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Treasury Laws Amendment (Black Economy Taskforce Measures No. 1) Bill 2018

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2016-2017-2018

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

Treasury Laws Amendment (Black Economy Taskforce Measures No. 1) Bill 2018

 

Amendments to be moved on behalf of the Government





SUPPLEMENTARY EXPLANATORY MEMORANDUM

 

 

 

(Circulated by authority of the

Minister for Revenue and Financial Services, Minister for Women and Minister Assisting the Prime Minister for the Public Service the Hon Kelly O’Dwyer MP)

                                                                                                  

 



Table of contents

Glossary............................................................................................................. 1

General outline and financial impact........................................................... 3

Chapter 1 ........... Third party reporting........................................................... 5

Chapter 2 ........... Statement of Compatibility with Human Rights............ 9

 

 



The following abbreviations and acronyms are used throughout this explanatory memorandum.

Abbreviation

Definition

Bill

Treasury Laws Amendment (Black Economy Taskforce Measures No. 1) Bill 2018

Commissioner

Commissioner of Taxation

GST Act

A New Tax System (Goods and Services Tax) Act 1999

 



Third party reporting

The amendments to Schedule 2 to the Bill treat the Commissioner as having exempted entities from the requirement to report payments to other entities (such as contractors) for courier or cleaning services where the total amount of payments an entity receives for courier or cleaning services are less than 10 per cent of the entity’s GST turnover.

Date of effect Consistent with Schedule 2 to the Bill, the amendments apply to transactions that occur on or after 1 July 2018.

Proposal announced The amendments have not previously been announced.

Financial impact :  The expansion of the reporting requirements for courier and cleaning services is estimated to have a gain to revenue of $132 million from 2017-18 to 2020-21. This includes an estimated increase in goods and services tax receipts of $56 million from 2017-18 to 2020-21. Schedule 2 implements this measure.

Human rights implications :  The amendments do not raise any human rights issues. See Statement of Compatibility with Human Rights — Chapter 2, paragraphs 2.1 to 2.4.

Compliance cost impact The amendments have no additional compliance cost impact.

 

 



Chapter 1          

Third party reporting

Outline of chapter

1.1                   The amendments to Schedule 2 to the Bill treat the Commissioner as having exempted entities from the requirement to report payments to other entities (such as contractors) for courier or cleaning services where the total amount of payments an entity receives for courier or cleaning services are less than 10 per cent of the entity’s GST turnover.

Detailed explanation of new law

1.2                   The Commissioner is taken to have made a determination under subsection 396-70(4) of Schedule 1 to the Taxation Administration Act 1953 . This applies from the date of commencement of Schedule 2 to the Bill. [Amendment 1, item 3(1)]

1.3                   The determination that is taken to be made exempts entities that make a supply of either a courier or cleaning service from the requirement to prepare and give a report to the Commissioner detailing payments made to other entities for courier or cleaning services. The exemption applies if:

•        the total payments a reporting entity receives for supplies of courier or cleaning services are less than 10 per cent of the reporting entity’s relevant GST turnover (the turnover-threshold test);

•        the reporting entity is not required to report details of the transaction under a separate reporting obligation in section 396-55 of Schedule 1 to the Taxation Administration Act 1953 ; and

•        the entity has not chosen to prepare and give the report.

[Amendment 1, items 3(2) and 3(3)]

1.4                   The determination that is taken to be made ensures that entities that only make a minimal number of supplies of cleaning or courier services as a proportion of their overall GST turnover are not required to prepare and give reports. [Amendment 1, items 3(2) and 3(3)]

Turnover-threshold test

1.5                   The turnover-threshold test applies to each report that the entity is required to prepare and give to the Commissioner. The test also applies separately to courier and cleaning services, so that if an entity offers both courier and cleaning services it must work out whether it satisfies the test separately for both cleaning and courier services. If an entity receives less than 10 per cent of its GST turnover in payments for courier services, but 10 per cent or more of its GST turnover in payments for cleaning services, it will be required to report payments made to contractors or subcontractors in relation to cleaning services and not courier services.

[Amendment 1, items 3(2)(a) and 3(3)(a)]

1.6                   The test compares the payments that a reporting entity receives for supplies of courier or cleaning services for the period that the report covers with the entity’s relevant GST turnover. Where the payments are less than 10 per cent of the entity’s relevant GST turnover the test is satisfied. This includes supplies made through a contractor or subcontractor of the entity, where the consideration for that supply is received by the reporting entity. [Amendment 1, items 3(2)(a) and 3(3)(a)]

1.7                   An entity’s relevant GST turnover is either an entity’s ‘current GST turnover’, or ‘projected GST turnover’ as worked out in accordance with the GST Act. If an entity has been operating for more than 12 months then their ‘current GST turnover’ is the ‘relevant GST turnover’ used in the turnover-threshold test. If an entity has been operating for less than 12 months, then its ‘projected GST turnover’ is the relevant GST turnover. In either case, the relevant GST turnover used is the turnover as of the last day of the period for which the entity would be required to submit a report with details of the transactions. [Amendment 1, items 3(2)(a), 3(3)(a) and 3(7)]

1.8                   Generally, an entity’s ‘current GST turnover’ at a time during a particular month is the sum of the amount of all the supplies that the entity has made, or is likely to make, during the 12 months ending at the end of that month, with certain types of supplies excluded from that calculation (section 188-15 of the GST Act). An entity’s ‘projected GST turnover’ at a time during a particular month is the sum of the values of all the supplies it has made, or is likely to make, during that month and the next 11 months, with certain types of supplies excluded from that calculation (section 188-20 of the GST Act). [Amendment 1, items 3(2)(a), 3(3)(a) and 3(7)]

1.9                   The turnover-threshold test is directed at payments the reporting entity receives for making supplies of courier or cleaning services. A supply has the same meaning as it has in the GST Act. There are a number of ATO rulings which explain what constitutes a supply in particular circumstances. Where a courier or cleaning service is part of a mixed supply with other goods or services, only the payment received for the courier or cleaning service is counted towards the 10 per cent threshold. The other goods or services that are part of the mixed supply are not counted towards the 10 per cent threshold. [Amendment 1, items 3(2)(a) and 3(3)(a)]

1.10               Where the courier or cleaning service is part of a composite supply the dominant part of which is a courier or cleaning service, the whole of the payment is to be counted towards the 10 per cent threshold. [Amendment 1, items 3(2)(a) and 3(3)(a)]

1.11               Whether a courier or cleaning service is part of a mixed or composite supply is a question of fact. There are a number of ATO rulings which characterise whether a supply is a mixed or composite supply.

No exemption where otherwise required to report details of transactions

1.12               Where an entity would be required to report details of the transaction because of a separate reporting obligation under section 396-55 of Schedule 1 to the Taxation Administration Act 1953 , then the exemption does not apply to those transactions. This ensures that existing reporting obligations are not affected by the exemption. [Amendment 1, items 3(2)(b), 3(3)(b) and 3(7)]

Choice to lodge a report

1.13               Even where the reporting entity satisfies the turnover-threshold test and is not otherwise required to report details of the transaction, the entity may still choose not to be covered by the exemption and to lodge a report setting out details of the transactions. [Amendment 1, items 3(2)(c), 3(3)(c) and 3(7)]

1.14               An entity is not required to notify the Commissioner before making a choice whether to give a report. The giving of the report for the transaction is sufficient evidence of the making of the choice to give the report. It is not necessary to notify the Commissioner where the entity intends to rely on the exemption and not prepare and give a report. [Amendment 1, item 3(6)]

1.15               A choice to report that is made for one report does not restrict an entity from choosing whether or not to give a report for a later period. [Amendment 1, items 3(2)(c) and 3(3)(c)]

Exemption is taken to be made under subsection 396-70(4)

1.16               The exemption is taken to have been made under the Commissioner’s power to exempt classes of entities from the requirement to prepare and give reports, or to prepare and give reports for specified classes of transactions. [Amendment 1, item 3(1)]

1.17               While the exemption is taken to have been made under subsection 396-70(4), it is not a legislative instrument. This means that the exemption is not subject to a range of provisions under the Legislation Act 2003 which would otherwise apply to legislative instruments, such as the requirement to register a legislative instrument, the requirement that legislative instruments must be tabled for disallowance, or the requirement that legislative instruments sunset after a period of time. This is appropriate as the making of the exemption in the primary law is subject to scrutiny by Parliament. [Amendment 1, item 3(4)]

1.18               Ordinarily, a legislative instrument is not able to contradict or modify the operation of an Act unless that Act explicitly contemplates that outcome. Because the exemption is made by an Act of Parliament, a provision has been inserted to ensure that a new instrument made under the existing power in subsection 396-70(4) can amend or repeal the determination that is taken to be made. [Amendment 1, item 3(5)]

1.19               This ensures that there is flexibility to modify the determination to address any concerns with its operation raised by affected entities in the future.



Chapter 2          

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Third party reporting

2.1                   These amendments to Schedule 2 to the Bill are compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 .

Overview

2.2                   The amendments to Schedule 2 to the Bill treat the Commissioner as having exempted entities from the requirement to report payments to other entities (such as contractors) for courier or cleaning services where the total amount of payments an entity receives for courier or cleaning services is less than 10 per cent of the entity’s GST turnover.

Human rights implications

2.3                   The amendments to Schedule 2 to the Bill do not engage any of the applicable rights or freedoms.

Conclusion

2.4                   The amendments to Schedule 2 to the Bill are compatible with human rights as they do not raise any human rights issues.