11 January 2011

Exempting Taxes, Fees and Charges from the GST

As part of the Gillard Government's ongoing efforts to simplify Australia's tax laws, the Assistant Treasurer is proposing new legislation to change how we determine which taxes, fees and charges are exempt from the Goods and Services Tax (GST).

"Under current GST legislation, twice a year the Government has to determine which Government taxes, fees and charges are exempt from the GST. At over 680 pages, the list of exempt taxes, fees and charges is enormous and an administrative burden," Minister Shorten said.

"Today I am releasing a discussion paper on draft legislation to reform the mechanism for exempting Australian taxes, fees and charges from the Goods and Services Tax (GST) for public consultation. I encourage all interested parties to make submissions."

The Government announced in the 2010-11 Budget that it would amend the law to replace the current mechanism for exempting Australian taxes, fees and charges under Division 81 of the GST Act with a principles based legislative exemption with effect from 1 July 2011.

"Introducing a principles-based model for determining which taxes, fees and charges are exempt from the GST will significantly reduce administrative costs and will provide increased certainty in relation to the GST treatment of new taxes, fees and charges."

The key features of the amendments to Division 81 include:

  • Replacing the current mechanism for exempting Australian taxes, fees and charges from the GST with a principles-based legislative exemption
  • Allowing government entities to self assess the GST treatment of an Australian tax, fee or charge, rather than having to have it listed in a Determination
  • Providing for the GST treatment of a specific Australian tax, fee or charge, or an Australian tax, fee or charge of a kind to be specified by regulation.

The changes will come into effect from 1 July 2011. In order to allow for a smooth transition to the new mechanism, Australian taxes, fees and charges will continue to be exempt under the A New Tax System (Goods and Services Tax) (Exempt taxes, fees and charges) Determination 2011 (No.1) until 1 July 2012.

Examples of fees, charges and taxes exempt from GST include:

  • Taxes: Income tax, Medicare levy and Stamp duties.
  • Fees or charges paid to a government agency for permissions: Medical and legal professionals' right of practice licences, pilot's licences, driver's licences and permits for restaurants to occupy the footpath.
  • Fees or charges paid to a government agency relating to information and record-keeping: Searches and extracts from registers (e.g. title searches), copies of official documents (e.g. birth certificates) and fees for the right to access government information generally (e.g. FOI charges).

The exposure draft legislation is available on the Treasury website www.treasury.gov.au. Consultation closes on Friday, 11 February 2011.