1998

The Parliament of the Commonwealth of Australia

house of representatives

A new tax system (goods and services tax transition) bill 1998

Explanatory Memorandum

(Circulated by authority of the
Treasurer, the Hon Peter Costello, MP)

ISBN:  0642 387206

Table of contents

General outline	1
Main features of the Bill	1
chapter 1: administration arrangements
Overview	3
References	3
Date of commencement	3
Definitions	3
Transitional ‘time of supply’ rule	4
When is a supply or acquisition made?	4
Start of GST on 1 July 2000	5
Diesel fuel credits	5
Effect on sales tax on and after 1 July 2000	5
Registration before 1 July 2000	6
chapter 2: arrangements spanning the implementation date
Overview	9
References	9
General rules for attributing supplies to a tax system	10
The general GST transitional rule	10
Transactions involving more than one type of supply	11
Accounting for GST for transactions spanning implementation	11
Importations	12
Transactions involving assessable dealings (WST)	12
All of the supply made before, but assessable dealing after, 1 July 2000	12
Assessable dealing before, but all of the supply made after, 1 July 2000	13
Where supply partly on either side of, but assessable dealing before, 1 July 2000	13
Where supply partly on either side of, but assessable dealing after, 1 July 2000	14
Exceptions to the general rule: agreements spanning implementation	14
Review opportunities	15
Non-reviewable agreements	15
All of the consideration is paid prior to 2 December 1998	16
Recipient is entitled to full input tax credit for the acquisition	17
Recipient not entitled to full input tax credit for the acquisition	17
Reviewable and new contracts	17
Recipient entitled to full input tax credit for the acquisition	18
Recipient not entitled to full input tax credit for the acquisition	18
Right granted prior to 2 December 1998 for life	19
Totally GST-free	19
GST-free to the extent that consideration is paid before certain dates	19
Not GST-free	19
Funeral agreements entered into prior to 2 December 1998	20
Totally GST-free	20
GST-free to the extent that consideration is paid before certain dates	20
Not GST-free	20
Progressive or periodic supplies of services and rights	21
Construction agreements	22
Calculation of value of supplies attributable before 1 July 2000	23
Summary of the treatment of certain contracts spanning implementation	25
chapter 3: stock on hand at start of 1 july 2000
Special GST credit for wholesale sales tax (WST)	27
Overview	27
References	27
Goods which attract the special credit	28
Goods that do not attract the special GST credit	28
Goods for the purposes of manufacture	28
Second hand goods	28
Goods for hire, consumables or for own use	28
Beer, wine and spirits	28
How to claim the special GST credit	29
How to calculate the special GST credit	29
Stock of assessable goods later applied for a private or domestic purpose	30
Overview	30
chapter 4: phasing in of input tax credits for motor vehicles
Overview	31
References	31
General rule	31
Vehicles to which phasing-in applies	32
Exceptions to the rule	32
chapter 5: reduction of sales tax rates
Overview	35
Items 4 to 14 of Schedule 5 of the ST(E&C)Act	35
chapter 6: other arrangements
Overview	37
References	37
Second hand goods acquired before 1 July 2000	37
Insured events before 1 July 2000	37
Gambling	38

General outline

A New Tax System (Goods and Services Tax Transition) Bill 1998 (the Transition Bill) is one of several Bills which introduce and implement the goods and services tax (GST).  It also deals with the transition from the wholesale sales tax (WST) system, and makes other changes.
The Transition Bill provides the arrangements that will establish whether a taxpayer’s entitlements and obligations in connection with supplies of goods, real property and things other than goods and real property will be determined under the WST law, if applicable, or under the GST law. WST applies only to goods, whereas the GST applies to goods, real property and things other than goods and real property, including services.
Unless otherwise stated, all references are to the Transition Bill.
The main Act implementing the GST, titled A New Tax System (Goods and Services Tax) Act 1998, is referred to in this Explanatory Memorandum (EM) as the GST Act.
Main features of the Bill
•	The Transition Bill provides for the registration of entities for GST purposes prior to the implementation date of the GST Act.
•	The commencement date of the Transition Bill is the day after the last of the Bills implementing the GST receives the Royal Assent. The Transition Bill should be read in conjunction with the other GST Acts and the WST law.
•	The Transition Bill provides the rules for determining which taxing system will apply to transactions and events, particularly those spanning the implementation date.
•	Having determined which taxing system is relevant, the laws of that system are then applied.
•	Transactions occurring prior to 1 July 2000 and which span the date of implementation of the GST may be affected by the transitional arrangements with the effect that GST is payable.
•	Where a taxable supply is made but the invoice was issued or payment was made prior to 1 July 2000, the Transition Bill provides that payment of  any GST liability is not due until the first tax period commencing on or after 1 July 2000.
•	WST will not apply to supplies of assessable goods made after 30 June 2000, and monthly and quarterly WST returns will not be required for periods starting on or after 1 July 2000.
•	Provision is made for a special credit for WST embedded in stock on hand at the date of implementation.  The special GST credit is offset against GST liability during the first six months of the GST system. This credit is not available for stocks of beer, wine, spirits and similar drinks, second hand goods or goods for hire, amongst other goods.
•	The Transition Bill provides for the phasing-in over two years of input tax credits for motor vehicles. Those who would be entitled to WST exemption, if WST continued, will be entitled to full input tax credits.
•	A schedule to the Transition Bill provides for the reduction of WST rates on certain goods from 32% to 22% from the date of Royal Assent to the GST Act, by means of a transitional credit effected through amendments to the Sales Tax Assessment Act 1992 (STAA).
•	Items 4 to 14 of Schedule 5 of the Sales Tax (Exemptions and Classifications)Act 1992 [ST(E&C)Act] are repealed, giving effect to the reduction of rates.

Chapter 1
Administration arrangements
Overview
1.1		The Transition Bill contains several operative provisions for administrative requirements of both the Transition Bill and the GST Act. These include the effective start date for the GST and a last date for assessable dealings and their associated returns under the WST system. 
References
1.2		A summary of the provisions in the Transition Bill and the relevant references in the EM are set out in the following table:
	Transition Bill	EM paragraph	
Commencement of the Act	Section 2	1.3	
Definitions	Section 5	1.5	
Special ‘time of supply’ rule	Section 6 	1.6	
Start of GST	Section 7	1.11	
Start of diesel fuel credits	Section 7	1.14	
Effect on sales tax	Section 8	1.18	
Registration requirements	Section 9	1.25	

Date of commencement
1.3		The Transition Bill commences from the day after the day that the last of the Acts implementing the GST, as listed in subsection 2(2), receives Royal Assent.  [Section 2]
1.4		If you are a party to a transaction occurring prior to that date, and which spans the date of implementation of the GST, you may be affected by the transitional arrangements.
Definitions
1.5		Expressions used in the Transition Bill have the same meaning as in the GST Act.  Additional terms defined in other Acts are listed in the Transition Bill.  [Section 5]
Transitional ‘time of supply’ rule
1.6		The time of supply or acquisition is defined, providing a special rule for determining when a supply or acquisition is made for the purposes of the Transition Bill only. [Section 6]
1.7		This rule is referred to as the ‘time of supply’ rule throughout this EM, though the rule is also relevant to acquisitions, in determining when an entitlement to input tax credits arises.
When is a supply or acquisition made?
1.8		The rules concerning when a supply or acquisition is made are contained in section 6 and are summarised in the following table:
Type of supply	When the supply or acquisition is made	
Goods	When the goods are removed; or
if the goods are not to be removed - when the goods are made available to the recipient; or
if the goods are removed before it is certain that a supply will be made (for example, if the goods are given or taken on approval, sale or return or similar terms) – when it becomes certain that a supply has been made	
Real property	When the property is made available to the recipient, but see section 18	
Services	When the services are performed, but see section 11	
Any other thing, for example, rights	When the thing is performed or done, but see section 11	

1.9		Section 11 provides a variation on this rule for supplies of things other than goods and real property, which are made on a periodic or progressive basis. Section 18 also varies the rule for certain major construction agreements.
1.10	Note that goods is defined at section 195-1 of the GST Act to be personal tangible property. This could include live plants and animals.
Examples
1.	As part of a contract for the sale of goods, NJC Pty Ltd removes from its warehouse and places on a truck on 29 June 2000 goods that are then transported from Melbourne to Perth. They arrive at the purchaser’s premises on 2 July 2000. For the purposes of the Transition Bill, the time of the supply and the assessable dealing take place on 29 June 2000, regardless of the terms of trade, which may include a Romalpa clause and/or delivery being on a free-into-store basis. The sale of the goods is not subject to the GST law.
2.	In the case of the trucking company transporting the goods, the service is performed when the delivery service is completed. The service of delivering the goods is subject to the GST law.
Start of GST on 1 July 2000
1.11	Generally you are liable for GST on a supply or importation to the extent that it is made on or after 1 July 2000.  [Subsection 7(1)] 
However, section 6 contains specific timing rules for determining when a supply is made for the purposes of the transitional arrangements.  [Section 6]
1.12	The GST or WST liability for an importation of goods arises at the time of ‘entry for home consumption’ or some other relevant act by the Australian Customs Service (Customs).
1.13	Entitlements to input tax credits are also determined according to when the acquisition or importation is made.  [Subsection 7(2)]  Section 6 provides the rules for determining when an acquisition is made, for the purposes of this provision.
Diesel fuel credits
1.14	Subsection 7(3) provides a commencement date for the claiming of diesel fuel credits under Division 123 of the GST Act.
1.15	Under this subsection, an entitlement to a diesel fuel credit only arises on an acquisition of diesel or like fuel to the extent that it is made on or after 1 July 2000.
1.16	Section 6 provides the rules for determining when an acquisition is made.
1.17	An importation of diesel or like fuel is made when it is entered for home consumption.
Effect on sales tax on and after 1 July 2000
1.18	Sections 6, 7 and 8 provide the rules for determining into which taxing system a supply or acquisition of WST assessable goods will fall.
1.19	Section 8 recognises that the time of a WST assessable dealing with WST assessable goods may not necessarily coincide with removal (that is, when the supply is made).
1.20	In effect, subsection 8(1) and the GST transitional rule on the ‘time of supply’, described at paragraph 2.7, is applied to these goods, such that:
•	any part of a supply, or an importation, made on or after 1 July 2000 will fall under the GST system; and 
•	any part of a supply, or an importation, made before 1 July 2000 will fall under the WST system.
1.21	The A New Tax System (End of Sales Tax) Act 1998 provides that WST will not be payable on an assessable dealing made on or after 1 July 2000.
1.22	Subsection 8(2) and the ‘time of supply’ rule in section 6 mean that an assessable dealing on or after 1 July 2000, in respect of a supply or importation made before that date, is taken back to immediately before the end of sales tax.
1.23	As no WST liability can arise for any period starting on or after 1 July 2000, WST returns will not be necessary for periods after 30 June 2000.
1.24	Paragraphs 2.19 to 2.30 provide more details on attributing transactions involving assessable dealings to the correct taxing system.
Registration before 1 July 2000
1.25	If you expect to satisfy the requirements to be registered for GST at 1 July 2000 you must apply before 1 June 2000 to be registered.  [Section 9]  
The registration requirements in the GST Act, in particular Parts 2-5 and 4-5, provide the details on registration requirements.  The information on annual turnover thresholds in Division 188 of the GST Act will also assist you in determining whether you are required to be registered.
1.26	In summary, you are required to be registered if:
•	you are carrying on an enterprise; and
•	your annual turnover meets the registration turnover thresholds, which are:
•	$100,000 for non-profit bodies; and
•	$50,000 for other enterprises.
1.27	You must also comply with the registration requirement if your situation changes such that you become required to be registered, for example, if you revise your estimates of annual turnover and you expect to exceed the threshold at 1 July 2000.
1.28	You will be able to register well in advance of 1 June 2000, and the Commissioner of Taxation will make it known when the appropriate forms are available.
1.29	The registration provisions in the GST Act allow you 21 days, from the date of being required to do so, in which to apply for registration.  If you only become required to be registered in the 21 days prior to 1 June, you will still have 21 days to register, through the normal operation of section 25-1 of the GST Act.
Examples
1.	You are carrying on an enterprise, and on 20 April 2000 your annual turnover exceeds the turnover threshold, and you expect to continue to exceed the threshold.  You can apply to be registered anytime before 1 June 2000, but you must apply before 1 June 2000.
2.	You commence an enterprise on 2 June 2000, and you estimate your annual turnover will exceed the threshold.  You must apply by 23 June 2000 to be registered.
1.30	Failure to register within the required time will incur penalties, which are prescribed in the A New Tax System (Goods and Services Tax Administration) Act 1998.

Chapter 2
Arrangements spanning the implementation date
Overview
2.1		The Transition Bill contains rules for determining whether the GST system applies to certain arrangements that span the implementation date. These arrangements include those where:
•	part or all of the consideration is paid, or the invoice is issued, prior to 1 July 2000 for a supply which will be made on or after 1 July 2000; 
•	an arrangement is entered into prior to 1 July 2000 for something to be done on or after 1 July 2000; and
•	an agreement provides for supplies to be made on more than one occasion, and those occasions occur both before and on or after 1 July 2000.
2.2		Section 7 provides the general principle that the GST regime applies to all supplies or importations made on or after the implementation date of 1 July 2000. Section 6 provides a ‘time of supply’ rule for determining when a supply or acquisition of goods, real property, services or any other thing is made, so that supplies can be attributed to a particular tax system.
2.3		The Transition Bill also contains rules for particular types of contracts and supplies, which may vary the general rule for certain types of arrangements.
2.4		The transition provisions also apply to importations.
References
2.5		The information contained in this chapter is set out as follows:
	Transition Bill	EM paragraph	
General rule for transitional arrangements	Sections 6, 7	2.6	
Accounting for transactions spanning implementation	Section 10	2.12	
Importations	-	2.17	
Transactions involving assessable dealings	Section 8	2.19	
Review opportunities	Subsection 12(5)	2.32	
Payment in full prior to date of introduction of Bill	Section 12	2.34	
Non-reviewable contracts	Section 12	2.39	
Reviewable contracts	Section 12	2.45	
Rights granted for life	Section 13	2.53	
Funeral arrangements	Section 14	2.60	
Progressive or periodic supplies	Section 11	2.66	
Construction contracts	Section 18	2.74	

General rules for attributing supplies to a tax system
The general GST transitional rule
2.6		Sections 6 and 8 together provide the basis for a general rule to determine whether supplies or importations that span implementation will fall under the GST system.
2.7		The general GST transitional rule, which applies to transactions spanning the implementation date, can be stated as:
•	any part of a supply, or an importation, made on or after 1 July 2000 will fall for consideration under the GST system; and
•	any part of a supply, or an importation, made before 1 July 2000 will not.
2.8		This is so whether or not consideration passed or an invoice was issued prior to 1 July 2000.  Section 10
2.9		The effect of sections 6, 8 and 10 is that a supply to be made on or after 1 July 2000 for which any consideration was provided or an invoice was issued before 1 July 2000 is subject to the GST law.
Example
Tickets purchased in April 2000 for a concert to be held in Australia in November 2000 will be subject to GST if the supplier of the ticket is registered or required to be registered.
2.10	The general rule is varied for certain types of agreements or contracts.
Transactions involving more than one type of supply
2.11	Where a transaction involves more than one type of supply (a mixed supply) each type of supply should be considered separately under section 6.
Example
Under a contract entered into before 1 July 2000 to supply and install a kitchen, the parts are removed to the recipient on 26 June 2000 but the installation is not done until 5 July 2000.  The supply of the goods would not be subject to GST (though WST may apply).
If any part of the payment was made or the invoice issued before 1 July, the portion applying to the supply of the installation service would be attributable to the first GST tax period applying to the supplier, if the supplier is registered or required to be registered. 
The proportionate value of each supply would need to be determined by the supplier, to apportion the consideration.
Accounting for GST for transactions spanning implementation
2.12	Having determined under which taxing system a transaction (or part) falls, the rules of that system apply to the transaction to determine any liability for taxation, and any entitlement to credits.
2.13	Where a supply or acquisition falls under the GST system, the GST law would normally attribute a taxable supply or creditable acquisition with reference to the tax period in which any part of the consideration is received, or an invoice is issued. For many transactions spanning implementation, the payment or invoicing could occur prior to 1 July 2000.
2.14	Section 10 provides that where any consideration is received or an invoice is issued before 1 July 2000 in connection with a supply which is to be made on or after that day, the consideration or invoice is attributed to the first tax period applying to the supplier on or after 1 July 2000 for GST purposes. This is illustrated in the following diagram.

			_______________|________________
			Payment		1 July 2000	Supply

2.15	Section 10 therefore establishes 1 July 2000 as the start of the first possible tax period in which a liability for GST can arise. 
Example
The entity supplying the ticket in the example after paragraph 2.9 above must, if registered or required to be registered, account for the GST payable on consideration received or invoiced prior to 1 July 2000 in its GST return for the first tax period that applies to it on or after 1 July 2000.
2.16	This attribution rule is varied for contracts for progressive or periodic supply of services and of other things other than goods or real property  [section 11] and for construction contracts  [section 18].  See paragraphs 2.66 and 2.74 of this EM.
Importations
2.17	As the date of ‘entry for home consumption’ or some other act initiated by Customs crystallises the liability for GST, and for WST, it is not necessary to have a specific ‘time of supply’ rule for the importation of goods.
2.18	Other acts initiated by Customs include the sale by them of imported goods which are seized and sold, or delivered later, under certain provisions of the Customs Act 1901. The time of sale or delivery, as appropriate, is taken as the time of importation.
Transactions involving assessable dealings (WST)
2.19	The general transitional rule applies to WST assessable dealings of goods such that any part of a supply made in relation to that dealing before 1 July 2000 falls under the WST system, and any part of a supply made on or after 1 July falls under the GST system.
2.20	Section 8 provides additional rules applying to transactions involving assessable dealings.
2.21	Subsections 8(1) and 8(2) and the ‘time of supply’ rule effectively mean that no assessable dealing can be made on or after 1 July 2000. This ensures that any part of a supply made before 1 July 2000 is related to an assessable dealing before 1 July 2000, and that no assessable dealings can be taxed after 30 June 2000 under the WST.
All of the supply made before, but assessable dealing after, 1 July 2000
2.22	In general, an assessable dealing relating to a supply or importation made on or after 1 July 2000 will not be subject to sales tax.  [Subsection 8(1)]  
However, subsection 8(2) provides that 
•	where the supply of goods is made prior to 1 July 2000; and
•	an assessable dealing of those goods is made after 1 July 2000;
the time of the dealing is taken to be immediately before 1 July 2000 and the transaction falls under the WST system.
2.23	Where an assessable dealing after 30 June is brought back to the WST regime, any WST payable in respect of the dealing would be due with the WST return due for the period ending 30 June 2000.

Diagram 1	
___________|____________|____________________
		Supply		1 July		Assessable 
Made		2000		dealing
No GST		WST		dealing taken back to 30 June
Assessable dealing before, but all of the supply made after, 1 July 2000
2.24	An assessable dealing occurring before 1 July 2000 would normally be subject to the WST system.  However, where the supply of goods is actually made on or after 1 July 2000, no WST is payable.  The transaction would fall under the GST system.  [Subsection 8(1)] 
Where supply partly on either side of, but assessable dealing before, 1 July 2000
2.25	Subsection 8(1) provides that no WST is payable on an assessable dealing to the extent that the supply in respect of the dealing is made after 1 July 2000. That part of the supply made on or after 1 July 2000 falls under the GST system.  [Subsection 7(1)]  The WST system applies to the portion supplied before 1 July 2000.
2.26	The taxable value on which WST is paid will be based on the proportion of the value of the total supply which is made before 1 July 2000.
_______|____________|____________|____________|___
	Part supply 	Assessable	1 July		Part supply
made 		dealing		2000		made
	No GST 		WST				GST on this part
	on part				(refer attribution rules)
2.27	Note that if stock on hand at 1 July 2000 includes stock on which WST has been paid, a credit may be available. See paragraphs 3.1 to 3.18 of this EM for details.
2.28	Special rules addressing arrangements spanning the implementation date are dealt with from paragraph 2.31.
Where supply partly on either side of, but assessable dealing after, 1 July 2000
2.29	Where the assessable dealing occurs after 1 July 2000, any portion of the supply that is made before 1 July 2000 would fall under the WST system.  [Subsection 8(2)]  The time of the dealing is taken to be immediately before 1 July 2000. The portion of the supply made after 1 July 2000 would fall under the GST system.
	Example
The kitchen manufacturer in the example at paragraph 2.11 delivers kitchen components on 26 June 2000 and installs it on 5 July 2000. Entitlement to the goods does not pass until 5 July 2000 (this is usually when the assessable dealing occurs). The assessable dealing in relation to the goods is taken to have occurred on 30 June 2000.

		_______|___________|________________________|___
		Part supply	      1 July	Assessable	Part supply
made		     2000		dealing 		made
		No GST	      	WST		Dealing		GST on part
			       	on part		taken back
2.30	The taxable value on which WST is paid will be based on the proportion of the value of the total supply made before 1 July 2000.
Exceptions to the general rule: agreements spanning implementation
2.31	Variations from the general rule are provided for some agreements entered into prior to 1 July 2000, and which involve supplies to be made after and/or before that date. This includes:
•	non-reviewable agreements;  
•	reviewable agreements; 
•	rights granted for life;  
•	funeral agreements entered into before 2 December 1998 (date of introduction of the Transition Bill); 
•	agreements for periodic or progressive supplies of things other than goods or real property; and
•	construction agreements made before 1 July 2000.  
Review opportunities
2.32	In order to understand the treatment of contracts under section 12, you will first need to distinguish between an agreement that has an opportunity for review and one that does not.
2.33	Under subsection 12(5) an agreement is considered to have no opportunity for review if:
•	the agreement specifically identifies a supply; and
•	the agreement specifically identifies the consideration in money, or a way of working out the consideration in money (for example, by reference to a formula) for that supply; and
•	no opportunity has arisen under the agreement after the date of Royal Assent to the Transition Bill or 2 December 1998, as appropriate, but before the supply is made, to vary the consideration or the method for calculating the consideration, or to alter the consideration for the supply in any other way.
Examples of opportunities to review
1.	Company A has an agreement to supply steel. The consideration is calculated by a formula that allows for adjustments to reflect exchange rates. This of itself would not cause the agreement to be treated as having a review opportunity.
2.	Company B has a similar contract to company A, but Company B’s agreement provides a date upon which both parties could negotiate a change in the consideration, which is broad enough to allow for the GST to be taken into account, or in the quantity to be provided for the same consideration. This agreement would be considered to have an opportunity for review.
Non-reviewable agreements
2.34	Agreements entered into either prior to 2 December 1998 or Royal Assent of the Transition Bill, but under which supplies will be made after 1 July 2000, may contain provisions such that the agreed consideration does not include GST and the consideration cannot be reviewed to take it into account. Such agreements are often called ‘non-reviewable contracts’.
2.35	Unless the Transition Bill has provisions to relieve this, GST may be payable on supplies made under the agreement, but the supplier would be unable to pass on the tax. 
2.36	If you have an opportunity to review an agreement or otherwise build any GST into the agreed price, you would normally be expected to do so.
2.37	The final date by which a contract can be entered into and receive the benefit of this provision differs on the basis of whether the acquirer of the supplies under the agreement is entitled to input tax credits on the supply.
•	If you are entitled to full input tax credits on the acquisitions, agreements you enter into prior to the date of Royal Assent to the Transition Bill can be treated under section 12.
•	If you are not entitled to full input tax credits on the acquisitions, only agreements you entered into prior to 2 December 1998 can be treated under section 12.
2.38	The reason why those entitled to input tax credits have until Royal Assent to enter contracts that may be treated as GST-free for a period after 1 July 2000 is that the net tax result for these people is nil. The only possible benefit is one of timing. 
All of the consideration is paid prior to 2 December 1998
2.39	If an agreement with no opportunity for review is entered into and paid in full prior to 2 December 1998, all the supplies under that agreement will be GST-free.  [Subsection 12(3)]  It does not matter whether or not the recipient is entitled to input tax credits on the acquisition. 
2.40	If the agreement provides for a later review date, even though the consideration is paid in full in respect of its present terms, the supplies under the contract are GST-free only until the review date, even if that is after 1 July 2005.  [Subsections 12(2) and 12(3)]
2.41	The concession available under subsection 12(3) is only available when the consideration is paid in full. Issuing of an invoice will not attract the operation of the provision.
Examples
1.	A football club supplies a 20 year membership, from 1 January 1998 to 31 December 2017, to Noel. The membership was paid in full ($1,000), but the terms of the membership provide for an adjustment to be made and paid after 10 years, to reflect general price changes. The supply of the membership would be GST-free under subsections 12(2) & (3). The adjustment made 10 years later is the first review opportunity, and any additional charges for supplies to be made after that review opportunity would be subject to GST.
2.	Using the earlier example of a concert in November 2000, any tickets purchased and paid for in full before 2 December 1998 would not be subject to GST.
Recipient is entitled to full input tax credit for the acquisition
2.42	If the recipient of the supply is entitled to full input tax credits, any supplies made prior to 1 July 2005, under agreements which are made prior to the date of Royal Assent to the Transition Bill and which provide no opportunity for review, will be GST free.  [Subsection 12(2)]
Note: If all of the consideration is paid before 2 December 1998, all of the supplies made under the agreement will be GST-free.  [Subsections 12(2) and 12(3)]
2.43	A person making taxable supplies to recipients entitled to full input tax credits under a non-reviewable agreement entered into after the date of Royal Assent will be subject to GST on all supplies made under that agreement.  [Subsection 12(1)]
Example
NJC Pty Ltd, is entitled to full input tax credits and has an agreement with the football club for the company to put its advertising banners around the football ground. The agreement, which is for 10 years, was entered into in February 1998 and has no opportunity for review. Consideration is paid annually. Supplies made by the football club prior to 1 July 2005 under the contract are not subject to GST. The consideration for the year commencing February 2005 would be apportioned on a time basis to ascertain the value which would be subject to GST.
Recipient not entitled to full input tax credit for the acquisition
2.44	If the recipient of the supply is not entitled to full input tax credits on its acquisitions (for example, financial institutions and end-consumers), supplies made prior to 1 July 2005 under agreements which are made prior to 2 December 1998 and which provide no opportunity for review, will be GST free. [Subsection 12(2)]
Note: If all of the consideration is paid before 2 December 1998, all of the supplies made under the agreement will be GST-free. [Subsections 12(2) and 12(3)]
Example
Noel’s wife Margaret signs a contract for a 10 year membership of the football club in October 1998, but she has not paid the full consideration by 2 December 1998. The contract has no provision for a review of the consideration. The supply of the membership would be treated under paragraph 12(2)(a), such that the portion of the membership attributable to the period on or after 1 July 2005 would be subject to GST. 
Reviewable and new contracts
2.45	If an agreement provides a review opportunity making it possible to take the GST into account in some way, any supply made under the agreement after that opportunity for review (or 1 July 2005, if that is earlier) is no longer GST-free.  [Subsection 12(2)]
2.46	Subsection 12(4) also provides that recipients not entitled to full input tax credits are treated differently to those who are entitled to full input tax credits, for agreements entered into after 2 December 1998.
Recipient entitled to full input tax credit for the acquisition
2.47	Supplies made on or after 1 July 2000 under any agreement entered into after the date of Royal Assent to the Transition Bill will be subject to GST.
2.48	Supplies made on or after 1 July 2000 under a reviewable agreement entered into before the date of Royal Assent to the Transition Bill with a recipient who is entitled to full input tax credits will only be GST-free until the first opportunity to review the consideration or the means to calculate the consideration. [Paragraph 12(2)(b)]
2.49	If the first opportunity for review is on or after 1 July 2005, then only supplies before 1 July 2005 would be GST-free under section 12.
Example
An accounting firm with offices in the city has an option to renew its lease for another ten years, from December 1998. The accounting firm expects to be registered, and to be entitled to full input tax credits. The landlord and the tenant have the opportunity, before Royal Assent to the Transition Bill, to make the new lease non-reviewable for a set period, or reviewable. If they enter a contract in December 1998 under which the consideration is reviewable after five years, whatever is to be supplied under the lease would be GST-free only until that review date in 2003.
Recipient not entitled to full input tax credit for the acquisition
2.50	Supplies under an agreement entered into prior to 2 December 1998 with a recipient who is not entitled to full input tax credits are only GST-free until the first opportunity to review the consideration or the means to calculate the consideration arises.  [Subsection 12(2)]
Once that opportunity passes, any subsequent supplies under the agreement are no longer GST-free.
Example
A financial institution with offices in the city took up its option to renew its lease for another ten years in November 1998. The institution is registered, but is not entitled to full input tax credits. Under the new agreement the consideration is reviewable after five years. Supplies under the lease would only be GST-free until that review date in 2003.
2.51	If the first opportunity to review is on or after 1 July 2005, then only supplies before 1 July 2005 would be GST-free under section 12.
2.52	A supplier entering a new agreement, or reviewing an existing agreement, after the 2 December 1998 introduction of the Transition Bill, with an entity that is not entitled to full input tax credits on the acquisition under the agreement, should be aware that supplies made by them on or after 1 July 2000 under the agreement will not be GST free.
Right granted prior to 2 December 1998 for life
2.53	An agreement for a right that is granted or exercisable for the rest of an individual’s life can be treated in one of three ways, applying the provisions of sections 12 and 13.
Totally GST-free
2.54	If the agreement for the grant of the right was entered into prior to 2 December 1998, and paid for in full prior to 2 December 1998, the supply is totally GST-free.  [Paragraph 13(3)(b)]
GST-free to the extent that consideration is paid before certain dates
2.55	If the agreement for the grant of the right was entered into prior to 2 December 1998 but was not paid for in full before 2 December 1998, the recipient is effectively given until 1 July 2005, or any earlier review date, if one exists, to pay for it.
2.56	Any consideration paid before 1 July 2005, (or an earlier review date if one applies to the agreement) is taken to be for a supply which is GST‑free.  [Paragraph 13(3)(b)]
Examples
1.	Tracey signs a non-reviewable agreement for life membership to a health club in October 1998. She makes the final payment for the membership in February 2002. The supply is GST-free because all the consideration is paid before 1 July 2005.
2.	George signs a non-reviewable agreement for life membership to a health club in October 1998 but has only paid part of it ($600) by 1 July 2005. The supply is GST-free to the extent of the consideration paid before 1 July 2005 ($600). Any payments made on or after 1 July 2005 would be taken to be for supplies made after that date and would be subject to GST.
Not GST-free
2.57	If the agreement for the grant of the right is entered into on or after 2 December 1998, all of the consideration for the grant of the right is subject to GST. This would include any supplies made from the date of the agreement to 1 July 2000.  [Subsection 13(2)]
2.58	This rule is needed because it is not easy to apportion the supplies under the agreement between those that are subject to GST and those that are not without resorting to actuarial calculations.
2.59	The treatment of a right granted for life is considered at the time the right is granted. The services or other things envisaged as being supplied under this right are those specifically provided for and paid for as part of the agreement. Section 13 does not impact on other transactions the holder of the right may undertake as a result of having the right.
Example
The grant of a life membership of a racing club entitles the holder of the life membership to attend certain functions, and to obtain certain services at a reduced rate. Section 13 is only relevant to the grant of the right itself. Payment to attend the functions, or for the other reduced rate services, would be considered under the other provisions of this Bill and the GST Act.
Funeral agreements entered into prior to 2 December 1998
2.60	Section 14 provides concessional treatment for funeral arrangements entered into before 2 December 1998.
Totally GST-free
2.61	If the funeral agreement was entered into prior to 2 December 1998 and paid for in full prior to 2 December 1998, the supply is totally GST-free. [Paragraph 14(1)(b)]
2.62	Funerals supplied before 1 July 2000 would not be subject to GST.
GST-free to the extent that consideration is paid before certain dates
2.63	If the funeral agreement was entered into prior to 2 December 1998 but was not paid for in full before 2 December 1998, the recipient is effectively given until 1 July 2005, or any earlier review date, if one exists, to pay for it.
2.64	Any consideration paid before 1 July 2005, (or an earlier review date if one applies to the agreement) is taken to be for a supply which is GST‑free.  [Paragraph 14(b)]
Not GST-free
2.65	If the funeral agreement is entered into on or after 2 December 1998, the supply of the funeral will be subject to GST, if it is supplied on or after 1 July 2000, under the GST law. Section 10 would apply to any payment received or invoice issued prior to 1 July 2000.
Progressive or periodic supplies of services and rights 
2.66	Under section 11 if an agreement entered into prior to 1 July 2000 specifically provides for:
•	supplies of things (other than goods or real property);
•	on a periodic or progressive basis; and
•	over the period of the agreement and extending after 1 July 2000;
those supplies are taken to be made continuously and uniformly throughout that period. Agreements to which this section applies will always involve the making of more than one supply under the agreement, and it does not matter if those supplies are made at irregular intervals or are of varying value.
2.67	The section only applies where the agreement specifically provides that the supplies are to be made progressively or periodically.
2.68	Section 11 only applies to supplies of services and of things other than goods or real property. A construction contract under which the supplies are to be made on a progressive basis could not be considered under section 11, because the supply is of goods or property.
2.69	The proportion of the supplies made prior to 1 July 2000 under contracts to which section 11 applies, as a time-based proportion of the total supplies under the contract, will not be subject to GST.
2.70	The value of the supplies made on or after 1 July 2000 is brought to account continuously over the term of the contract. In effect this means that the proportion of supplies taken to be made during a tax period of the supplier will be brought to account in that tax period. If the entity has monthly tax periods, then the proportion equivalent to one month would be brought to account.
Examples
1.	An enterprise takes out a one year maintenance agreement for its office equipment, effective from 1 April 2000, fully paid for in advance in March 2000 ($1200). The contract is one of periodic supply. Twenty-five per cent of the value of the contract ($400) is taken to be performed before 1 July 2000 and will not be subject to GST. The balance will fall under the GST system, with supplies taken to be made continuously.
The supplier would bring the appropriate proportion of the supplies made to account in each tax period applying to them. If the supplier lodges monthly, GST of one eleventh of $100 is payable each month for the period of the agreement starting on or after 1 July 2000.
2.	A one year subscription to a business tax reporting service, spanning the date of implementation, provides, amongst other things, updates of various sizes at irregular intervals, in various forms. The supplies under the contract are taken as being made at regular intervals over the period of the contract for the purposes of the transition arrangements.
2.71	An agreement for periodic or progressive supplies may also be non-reviewable, so the provisions relating to agreements with or without an opportunity for review should also be read. These would override section 11, in terms of determining whether supplies were GST-free. That is, if a recipient was entitled to receive services GST-free under section 12, that would still be the case. 
2.72	However, section 11 provides the basis for determining the proportion to be attributed to the period before and after 1 July 2000 (or a later date provided by section 12) for those agreements under which supplies are subject to GST.
2.73	Supplies made on a continuous basis, such as the provision of power and telephone services, would be taken to be made continuously and uniformly throughout a period under the general transitional rule, based on when the supply is made.
Example
The supply of rental of a telephone line for a three month period, from 1 June to 31 August 2000 is a continuous supply. Two thirds of the value of the supply will be subject to GST under the general transitional rule.
Construction agreements
2.74	Section 18 provides a special rule for attributing the value of certain construction agreements which span implementation. The rule ensures that the value of the project is attributed across the term of the agreement on the basis of the value of the work and materials permanently incorporated in or affixed to the building or site. This effectively breaks the supply of the completed project into two portions – that which is not subject to GST and that which is. Division 29 of the GST Act and section 10 of the Transition Bill contain rules about attributing the GST to tax periods.
2.75	The construction agreements to which this section applies are those involving the supply of goods or real property, where the goods or real property being supplied is:
•	the construction, major reconstruction, manufacture or extension of a building, or the construction, major reconstruction, manufacture or extension of a civil engineering work; that is
•	supplied in accordance with a written agreement made before 1 July 2000; and
•	the completed project is made available to the recipient on or after 1 July 2000.
2.76	Particular points to note about this provision include:
•	the agreement must be in writing; [paragraph 18(1)(a)]
•	the supply is the supply of the total construction project itself, as provided for in the agreement, not the components in its creation;
•	only the head contractor’s agreement with the owner of the real property can be considered under this provision. The reason these provisions are restricted to the supply under the agreement between the owner and the head contractor is that subcontractors will charge GST on any supplies that are delivered or performed on or after 1 July 2000 (if they are taxable supplies) and the head contractor can claim input tax credits on the acquisitions; 
•	the provision only applies to the extent that you have determined the value of the work and materials permanently incorporated or affixed as at 30 June 2000, in a manner and within the time specified by the Commissioner.
2.77	In the absence of the special rule in section 18, the total value of the agreement would be subject to GST attributable at the time the goods or property are made available to the recipient, in accordance with section 6.
2.78	If supplies under a construction agreement would be GST-free under section 12, which provides a special rule for certain non-reviewable and reviewable agreements, those supplies would continue to be GST-free. However, the value of any part of the supplies under the agreement that is subject to GST should be calculated as provided for in subsection 18(5).
Calculation of value of supplies attributable before 1 July 2000
2.79	Section 18 only applies to the value of all work and materials permanently incorporated in or affixed on the site of the building or civil engineering work in accordance with the agreement prior to 1 July 2000 (the value added) [subsection 18(2)], that you determine by an appropriate valuation method.  [Subsection 18(4)]
2.80	Subsection 18(5) provides for later valuation, where the supplies are GST-free for a period after 1 July 2000, under the provisions of section 12. This ensures that the value of supplies made up to the review date or 1 July 2005, whichever comes first, are treated as being GST-free.
2.81	The valuation necessary for the application of this provision must be done on or before the end of the head contractor’s first tax period after 1 July 2000 (or the first tax period after the date of the later valuation provided by subsection 18(5)).  [Subsection 18(4)]
2.82	If your records make the value of the supplies prior to 1 July 2000 (or later valuation date) clear, that is a sufficient record for the purposes of this section. If not, the Commissioner would accept a valuation by an independent, registered valuer.
2.83	The value added before 1 July 2000 (or the later valuation date) is effectively treated as a supply made prior to that date, and is not subject to GST. 
2.84	If the value added is less than the consideration paid or invoiced before 1 July 2000 (or later valuation date), the difference is, in effect, a payment in advance for a supply made on 1 July 2000 (or the later date). That supply would be attributed to a GST tax period under section 10.
Example (assuming a valid valuation is obtained)
1. An agreement to construct a warehouse is of the type entitled to apply the provisions of section 18 and has a total value of $1 million. It is entered into on 1 January 2000. At the start of 1 July 2000, the value of work and materials permanently incorporated into the construction is $550,000. Consideration invoiced to that time is $650,000. Supplies under the agreement to the value of $550,000 will not be subject to GST. The $100,000 excess consideration would be taken as consideration for supplies occurring after 1 July 2000, and would be attributed to the first tax period commencing on or after 1 July 2000, per section 10.
Summary of the treatment of certain contracts spanning implementation
The table below summarises the treatment of supplies under various types of contracts which span the implementation date. Columns A,B and C refer to the date on which the contract is entered.
	Date contract entered 

Recipient under contract	A:
Prior to 2 December 1998	B:
After introduction, but prior to Royal Assent to GST Act	C:
After Royal Assent, but prior to implementation	
1	Section 13:
Right granted for life
	GST-free to the extent of consideration paid prior to 1 July 2005, or an earlier review date if one exists.	Not GST-free for supplies made before or after 1 July 2000. Supplies made before 1 July 2000 are taken to be made on 1 July 2000.	As for 1B.	
2	Section 14: 
Funeral arrangements	GST-free to the extent of consideration paid prior to 1 July 2005, or an earlier review date if one exists.	Not GST-free.	Not GST-free.	
3	Section 12: Entitled to full input credit on the acquisition –no opportunity to review	Supplies GST-free to 1 July 2005.  
If paid in full prior to 2 December 1998, all GST-free.	Supplies GST-free to 1 July 2005.	Not GST-free for supplies on or after 1 July 2000.	
4	Section 12: Entitled to full input credit on the acquisition – opportunity to review, or new contract	GST-free until earlier of first opportunity to review, or 1 July 2005.	GST-free until earlier of first opportunity to review, or 1 July 2005.	Not GST-free for supplies on or after 1 July 2000.	
5	Section 12: Not entitled to full input credit on the acquisition – no opportunity to review	Supplies GST-free to 1 July 2005.
If paid in full prior to 2 December 1998, all GST-free [s12(3)].	Not GST-free for supplies on or after 1 July 2000. 
	Not GST-free for supplies on or after 1 July 2000. 	
6	Section 12: Not entitled to full input credit on the acquisition –opportunity to review	GST-free until earlier of first opportunity to review, or 1 July 2005.	Not GST-free for supplies on or after 1 July 2000. 
	Not GST-free for supplies on or after 1 July 2000. 
	
7	Section 11:Contracts for periodic or progressive supplies of things other than goods or real property	If reviewable, as for 4A or 6A as appropriate and with any taxable proportion based on the rule in s 11.
If non-reviewable, as for 3A or 5A as appropriate.	If reviewable, as for 4B or 6B as appropriate and any taxable proportion based on the rule in s 11.
If non-reviewable, as for 3B or 5B as appropriate.	Not GST-free for proportion of supplies made on or after 1 July 2000. 
	
8	Construction contracts to which section 18 applies
	If reviewable, as for 4A or 6A as appropriate and with any taxable proportion based on the rule in section 18
If non-reviewable, as for 3A or 5A as appropriate.	If reviewable, as for 4B or 6B as appropriate and with any taxable proportion based on the rule in section 18
If non-reviewable, as for 3B or 5B or as appropriate.	Not GST-free for value of supplies made after 1 July 2000, based on the rule in section 18.	

Chapter 3
Stock on hand at start of 1 July 2000
Special GST credit for wholesale sales tax (WST)
Overview
3.1		At the time of introduction of the GST, many enterprises will be holding inventories of new goods for sale on which WST has been paid. To apply GST on top of WST already embedded in the price of goods would be inappropriate double taxation. Consequently, businesses may claim a special GST credit for the WST paid on the stock. 
3.2		The amount of the special GST credit is equal to the amount of sales tax that you have borne in respect of the goods. The special GST credit is available only if you are registered for GST and can only be claimed through your GST return, in a tax period of your choice, but it must be a tax period ending before 1 January 2001. The special GST credit must be claimed before 22 January 2001.
References
3.3		The information contained in this chapter includes:
	Transition Bill	EM paragraph	
Goods to which provision applies	Subsection 15(1)	3.4	
Goods to which provision doesn’t apply	Subsections 15(1) & 15(2)	3.6	
Who is entitled to claim a credit	Subsections 15(1) & 15(4)	3.12	
How to claim a credit	Subsection 15(4)	3.13	
How to calculate the credit	Subsections 15(3) & 15(5)	3.15	
Goods later applied for private purposes	Section 16	3.19	

Goods which attract the special credit
3.4		The special GST credit can only be claimed in respect of stock on hand at the start of 1 July 2000 which is held for sale or exchange in the ordinary course of business.  [Paragraph 15(1)(b)]
3.5		Stock which attracts the special credit may be held by retailers or wholesalers, provided that it is not excluded by the provision.
Goods that do not attract the special GST credit
Goods for the purposes of manufacture
3.6		Stock held for the purposes of manufacture, for example, raw materials, is excluded from entitlement to the GST credit.  [Paragraph 15(1)(b)]
Second hand goods 
3.7		Stocks of second hand goods are not eligible for the special GST credit.  [Paragraph 15(2)(a)]
Goods for hire, consumables or for own use
3.8		Goods held for hire, as business consumables (for example, stationery) or for your own use are not held for the purposes of sale or exchange, so would not be eligible for the special GST credit. 
Beer, wine and spirits 
3.9		You can not claim the special GST credit for stocks of alcoholic beverages of the type mentioned in subsection 15A(1) of the ST(E&C)Act.  [Paragraph 15(2)(b)]
3.10	Subsection 15A(1) of the ST(E&C)Act mentions the following alcoholic beverages:
•	the following, only if they contain more than 1.15% by volume ethyl alcohol:
•	wine; 
•	cider;
•	beverages similar to wine or cider; and
•	mead, perry, sake and other similar fermented beverages;
•	beer;
•	spirits, liqueurs or spiritous liquors; and
•	beverages that contain beer, spirits (other than spirits for fortifying wine or other beverages), liqueurs, or spiritous liquors.
3.11	The Government has announced that these products are to be subject to a different approach which effectively maintains their retail price.
How to claim the special GST credit
3.12	To claim the special GST credit for embedded WST, you must be registered as at 1 July 2000.  [Paragraph 15(1)(a)]
You will be regarded as registered as at 1 July 2000 if your registration has a date of effect of 1 July 2000, even if you are not notified of your registration until after that date.
3.13	You can only claim the special GST credit through a GST return, as a separate adjustment against your GST liability, where it is treated as though it were an input tax credit.  [Subsection 15(4)]
3.14	You can claim the special GST credit in only one tax period applicable to you, and which ends before 1 January 2001. The GST return in which the claim is made must be lodged before 22 January.  The Commissioner has no discretion to extend this period.  [Subsection 15(4)]
How to calculate the special GST credit
3.15	The amount of the credit is the amount of WST that you have borne on the goods.  [Subsection 15(3)]
This may have been directly paid by you to the supplier of the goods, and appear on your invoice, or it may have been paid at an earlier taxing point.
Example
A tradesman who is entitled to claim the special GST credit, purchased a stock of plumbing hardware for use in an enterprise from a retail store in June 2000, and has it on hand at 1 July 2000. The receipt from the retail store would not provide details of any WST contained in the price.
3.16	If you did not directly bear the WST, or other circumstances make it difficult to readily ascertain the amount of WST which goods have borne, the Commissioner can provide an alternative means of calculating the credit. This will be provided in writing, and may be in response to a specific request by you, or may be initiated by the Commissioner. [Subsection 15(5)]
3.17	The Commissioner may issue public rulings which provide methods for calculation for certain types of goods, or in certain industries, where it is likely that difficulties will be experienced in identifying the WST embedded in stock. 
3.18	Taxpayers whose circumstances are addressed in a ruling and who subsequently act in accordance with that ruling, will be afforded the protection available under section 37 of the A New Tax System (Goods and Services Tax Administration) Act 1998.
Stock of assessable goods later applied for a private or domestic purpose 
Overview
3.19	If assessable goods are applied for private or domestic use rather than in the course of carrying on an enterprise, they will become subject to GST under section 16.  Subsection 16(1) ensures that such dispositions of the goods are taxable supplies. Subsection 16(3) also provides that such goods on hand on cessation of registration are taxable supplies.
3.20	Section 16 only applies if you are registered or required to be registered on 1 July 2000.
3.21	The taxable supply is taken to be made during the tax period in which you apply the goods for a private or domestic purpose [subsection 16(1)] or the last period that began before cessation of registration [subsection 16(3)], whichever is relevant.
3.22	The value of the supply is the market value of whatever is applied to a private or domestic purpose, but only to the extent that it is applied in this way. The market value is taken at the time the goods are applied for a private or domestic purpose [subsection 16(2)], or at the time of cessation where the supply results from the cessation of registration.  [Subsection 16(4)]

Chapter 4
Phasing in of input tax credits for motor vehicles
Overview
4.1		Given the nature of the GST and the limited business input exemption provisions in the WST system, businesses currently bearing the WST on motor vehicles may delay purchases until after the introduction of the GST in order to get the input tax credits. This delay could seriously disrupt the motor vehicle market. 
4.2		To take account of this, input tax credits for sales of motor vehicles, detachable trailers for heavy prime movers, and specialised bodies for motor vehicles will be phased in over a two year period, for certain businesses.
References
4.3		The information contained in this chapter includes:
	Transition Bill	EM paragraph	
Effect on claiming of input credits	Subsections 19(2) & (3)	4.4	
Which vehicles are included	Subsection 19(1)	4.5	
Vehicles, and purchasers, not affected	Subsection 19(4)	4.6	

General rule
4.4		If you acquire goods, services or other things on or after 1 July 2000, for use in carrying on your enterprise, you would normally be entitled to input tax credits for the acquisition. However, this is varied for motor vehicles, bodies and certain trailers by applying a phasing-in approach: 
•	in the first year of operation (1 July 2000 to 30 June 2001) no input tax credits will be allowed for relevant purchases; [subsection 19(2)]
•	in the second year (1 July 2001 to 30 June 2002), half the value of the full input tax credit will be allowed;  [subsection 19(3)] and
•	full input tax credits will be available in the third year.
The provisions apply to both domestic acquisitions and importations, but not to purchases of second hand motor vehicles.  [Subsection 19(4)]
Vehicles to which phasing-in applies 
4.5		Section 19 applies to:
•	motor vehicles, which means any motor powered road vehicle (including a 4 wheel drive);
•	detachable trailers for heavy prime movers such as semi-trailers; and 
•	specialised commercial truck bodies as described in the provision
which are used in the enterprise, and includes those held for hire. [Paragraph 19(4)(a)]
Examples of things that are subject to phasing-in
1.	Cars used by sales staff in carrying on the business of an enterprise
2.	Refrigerated trailer for a semi-trailer
3.	Milk tanker
4.	Prime mover for a semi-trailer
Exceptions to the rule
4.6		This provision does not apply if:
•	you acquire or import a motor vehicle, body or trailer to hold as trading stock (unless it is held for hire);  [Paragraph 19(4)(a)]
•	the purchase is of second hand motor vehicles, bodies or trailers; [Paragraph 19(4)(b)]
•	you would have been entitled to exemption from WST on the purchase under the sales tax law, if it still applied.  [Paragraph 19(4)(c)]
Explanation: Enterprises entitled to exemption will have no incentive to delay purchases and so they will be able to claim full input tax credits from the date of implementation. 
•	the new motor vehicle or trailer is provided by an insurance company to replace a vehicle under the terms of an insurance policy. 
Explanation: The measure is intended to impact on planned purchases, and an event resulting in the replacement of a vehicle under an insurance policy is unlikely to be planned.  [Paragraph 19(4)(d)]
Examples of things that are not subject to phasing-in
1.	Motor vehicles used exclusively off-road, such as on mine sites
2.	Trucks used totally by a gift-deductible charity to collect and deliver donated goods
3.	Tractors and other farm machinery that would have been exempt from sales tax, if it still existed
4.	Trailers, caravans and horse floats used with family sedans.

Chapter 5
Reduction of sales tax rates
Overview
5.1		Without this provision, some goods currently subject to the 32% rate of WST are likely to fall considerably in price after the GST is introduced.
5.2		To spread the price fall, the rate of WST will be reduced to the Schedule 4 rate (ST(E&C)Act) of 22%, prior to the start of GST.  [Item 2, Schedule 1 of the Transition Bill]
Items 4 to 14 of Schedule 5 of the ST(E&C)Act
5.3		Effective from the date of Royal Assent of the GST Act, the rate of WST applicable to goods covered by items 4 to 14 of the ST(E&C)Act will be reduced from the current Schedule 5 rate of 32%, to 22%. This is effected by repealing the items, such that the Schedule 4 rate of 22% applies.
5.4		The goods affected include televisions, video recorders, radios, watches and cameras.
5.5		Items 2 to 3, namely jewellery and furs, remain at the rate of 32%.
5.6		This measure is intended to avoid consumers holding off on purchases, by spreading the impact of the price change occurring on the introduction of the GST.

Chapter 6
Other arrangements
Overview
6.1		The Transition Bill contains the operative provisions for parts of the GST Act.  It also contains special provisions relating to arrangements spanning implementation for certain industries or events.
References
6.2		The information contained in this chapter is set out as follows:
	Transition Bill	EM paragraph	
Second hand goods on hand at 1 July 2000	Section 17	6.3	
Insured events before 1 July 2000	Section 20	6.5	
Gambling	Section 21	6.7	

Second hand goods acquired before 1 July 2000
6.3		Division 66 of the GST Act applies to second-hand goods even if they were acquired before the GST starts. The Division applies to goods only if they are held at the start of 1 July 2000 for the purposes of sale or exchange in the ordinary course of business.  [Section 17]
6.4		Section 17 has the effect of extending the application of Division 66 of the GST Act to goods for sale or exchange which would otherwise be excluded by subsection 66-5(2) of that Act.
Insured events before 1 July 2000
6.5		Insurance arrangements can span implementation when the insured event and the settlement of a claim under an insurance policy fall either side of implementation.
6.6		If an insurance company settles an insurance claim on or after 1 July 2000 in relation to an event that occurred before that date, section 20 provides that:
•	the acceptance of the payment by the insured is not a taxable supply by them [Subsection 20(1)]; and
•	the acquisition by the insurance company of the insured person’s right to pursue the claim any further is not a creditable acquisition.  [Subsection 20(2)]
Gambling
6.7		Division 126 provides for the treatment of gambling under the GST law. It provides for a global accounting approach, and involves the identification of gambling supplies and gambling events.
6.8		Gambling supplies and gambling events can span implementation, so the Transition Bill provides a basis for determining under which taxing system they fall. In doing so, the time of the gambling event, at which the outcome of the race, lottery, raffle etc is established, is the determinant.
6.9		Where the gambling event occurs on or after 1 July 2000, all the gambling supplies associated with that gambling event will fall under the GST system. Any gambling supplies made before 1 July 2000, for example tickets purchased, wagers made or bets placed, are taken to have been made on 1 July 2000, and will be subject to GST.  [Subsection 21(1)]
Example 
A lottery is drawn on 1 August 2000, tickets for which have been sold throughout the period from 1 May 2000 to mid-July 2000.
Each of the ticket sales is a gambling supply.  The drawing of the lottery is a gambling event. All of the tickets would be subject to GST. Consideration received for tickets sold before 1 July 2000 would be attributed to the first tax period starting on or after 1 July 2000.
6.10	Where the gambling event occurs before 1 July 2000, the gambling supplies are not subject to GST, and any prizes paid out in respect of that event are not included in the calculation of the global gambling GST amount under section 126-10 of the GST Act.  [Subsection 21(2)]

.