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A NEW TAX SYSTEM (GOODS AND SERVICES TAX) AMENDMENT REGULATIONS 2000 (NO. 4) 2000 NO. 110
EXPLANATORY STATEMENTSTATUTORY RULES 2000 No. 110
Issued by authority of the Assistant Treasure
A New Tax System (Goods and Services Tax) Act 1999
A New Tax System (Goods and Services Tax) Amendment Regulations 2000 (No. 4)
The Governor-General may make regulations under section 177-15 of the A New Tax System (Goods and Services Tax) Act 1999 (the Act) for the purposes of the Act.
The regulations amend the A New Tax System (Goods and Services Tax) Regulations 1999. Further authorities for the regulations are as follows:
* subsection 3 8-3 (2) of the Act provides for regulation Is to exclude specified food from the application of the GST-free exception provisions for food contained within section 38-3;
* paragraph 38-45(1)(a) of the Act provides for regulations to prescribe additional medical aids and appliances that will be GST-free;
* item 7 of subsection 38-185(1) of the Act permits GST-free supplies of goods to travellers where the goods are to be exported by them as accompanied baggage. The supplies are GST-free if made in accordance with the rules specified in the regulations and the goods are exported as accompanied baggage of travellers; and
* subsection 168-5(1) of the Act provides for regulations to specify the requirements of the Tourist Refund Scheme (TRS) for travellers who export as accompanied baggage goods on which GST has been paid.
The purpose of the regulations is to:
* reduce the cost of compliance and administration relating to vending machine supplies of beverages that would otherwise be GST-free if not for the application of GST-free exception provisions for food contained within the Act;
* allow additional medical aids and appliances included in the regulation, to be GSTfree;
* prescribe procedures to be instituted for GST-free sales of goods to travellers leaving Australia; and
* establish the TRS, by specifying the kinds of acquisitions, and the circumstances in which people must leave Australia and export the goods to be eligible for a refund of the GST and wine tax incorporated into the price of goods they acquired. The regulations also specify the manner and the period within which a refund can be paid.
The regulations:
* provide for otherwise GST-free beverages to remain GST-free even when supplied on premises from a vending machine for consumption on premises [new regulation 38-3.01];
* provide that those medical aids and appliances listed in the regulation will be GSTfree. These are in addition to those medical aids and appliances covered by Schedule 3 to Act [new regulation 3845.01];
* allow for GST-free sales of goods to be made through an export verification system known as the sealed bag system. The goods must be exported from Australia as accompanied baggage of the travellers within 30 days of their being supplied with the goods [new regulation 38-185.01];
* provide that the TRS will be available to both visitors and Australian residents, who make a purchase of eligible goods totalling $300 or more from a single business and export those goods as accompanied baggage when they depart Australia within 30 days of their being supplied with the goods [new Part 4-7]; and
* make a number of consequential technical amendments to renumber provisions of the Regulations [Schedule 1].
Details of the regulations are provided in Attachment A.
A Regulation Impact Statement for the regulation in relation to the sealed bag system is provided in Attachment B.
Regulations 1 to 3 and Schedule 1 (technical renumbering) commence on 15 June 2000. The other regulations commence 16 June 2000.
ATTACHMENT A
A New Tax System (Goods and Services Tax) Act 1999 A New Tax System (Goods and Services Tax) Amendment Regulations 2000 (No. 4)
GST-free beverages supplies from vending machines [Schedule 2, item 1]
Current treatment of supplies made through vending machines
The current GST status of products sold through vending machines will depend, in some cases, on the location of the vending machines. A vending machine is different from many other food outlets; they can be found in places which have a clearly defined boundary or limits, e.g. a sports ground, or outside such limits, e.g., by a public footpath. The products sold though the machines, may be taxable (e.g. soft drinks) or generally GST-free under section 38-2 of the Act (e.g. bottled water).
However, the issue of whether the generally GST-free products sold from vending
machines will be subject to GST is determined by the definition of 'premises' in
section 38-5 of the Act. This section, amongst other things, makes taxable the
otherwise GST-free products supplied through vending machines on the premises.
Compliance costs associated with supplies made through vending machines
It has been submitted by suppliers who use vending machines that the current treatment of otherwise GST-free products supplied through vending machines will create significant compliance costs for business. Without the regulations, vending machine owners will be required to identify each machine they make supplies through and determine whether each is on or away from the premises. As the majority of the products they supply are taxable regardless of where the machine is, it means they will be undertaking this work merely to determine whether products such as water and juice products (with at least 90% juice by volume) are taxable. They will then have to adjust the prices for those products to account for GST.
Application of the regulation
New paragraph 38-3. 01 (1) (a) specifies that the regulation apply to beverages which are specified in the third column of the table in clause 1 of Schedule 2 of the Act. These beverages include bottled still water and fruit juice with at least 90% fruit or vegetable content. New paragraphs 38-3. 01 (1) (b) and 38-3. 01 (1) (c) further identify the beverages subject to this regulation as those which would otherwise lose their GST-free status as they are supplied on the premises from a vending machine for consumption on the premises.
New subregulation 38-3.01(2) completes the mechanism for making supplies of the beverages specified in the previous paragraphs GST-free by excluding them from the application of the GST-free exception provisions contained with section 38-3. It should be noted that clauses 2 and 3 of Schedule 2 of the Act continue to apply and as a result, beverages such as ready-to-drink tea and coffee will continue to be taxable.
Medical aids and appliances [Schedule 2, item 1]
Application of the regulation
Under the Act, the supply of a medical aid and appliance is GST-free if it is covered by Schedule 3 to the Act, or specified in the regulations. To be GST-free, the thing supplied must also be specifically designed for people with an illness or disability, and not widely used by people without an illness or disability [paragraph 38-45(1)(b) of the Act].
New regulation 38-45.01 specifies those medical aids and appliances, the supply of which will be GST-free. These medical aids and appliances, listed in new Schedule 3 (inserted by Item 3 of Schedule 2 of the proposed regulations), are in addition to those listed in Schedule 3 to the Act. The second column of new Schedule 3, is not operative [new subregulation 3845.01(2)1.
Sealed Bag System [Schedule 2, item 1 and Schedule 5]
General features of the sealed bag system
New regulation 38-185.01 will allow for GST-free sales of goods to be made through an export verification system known as the sealed bag system. This system will apply to supplies of goods where the goods are delivered to relevant travellers before they cross the customs barrier at airports and seaports. The goods must be exported from Australia as accompanied baggage of the travellers within 30 days of their being supplied with the goods.
* Relevant travellers are persons including Australian residents who are departing Australia on an international flight or, if departing by ship, on an international voyage.
* Accompanied baggage is baggage which the traveller takes with them on departure.
* The customs barrier is the place where immigration and customs formalities are conducted prior to a traveller's departure from Australia.
The regulations will also allow for GST-free sales where the goods are delivered to relevant travellers after they have crossed the customs barrier.
Details of the sealed bag system
Under the sealed bag system vendors selling to travellers are required to place the goods inside transparent plastic bags which are sealed with tamper proof devices.
* The vendor is required to sight documents identifying the purchaser as a person about to depart Australia.
* The vendor puts one copy of the purchase invoice inside the bag and attaches another to the outside.
* Travellers carry their sealed bags with them through the customs barrier at airports and seaports on their way out of Australia.
* The vendor arranges for copies of the invoices attached to the outside of the bags to be detached and recorded and the vendor periodically given details of invoices detached.
The detached invoice is evidence that the traveller has taken the goods out of Australia. The practice of detaching and verifying invoices is known as 'docket plucking' and is carried out by employees of an organisation established and funded by subscriptions from retailers. The docket pluckers wait for travellers to cross the customs barrier at airports and seaports before plucking the dockets (invoices) from the sealed bags carried by the travellers. A periodic report is sent to vendors containing details of invoices plucked.
Provided the invoice is recorded as having been collected, and other documentary requirements satisfied, the sale is GST-free. If any of the requirements of the sealed bag rules are not met the sale is subject to GST and the vendor must pay the GST due on the goods.
Application of the regulation
The following sealed bag (SB) rules are set out in new Schedule 5, Table 1 pursuant to new regulation 38-185.01.
SB Rule 1: Seller to sight travel documents
SB Rule 2: Purchaser to sign an S13 declaration
SB Rule 3: Seller to make an invoice
SB Rule 4: Seller to retain copies of certain documents
SB Rule 5: Time is limited within which the purchaser may take possession of the goods
SB Rule 6: Purchaser may only take possession of goods in a sealed package
SB Rule 7 Invoice to be retrieved at the point of surrender of goods before the Customs barrier
SB Rule 8: Invoice to be retrieved when beyond the Customs barrier
SB Rule 9: Sealed package to be examined
SB Rule 10: Tampering or other discrepancy in respect of sealed package is to be notified
SB Rule 11 Retrieved invoices must be validated
SB Rule 12 Invoices must be matched
Details of the customs barrier rules
These rules allow for GST-free sales to travellers for export as accompanied baggage in two situations. Firstly, sales of goods to travellers for export out of Australia as accompanied baggage will be GST-free if the goods are sold to the tourists after they have completed customs formalities, ie, crossed the customs barrier. This occurs with sales by retailers whose premises are located on the outward departure ('air') side of the customs barrier.
Secondly, the sale can be GST-free if the traveller has purchased goods prior to crossing the customs barrier but does not take physical possession of them until after crossing the customs barrier. Under this arrangement the vendor retains possession of goods purchased by travellers and delivers them to the air side of the barrier for collection by the travellers after they have completed customs and immigration formalities and prior to boarding the departing aircraft or ship. In the case of travellers departing Australia by sea, the vendor will be required to deliver the goods to the ship's purser or another responsible official.
Application of the regulation
The following custom barrier (CB) rules are set out in new Schedule 5, Table 2 pursuant to new regulation 38-185. 01.
CB Rule 1 Seller to sight travel documents
CB Rule 2 Purchaser may have to sign a CB declaration
CB Rule 3 Seller to make an invoice
CB Rule 4 Seller to retain copies of certain documents
The Tourist Refund Scheme [Schedule 2, item 2]
General features of the Tourist Refund Scheme (TRS) Subsection 168-5(1) of the Act provides that if.
* you acquire goods and the supply of those goods to you is a taxable supply;
* the acquisition is of a kind specified in the regulations; and
* you leave Australia, and export goods as accompanied baggage, in the circumstances specified in the regulations;
then the Commissioner must pay you an amount equal to, or a proportion of, the GST that was payable on the taxable supply. Subsection 168-5(2) provides that the amount is payable within the period and in the manner specified in the regulations. *
The TRS will be available to both visitors and Australian residents, who make a purchase of eligible goods totalling $300 or more from a single business and export those goods as accompanied baggage when they depart Australia within 30 days of purchasing the goods. No special documentation other than a tax invoice will be required at the time of purchasing the goods and the purchaser will be eligible for a GST or wine tax refund after presenting the goods, tax invoice and travel documents to a Customs Officer when the purchaser departs Australia. Cash refunds of up to $200 in Australian currency will be available at major airports. All other refunds will be paid by cheque or by directly crediting a credit card account or an Australian bank account. The regulations specify the criteria for eligibility under the TRS by specifying:
* the kinds of acquisitions for which a refund may be paid;
* the circumstances in which people may leave Australia and export the goods; and
* special provisions to apply in exceptional circumstances where it would be impracticable to verify each traveller's entitlement (for example extreme passenger congestion at an airport that might delay the departure of aircraft if further exacerbated by delaying passengers to check goods and documents under the scheme). Under these provisions travellers will complete a claim form and deposit the form and the tax invoice in a designated box and the claim will be processed after the traveller has departed Australia.
The regulations prescribe the manner in which a refund can be paid. Travellers will be able to elect to have their refund paid in one of the following ways:
* an on the spot cash payment of up to $200 in Australian currency (only available at the eight major international airports due to the cost of infrastructure for cash handling facilities);
* a cheque payment in Australian or nominated foreign currency posted to a nominated address;
* direct credit in Australian currency of a nominated credit card account or an Australian bank account.
Cheque and direct credit payments will only be made if a payment authority issued by a Customs officer is lodged at the TRS facility on the date the traveller departs Australia or is posted from outside Australia and received by Customs within 30 days of the traveller's departure from Australia. Payments on claims made under the exceptional circumstances provision will be by cheque or direct credit only.
The regulations also prescribe the methods of calculating the amount of refund.
Application of the regulations
The following table sets out the key elements of the regulations under new Part 4-7.
New Division Tourist refund scheme
168
New Kinds of acquisitions
Subdivision
168.4
New Paragraph 168-5(1)(b) of the Act requires acquisitions to be of a
Regulation kind specified in the regulations to be eligible for a payment under
168-5.01: the TRS. This regulation provides that an acquisition in accordance
with the requirements in this Subdivision is one that will be eligible
Acquisition for a refund of GST under the TRS.
New This regulation provides that the TRS applies to any goods the
Regulation supply of which is a taxable supply except:
168-5.02: - tobacco and tobacco products;
- alcoholic beverages (except wine on which wine tax has been
Goods to which borne);and
Subdivision 168-1 - goods that have been partly consumed at the time the acquirer
applies leaves Australia.
It should be noted that tobacco and alcoholic beverages can still be
purchased GST and Duty-free for export under existing sealed bag
arrangements under Customs and Tax legislation.
New This regulation provides that the goods must be purchased from an
Regulation entity registered for GST. This requirement is necessary to ensure
168-5.03: that GST has been borne by the acquirer as part of the purchase
price of the goods. In addition, only registered entities can issue tax
Registered entity invoices under section 29-70 of the Act. Tax invoices will be
required under the TRS as evidence of GST having been borne as
part of the purchase prices of the goods [new regulation 168-5.051.
8.
New This regulation gives effect to the requirement that to be eligible for
Regulation the TRS the purchase price for the goods must be at least $300. The
168-5.04: $300 threshold can be met by the purchase of a single item or
several lower priced items, provided that they have been purchased
Purchase price from the same registered entity.
New This regulation requires the person claiming a TRS refund (the
Regulation "acquirer") to hold a single tax invoice in respect of the eligible
168-5.05: acquisition in order to be eligible for a refund under the TRS.
Tax invoice A tax invoice issued in accordance with. section 29-70 of the Act
will contain the minimum amount of information necessary to
determine the nature of the goods, the purchase price and the
amount of GST included in the purchase price of goods the subject
of a TRS claim.
A single tax invoice covering all the goods included in the $300
minimum purchase price is necessary to avoid delays at
international airports due to the time that would be required to
process multiple invoices for lower priced items.
New Departure from Australia
Subdivision
168-2
New Paragraph 168-5(1)(c) of the Act requires a person claiming a
Regulation payment under the TRS to leave Australia in circumstances
168-5.06: specified in the regulations. This regulation provides that to be
eligible for the TRS a person can leave Australia in any
Departure circumstance other than in the course of their employment as
member of the crew, or as the person in charge or command, of an
aircraft or ship.
If crew members leave Australia as passengers on an aircraft or
ship, however, they would be eligible to participate. These
arrangements reflect current provisions for customs duty and GST
concessions for crew arriving in Australia.
9.
New This regulation requires a person to leave Australia through an
Regulation airport or seaport that has a TRS verification facility. TRS refunds
168-5.07: will only be paid once a Customs officer has verified the export of
the goods and sighted specified documents [new regulation
Place of Departure 168-5.101.
Verification facilities will not be available at all places where
people leave Australia due to the cost of setting up such facilities.
Upon introduction of the scheme on 1 July 2000 facilities will be
available at the eight major international airport passenger terminals
and four seaports with cruise liner terminals, where over 98% of
departures from Australia take place.
TRS verification facility is defined to mean the place, at the airport
or seaport, at which the TRS is administered. This definition will
apply to TRS verification booths that are to be constructed at the
major airports, as well as more informal arrangements that may be
established at small airports and seaports as part of normal Customs
processing.
New Export as accompanied baggage
Subdivision
168-3
New Paragraph 168-5(1)(c) of the Act requires a person claiming a
Regulation payment under the TRS to export the goods from Australia as
168-5.08: accompanied baggage in circumstances specified in the regulations.
This regulation provides that goods must be exported in accordance
Accompanied with the circumstances set out in this Subdivision.
baggage
New This regulation requires the goods to be exported within 30 days
Regulation after the day on which they were acquired to be eligible for the
168-5.09: TRS.
Time of export
10.
New This regulation sets out the export verification requirements that
Regulation must be met before a person can receive a TRS refund.
168-5.10:
Acquirers will be required to present themselves at a TRS
Verification of verification facility at an airport or seaport when they are leaving
export Australia. Once at the verification facility they must present a
Customs officer with the tax invoice relating to the goods. The tax
invoice is required for every TRS claim in order to work out the
amount of GST that has been paid on the goods and consequently
the amount of the TRS payment.
The acquirer must also present to the Customs officer if requested
the goods and other documents confirming their entitlement to leave
Australia (for example a boarding pass or ticket).
TRS verification facilities at major airports will be located on the
'air' side of the Customs outwards control point (where formal
immigration procedures, etc are carried out for departing
passengers). Travellers will have checked-in their hold baggage
before this time therefore they will need to carry on to the aircraft
any goods for which they intend to claim a TRS refund.
New subregulation 168-5.10(4) provides that if goods cannot be
presented at the TRS verification facility because the goods have
been checked in as accompanied baggage, the tax invoice must be
endorsed in accordance with arrangements agreed to by the Chief
Executive Officer of Customs (the CEO). This provision will allow
the CEO to enter into arrangements that would, for example, allow
airline check-in staff to stamp a tax invoice for a large item like a
surf board or snow skis to the effect that the goods have been
checked in as hold baggage. The endorsed tax invoice would then
be taken to confirm that the goods are being exported even though
the Customs Officer has not sighted them at the TRS verification
facility.
New Proportion of amount of GST for payment in cash
Subdivision
168-4
New Paragraph 168-5(1)(e) of the Act provides that the Commissioner
Regulation must pay as a TRS refund such proportion of the amount of GST
168-5.11: that was payable on the taxable supply as is specified in the
regulations. As the amount of GST will be calculated as 1/11 of the
Cash Payment purchase price, in most cases that amount will not be an exact
multiple of 5 cents. If the TRS refund is to paid in cash, this
regulation allows that refund to be rounded up or down to the
nearest exact multiple of 5 cents so that a cash payment can be
made.
New Documentation relating to entitlement to payment
Subdivision
168-5
New This regulation provides that if.
Regulation - the acquirer produces to a Customs officer the documents and
168-5.12: goods requested under regulation 168-5. 10; and
- the officer is satisfied that the acquirer is entitled to be paid a
Payment authority TRS refund under section 168-5 of the Act;
the officer must give the acquirer a payment authority that includes
information identifying the acquirer and the amount of TRS refund
to which the acquirer is entitled.
This payment authority will then be the basis upon which the
acquirer can receive payment of the TRS refund under regulation
168-5.14 or 168-5.15.
The decision of the Customs officer in this regulation of whether or
not the acquirer is entitled to a refund is not subject to review. If an
officer makes a mistake about the acquirer's entitlement to a TRS
payment, the acquirer's entitlement to payment would still be
enforceable under section 168-5 of the Act.
New This regulation sets out an alternative procedure for claiming a TRS
Regulation refund in exceptional circumstances where full verification of
168-5.13: exportation of the goods and document production is not
practicable.
Claim for payment:
exceptional Under these arrangements the acquirer would complete a
circumstances documentary claim for payment, and lodge it and their tax invoice at
the TRS verification facility. The claim would then be processed
after the acquirer leaves Australia and any refund payable would be
forwarded in accordance with the acquirer's instructions in the
claim.
This procedure (which will never involve a Customs officer actually
sighting the goods) will only apply in exceptional circumstances.
An example of a circumstance where the procedure might be
employed would be where requiring full verification during extreme
passenger congestion might further exacerbate that congestion or
delay the departure of an aircraft.
New Period and manner of payment
Subdivision
168-6
12.
New Subsection 168-5(2) of the Act provides that the amount of TRS
Regulation refund is payable within the period and in the manner specified in
168-5.14: the regulations. This regulation provides for cash payments, up to a
maximum of $200, to be made before the acquirer leaves Australia
Processing if the acquirer gives their payment authority to a Customs officer at
payment authority a TRS facility at airports where cash payment facilities exist.
given to officer of
Customs at airport At the commencement of the scheme cash payment facilities will
exist at the eight major international airports. The infrastructure and
physical security costs associated with cash payment facilities mean
that setting up such facilities at smaller airports and seaports where
fewer departures take place is not a financially viable option.
New subregulations (2) and (3) make provision for Customs
officers to arrange for a payment other than by cash, if cash
payment is impracticable. This provision is intended to apply in the
exceptional circumstances, for example, where a particularly busy
period has used up all cash on hand or if there is a breakdown in the
cash dispensing machines that will be used at the airport TRS
verification facilities.
The $200 maximum is a combined total including any refund that
may be payable under the complementary scheme in the A New Tax
System (Wine Equalisation Tax) Regulations 2000.
New Subsection 168-5(2) of the Act provides that the amount of TRS
Regulation refund is payable within the period and in the manner specified in
168-5.15: the regulations. This regulation makes provision for the payment of
TRS refunds within 60 days after the acquirer lodges their payment
Processing authority at a TRS verification facility. Such payment will be made
payment authority by:
lodged at a TRS - posting a cheque to a nominated address; or
verification facility
- crediting a credit card account or an Australian bank account;
in accordance with the instructions of the acquirer.
13.
New Subsection 168-5(2) of the Act provides that the amount of TRS
Regulation refund is payable within the period and in the manner specified in
168-5.16: the regulations. This regulation makes provision for the payment of
TRS refunds where:
Processing - the acquirer posts the payment authority, from a place outside
payment authority Australia, to the CEO of Customs; and
given to Chief - the CEO receives the authority within 30 days after it was
Executive Officer
of Customs issued.
Such payment will be made, within 60 days of the payment authority being received by the CEO, by: - posting a cheque to a nominated address; or - crediting a credit card account or an Australian bank account; in accordance with the instructions of the acquirer.
This provision is intended to be a fall back option where the acquirer has undergone the export verification process and received a payment authority, but, due to some unforseen circumstance, does not claim a refund or lodge their payment authority at the TRS verification facility when they are leaving Australia. It is expected that most travellers will either claim a cash payment or lodge their payment authority in a designated box almost immediately after receiving it.
14.
New Subsection 168-5(2) of the Act provides that the amount of TRS
Regulation refund is payable within the period and in the manner specified in
168-5.17: the regulations. This regulation makes provision for the payment of
TRS refunds where:
Processing claim - the acquirer lodges a claim under the exceptional circumstances
for payment made arrangements in regulation 168-5.13; and
in exceptional - the CEO of Customs, or a person authorised by the CEO, is
circumstances
satisfied that the acquirer is entitled to be paid a TRS refund
under section 168-5 of the Act.
Such payment will be made, within 60 days after the claim is lodged
by:
- posting a cheque to a nominated address; or
- crediting a credit card account or an Australian bank account;
in accordance with the instructions of the acquirer.
The decision of the CEO or authorised person under this regulation
of whether or not the acquirer is entitled to a TRS refund is not
subject to review. If an officer makes a mistake about the acquirer's
entitlement to a TRS payment, the acquirer's entitlement to payment
would still be enforceable under section 168-5 of the Act.
Persons to be authorised under this provision will be either Customs
officers or persons employed by a contracted service provider to be
engaged to provide the service of making cheque and direct credit
TRS refunds.
Schedule 2, The following terms are added to the Dictionary at the end of the
items 4-8: GST Regulations:
Dictionary acquirer: is used to identify the person who has acquired goods the
supply of which is a taxable supply and who seeks a TRS refund
when leaving Australia;
Officer of Customs: is defined as having the same meaning as in
section 4 of the Customs Act 1901;
tourist refund scheme: means the arrangements set out in section
168-5 of the Act which allow the GST component of the purchase
price of certain goods to be refunded;
TRS verification facility: is defined as the place at an airport or
seaport at which the TRS is administered. This definition will apply
to TRS verification booths that are to be constructed at the major
airports, as well as more informal arrangements that may be
established at small airports and seaports as part of normal Customs
processing.
15.
ATTACHMENT B
Regulation impact statement
Regulation impact on business
Policy objectives
The A New Tax System (Goods and Services Tax) 1999 provides that goods supplied to travellers for export by them will be GST-free subject to the supplies being made in accordance with rules specified in the regulations and the goods being exported.
The rules and procedures specify the requirements for GST-free supplies of goods to travellers under the sealed bag system and GST-free supplies for goods delivered to travellers after they have crossed the customs barrier. The purpose of the rules is to provide a high degree of assurance that goods sold at GST-free prices to travellers are exported from Australia as part of their accompanied baggage and not fraudulently diverted into local consumption.
* Such diversion of GST-free goods would result in losses of GST revenue and would give retailers involved in such fraud a significant unfair commercial advantage against their competitors.
* The risk of improper diversion is heightened by the fact that Australian residents will have access to GST-free goods if they are departing Australia for holidays or other reasons.
A robust export verification system is therefore considered essential. The sealed bag is a well established system currently used by approximately 1800 retailers. It offers a 100% check on the export of goods.
Goods subject to wine equalisation tax can be sold free of this tax if sold to travellers for export by them and they are supplied in accordance with the rules specified in the regulations for GST-free sales.
How the sealed bag system will work
A full explanation of the sealed bag system can be found in the Explanatory Statement to the regulations.
16.
How the system for goods delivered beyond the customs barrier will work
The regulations will also allow for GST-free sales where the goods are delivered to relevant travellers after they have crossed the customs barrier. The customs barrier is the place where immigration and customs formalities are conducted prior to a traveller's departure from Australia.
Implementation
The current sealed bag and customs barrier systems for sales tax free sales to tourists will be continued for GST from 1 July 2000 without alteration. Retailing organisations have commented favourably on the retention of both systems for GST.
Main points:
* Under the sealed bag system vendors selling to tourists are required to place the goods inside transparent plastic bags which are sealed with tamper proof devices.
* The vendor is required to sight documents identifying the purchaser as a person about to depart Australia.
* The vendor puts one copy of the purchase invoice inside the bag and attaches another to the outside.
* Travellers carry their sealed bags with them through the customs barrier line at airports on their way out of Australia.
* The vendor arranges for copies of the invoices attached to the outside of the bags to be detached and recorded and the vendor periodically given details of invoices detached.
* The detached invoice is evidence that the goods have been taken by the tourist out of Australia. The practice of detaching and verifying invoices is known as 'docket plucking' and is carried out by employees of an organisation established by tourism retailers associations and funded by subscriptions from retailers. The docket pluckers wait for travellers to cross the customs barrier line at airports and seaports before plucking the dockets from the sealed bags carried by the travellers. A periodic report is sent to vendors containing details of invoices plucked.
* Provided the invoice is recorded as having been collected, and other documentary requirements satisfied, the sale is GST-free. If any of the requirements of the sealed bag rules are not met the sale is subject to GST and the vendor must pay the GST due on the goods.
17.
Assessment of impacts (costs and benefits)
Impact group identification
All suppliers of taxable goods to persons travelling out of Australia
All travellers acquiring taxable goods to take with them as part of their accompanied baggage when they depart Australia
Assessments of costs
Retailers supplying goods to travellers under the sealed bag system will incur costs in relation to the following items:
* Payment of fees to the export verification system operated by the tourist retail industry. This system is conducted on a non-profit basis and employs staff at airports to verify export and collect copies of invoices from travellers' sealed bags. The current costs are as follows:
> Full participant:
Annual fee per shop (including GST) $1050
Docket plucking fee First 100 no charge
101-100,100 $1.50 (per docket) + GST
100, 100 plus $0.50 (per docket) + GST
> Ad Hoc:
For those retailers such as small businesses which will not generate 50 dockets there will be an option for them to have their dockets retrieved for an initial fee of $52.50 (including GST) plus $20.00 per docket (plus GST).
* Purchases of bags, packaging materials, tamper proof seals and export declaration forms printed as separate documents or incorporated into the invoice forms they use.
* Sighting of travel documents
* Preparation of triplicate invoices
* Advising travellers
* Training shop staff
*
Preparing export declarations for customers
* Possibly obtaining professional advice as to obligations under the sealed bag system
18.
Retailers will be liable to pay GST on the goods they have sold to a traveller at a GST-free price if export of the goods is not verified. Under the sealed bag system currently in operation retailers become liable to pay tax on approximately 1 to 2 percent of the number of sales. Retailers may recover that tax from their customers if they choose to do so.
Assuming that retailers will pass on some or all of the above costs to their customers, travellers purchasing goods GST-free under the sealed bag arrangement will ultimately bear some or all of the costs of running the sealed bag export verification system.
There will be no increase in costs for retailers already subscribing to the sealed bag system apart from the printing of new invoices and declaration forms containing relevant references to GST and WET.
Implementation and recurrent impact
Approximately 1800 retailers involved in selling goods to the tourist shopping market are currently subscribing to the sealed bag export verification service conducted by the tourist retail industry. These retailers and any other suppliers who choose to join the system will continue to incur the costs listed above.
Cost to Government
Costs to Government will be the ongoing compliance effort needed to ensure that the rules for GST-free sales are adhered to.
Assessment of benefits
The retention of the two systems in conjunction with the creation of a refund system for GST paid on goods will maximise selling opportunities for retailers involved in the tourism retail sector. The arrangements will allow retailers and their customers to choose a system which suits their individual needs. Retailers can choose to use all of the options if they wish.
Consultation
The Australian Taxation Office has consulted widely with retail and tourism industry associations and with other Government agencies.
Conclusion
The requirements for GST-free sales to travellers are intended to prevent losses of GST revenue and unfair commercial advantages gained through fraud. Retailers will incur substantial ongoing costs to meet the requirements for GST-free sales to tourists. However, the GST-free
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concession for travellers creates a significant financial incentive for travellers to patronise retailers who choose to meet the requirements.
If a retailer finds the cost of using the sealed bag system excessive, and they make a sale in excess of $300 to a traveller, they may choose to advise their customer to obtain a full GST refund on departure from Australia. The Tourist Refund Scheme is at minimal cost to the retailer (small costs may result from the requirement to produce a consolidated invoice) and at no cost to the traveller.
The sealed bag and customs barrier systems will allow Australia to continue to offer a liberal GST-free tourism shopping system which compares favourably with those on offer in any foreign GST/VAT jurisdiction.
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