Financial Management and Accountability Amendment Bill 2000

1998-1999-2000

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

HOUSE OF REPRESENTATIVES

FINANCIAL MANAGEMENT AND ACCOUNTABILITY AMENDMENT BILL 2000

EXPLANATORY MEMORANDUM

(Circulated by the authority of the Minister for Finance and Administration,

the Hon John J Fahey MP)

ISBN: 0642 435626

FINANCIAL MANAGEMENT AND ACCOUNTABILITY AMENDMENT BILL 2000

OUTLINE

The purpose of this Bill is to appropriate moneys to Commonwealth entities to meet certain payments arising from the introduction of the Goods and Services Tax (GST).

The appropriation will apply only where the Commonwealth can recover the amount of the payment as an input tax credit (recoverable GST) under the GST law.

The amounts of appropriation shown in the Appropriation Bills 2000-2001 do not include an allowance for recoverable GST. The figures represent the net amount that Parliament is asked to allocate for particular purposes. This approach is in line with the accepted accounting practice for GST, which specifies that revenues, expenses and assets are to be recognised net of the amount of recoverable GST.

Consequently, additional appropriation is required to cover the following payments that give rise to recoverable GST:

* payments to suppliers to the extent of the GST embedded in the acquisition price; and

* payments of GST on creditable importations.

Financial Impact Statement

The additional appropriation will have no effect on recorded revenues, expenses and assets. It will not have any impact on the cash or Fiscal Budget balances.

Some agencies may find it necessary to draw, for a short time, on bridging finance that is available under current agency banking arrangements in order to address the cash flow effects of the GST on departmental expenditures.

FINANCIAL MANAGEMENT AND ACCOUNTABILITY AMENDMENT BILL 2000

NOTES ON CLAUSES AND SCHEDULE 1

Clause 1: Short title

1. The short title of the Act will be the Financial Management and Accountability Amendment Act 2000, reflecting that it will amend the Financial Management and Accountability Act 1997.

Clause 2: Commencement

2. The Act will commence on the day it receives the Royal Assent.

Clause 3: Schedule

3. Clause 3 provides that each Act that is specified in a Schedule to the Financial Management and Accountability Amendment Bill 2000 is amended or repealed as set out in the Schedule. This is a standard provision. In fact, only the Financial Management and Accountability Act 1997 is proposed to be amended by the Schedule.

SCHEDULE 1: AMENDMENTS

Item 1 New Section 30A - Appropriations to take account of recoverable GST

New Subsections (1) (2) (3) - Appropriation for recoverable GST on acquisitions

4. The effect of these subsections will be to increase an appropriation by the amount of GST qualifying amount arising from acquisitions in respect of the appropriation.

5. GST qualifying amount will be defined in new subsection (7) to be an input tax credit or a decreasing adjustment. A decreasing adjustment for an acquisition is defined in section 19-85 of the A New Tax System (Goods and Services Tax) Act 1999 as the difference between the corrected input tax credit amount and the previously attributed input tax credit amount for the acquisition.

6. New subsection (1) will provide for an appropriation to be increased

Back to Top
immediately before a payment is to be made in respect of an acquisition where a GST qualifying amount has arisen, or will arise, for that acquisition. This subsection covers the normal situation where it is known at the time of payment that an input tax credit has arisen or will arise in respect of the acquisition. It also covers the situation where an additional payment is made for the acquisition and it is known that a decreasing adjustment will result from that payment.

7. New subsection (2) will provide that where a payment for an acquisition has been made and a GST qualifying amount later arises, the increase in the relevant appropriation takes place when the GST qualifying amount arises. This subsection covers payments made before 1 July 2000 (the date on which GST will first apply). It would also cover a situation where a GST qualifying amount was not envisaged at the time of the payment. An example of the latter situation is where a decreasing adjustment arises on reassessment of the extent to which an acquisition is creditable.

8. New subsection (3) will limit the increase in the appropriation in respect of an acquisition to the total of the GST qualifying amounts for that acquisition. This subsection will preclude, for example, a situation whereby payment by instalments for the same acquisition would result in an increase in appropriation, for each payment, of the full amount of the input tax credit.

New Subsections (4) (5) (6) - Appropriation for recoverable GST on importations

9. The effect of these subsections will be to increase an appropriation by the amount of GST qualifying amount arising from importations in respect of the appropriation.

10. New subsection (4) will provide for an appropriation to be increased immediately before a payment of GST on an importation is to be made under the appropriation where a GST qualifying amount has arisen, or will arise, for that importation. This subsection covers the normal situation where it is known at the time of payment that an input tax credit has arisen or will arise in respect of the importation.

11. New subsection (5) will provide that where a payment of GST on an importation has been made and a GST qualifying amount later arises, the increase in the relevant appropriation takes place when the GST qualifying amount arises. This subsection covers a situation where a GST qualifying amount was not envisaged at the time of the payment. An example is where a decreasing adjustment arises on reassessment of the extent to which an importation is creditable.

12. New subsection (6) limits the increase in the appropriation in respect of an importation to the total of the GST qualifying amounts for that importation.

New Subsection (7) Definitions

13. New subsection (7) contains definitions of terms used in the section. Broadly, these attribute to `acquisition', `GST' and `importation' the same meaning as those terms have in the GST Act.

14. The definition of GST Act refers to Division 177 of the GST Act which states Parliament's intention that the Commonwealth and its entities should be notionally liable to GST where they cannot be made liable to taxation by a Commonwealth law. Finance Minister's Directions will be made under this Division to give effect to this intention. The result of these Directions will be to require the payment and receipt of moneys by Commonwealth entities as though those entities were liable to pay GST under the GST Act, and were entitled to input tax credits and adjustments arising under that Act, and as though payments between Commonwealth entities are real transactions requiring appropriation.