Accordingly, this exemption has only limited application in practice.

The second situation arises under Item 3 of the First Schedule of the Principal Act. Item 3 sets out the types of motor vehicles which are exempt when purchased for use in carrying out activities in the agricultural industry.

The only vehicles eligible for the exemption in this category are four wheel drive vehicles, with body type of jeep, platform, pick up or utility.

This provision therefore excludes from exemption two wheel drive utilities including those manufactured by Ford and General Motors Holden in Australia. All four wheel drive vehicles falling within this exemption are fully imported.

The exemption under item 3 has wide application and is not limited to primary producers. The exemption is also available to contractors engaged in harvesting, crop dusting, fertiliser spreading, fencing, droving and shearing, where the vehicles are purchased mainly for use in work related to agricultural activities.

It appears the restriction of the sales tax exemption to four wheel drive vehicles originated from the approach adopted by the Australian Taxation Office over the years that only four wheel drive vehicles contained specifications which categorised them especially suitable for use for agricultural purposes.

Such a view is no longer tenable or appropriate. In keeping with competition and through the massive ongoing development programs to upgrade the quality and capacity of commercial vehicles, locally manufactured two wheel drive utilities produced by Ford in particular now have performance capabilities that equal most imported four wheel drive vehicles used in the agricultural industry.

The Principal Act should therefore be amended to extend the exemption to two wheel drive vehicles with body type of jeep, platform, pick up or utility. This involves amending Item 3 of the First Schedule as my private members bill seeks to do. The bill extends the exemption to all two wheel drive vehicles, with the appropriate body type, whether they are locally produced or not.

The bill will make two wheel drive vehicles cheaper by several thousand dollars and more price competitive. The increase in demand would increase production and yield employment advantages.

I urge all members of this Chamber to support this bill. I commend the bill for the consideration of this Chamber.

Senator WATSON —I also table the explanatory memorandum relating to the bill. I seek leave to make a short statement to explain the purpose of the bill.

  Leave granted.

Senator WATSON —In February this year my colleague the shadow minister for primary industry, John Anderson, indicated in the national press a major anomaly in the sales tax legislation that created some buying distortions in relation to vehicles used in the agricultural industry. One of the Australian-produced vehicles suffered, therefore, a price discrimination in particular in relation to imported vehicles which were essentially tax free. This bill seeks to remove that anomaly.

  Debate (on motion by Senator Foreman) adjourned.