Amendment to the Sales Tax Law

The Assistant Treasurer, Senator Rod Kemp, today announced amendments to the sales tax law dealing with exemption for equipment used to protect people engaged in industrial operations.

The Government will amend the law so that exemption for industrial safety equipment will apply only to equipment of a kind used mainly in the course of industrial operations to protect persons engaged in those operations.

The amendments will apply to dealings that occur on or after today.

"The Government is committed to encouraging workplace safety, and an important way to achieve this is to provide a tax advantage to equipment that provides a legitimate aid to industrial safety," Senator Kemp said.

The Government is responding to two recent court decisions which mean that, without this amendment, many goods that have little direct involvement with industrial safety may be entitled to be treated as sales tax free.

As a result of these court decisions, some retailers may claim a refund of sales tax and the Government is concerned that refunds should not result in a windfall gain for retailers who have passed the cost of the tax on to their customers. Any benefit of a refund should go the end-consumer who actually bore the sales tax.

Consequently, the Government will also amend the sales tax law to deny refund claims made on or after today’s date that do not meet the "mainly" test. Refund claims made before today that do not meet the "mainly" test will only be allowed where the benefit of the refund will be passed on to the end-consumer. These amendments simply restore the sales tax law to the position that the Parliament always intended. This measure prevents the possibility of refunding large amounts of sales tax already paid for items that were always intended to be taxed. It does not create an increased sales tax liability.

This issue will disappear with the abolition of sales tax from 1 July 2000. Under the GST law applying from 1 July 2000, goods supplied to workers for their protection will attract input tax credits for the enterprise.

MELBOURNE

4 OCTOBER 1999