The Government intends to revise the way GST will be applied to long-term non-reviewable contracts that will not have had a review opportunity by 30 June 2005, Minister for Revenue and Assistant Treasurer, Senator Helen Coonan, announced today.
Under special transitional provisions, certain pre-existing contracts were allowed to remain GST-free until 30 June 2005. GST would then have applied in the usual way.
However, because prices for these contracts are effectively fixed, suppliers would have been unable to recover the GST, while recipients would have received input tax credits on what were effectively GST-free prices.
Originally it was proposed that, in situations where the GST would be matched by recipients receiving input tax credits, suppliers could adjust prices from 1 July 2005. Treasury then consulted extensively on this proposal with relevant industry groups.
“During consultation, concerns were raised about potential anomalies in the original proposal including the treatment of contracts where the recipient is not entitled to full input tax credits. The revised proposal will now address these concerns,” Senator Coonan said.
“So, from 1 July 2005, all suppliers with pre-existing long-term contracts that have not had a review opportunity, including contracts where the recipient is not entitled to input tax credits, will be allowed to recover the net impact of the New Tax System reforms from the recipient.
“In circumstances where the recipient does not accept an appropriate price adjustment proposed by the supplier, GST liability will be transferred to the recipient and the supplier will collect and remit the GST.
“This revised measure will provide a simpler, fairer and more comprehensive result.”
The Department of the Treasury will consult with industry to finalise the precise details for implementing this measure. Further details will be available from the Treasury web-site at www.treasury.gov.au.
Legislation to give effect to this measure will be introduced after approval by the States and Territories, pursuant to the Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations.