Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2008
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
tax laws amendment (luxury car tax-minor amendments) bill 2008
EXPLANATORY MEMORANDUM
(Circulated by the authority of the
Treasurer, the Hon Wayne Swan MP)
Table of contents
General outline and financial impact 5
Chapter 1 Minor luxury car tax amendments 7
General outline and financial impact
Minor luxury car tax amendments
Schedule 1 to this Bill contains minor and technical amendments to
the A New Tax System (Luxury Car Tax) Act 1999, the Taxation
Administration Act 1953 and the Tax Laws Amendment (Luxury Car Tax)
Act 2008 to ensure that the amendments contained in the Tax Laws
Amendment (Luxury Car Tax) Act 2008 operate as intended.
The amendments clarify that the vehicle financing arrangements do
not affect refunds under Division 18 of the A New Tax System
(Luxury Car Tax) Act 1999 being claimed by all eligible businesses,
or contracts entered into before Budget night facing
the 25 per cent luxury car tax rate. The amendments also clarify
that the luxury car tax refunds under Division 18 are to be paid
directly to the claimant.
Date of effect: In the main the changes take effect from 1 July
2008. However, the amendment for finance arrangements entered into
before 7.30 pm on 13 May 2008 will commence from 3 October 2008,
which is the date that these provisions commenced.
Financial impact: Nil.
Compliance cost impact: Minimal. Evidence will need to be
provided to eligible refund claimants on whether their vehicle has
borne, and the amount of, luxury car tax.
Chapter 1
Minor luxury car tax amendments
Outline of chapter
1. This chapter outlines minor and technical amendments to the A New
Tax System (Luxury Car Tax) Act 1999, the Taxation Administration
Act 1953, and the Tax Laws Amendment (Luxury Car Tax) Act 2008 made
by Schedule 1 to this Bill. The amendments relate to luxury car
tax refunds and contracts to purchase a vehicle that were entered
into before 7.30 pm on 13 May 2008.
Context of amendments
2. Division 18 of the A New Tax System (Luxury Car Tax) Act 1999
provides refunds of eight-thirty-thirds of the luxury car tax paid
on certain four-wheel and all-wheel drive vehicles purchased by
primary producers and eligible tourism operators. Sections 18-5
and 18-10 require that an eligible claimant 'bear' the luxury car
tax in order to be eligible for a refund.
3. The entity bearing the tax will depend on the arrangement used to
finance the vehicle, such as through chattel mortgage (car loan),
hire purchase or lease. For example, in lease arrangements the
finance company (lessor) will typically be the purchaser and retain
legal ownership of the vehicle. Accordingly, where a vehicle is
leased, the lessor will legally 'bear' the tax. However, a primary
producer or eligible tourism operator that leases their vehicles
could actually 'bear' the cost of the tax but would not be able to
claim the refund.
4. The application provision at item 13 of Schedule 1 to the Tax Laws
Amendment (Luxury Car Tax) Act 2008 provides that the luxury car
tax rate of 25 per cent applies to taxable supplies of vehicles
where the contract to make the supply was made before 7.30 pm, by
legal time in the Australian Capital Territory, on 13 May 2008.
5. The financing contract for a vehicle may be made after the initial
contract to purchase the vehicle. Where the financing contract is
made after 7.30 pm on 13 May 2008, the financing contract is the
relevant contract for the purpose of applying the 33 per cent rate
of luxury car tax for taxable supplies or taxable importations made
after 1 July 2008. Therefore, even though an initial contract was
entered into before 7.30 pm on 13 May 2008, if the finance contract
was signed after this time then the 33 per cent luxury car tax rate
would apply to a vehicle subsequently supplied after 1 July 2008.
6. Under section 18-20 of the A New Tax System (Luxury Car Tax)
Act 1999, if you are entitled to a refund and have claimed it, the
Commissioner of Taxation must, on behalf of the Commonwealth, pay
the amount of the refund to you. In the context of the tax law
more broadly, it may be unclear in what manner this payment should
be made.
Summary of new law
7. Schedule 1 to this Bill implements minor and technical amendments
to the luxury car tax and related legislation. These amendments
are intended to clarify the operation of the law by:
. ensuring luxury car tax refunds are payable to eligible
businesses where they actually bear the cost of the luxury
car tax regardless of the arrangement used to finance the
vehicle;
. ensuring that contracts entered into before 7.30 pm on
13 May 2008 are the relevant contracts for determining
luxury car tax rate of 25 per cent, when subsequent
financing arrangements are made; and
. putting beyond doubt that luxury car tax refunds are paid
directly to claimants.
Detailed explanation of new law
Refunds of luxury car tax
8. The refund provisions of the A New Tax System (Luxury Car Tax)
Act 1999 are amended to ensure that the refund of the increase in
the luxury car tax can be claimed even where the vehicle is
purchased through a financing arrangement. Claims for the refund
must still be made by the primary production or eligible tourist
operator business. In order for the eligible business to make a
claim, finance companies will need to provide evidence to the
claimant that luxury car tax was paid and the amount of luxury car
tax that was paid. [Schedule 1, items 1 to 4]
9. Section 18-20 of the A New Tax System (Luxury Car Tax) Act 1999
relates to the payment of the refunds to the claimant. An
amendment is made to the Taxation Administration Act 1953 in order
to put beyond doubt that the luxury car tax refunds are to be paid
directly to the claimant and are not to form part of the running
balance account with the Australian Taxation Office. [Schedule 1,
item 6]
Contracts entered into before 7.30 pm on 13 May 2008
10. The application provision in the Tax Laws Amendment
(Luxury Car Tax) Act 2008 is amended so that contracts for the
taxable supply or taxable importation of a vehicle that are entered
into before 7.30 pm on 13 May 2008 are the relevant contract for
determining the 25 per cent luxury car tax rate where the financing
contract relating to that initial contract was subsequently entered
into. [Schedule 1, item 8]
Application and transitional provisions
11. Items 1 to 4 and 6 take effect from 1 July 2008. This is the
commencement date of the provisions being amended and ensures that
there is no confusion as to the intended operation of the law.
12. Item 8 commences immediately after the commencement of the Tax Laws
Amendment (Luxury Car Tax) Act 2008 on 3 October 2008 to ensure the
law operates as intended.