A New Tax System (Goods and Services Tax) Amendment Regulations 2000 (No. 6) 2000 No. 363
EXPLANATORY STATEMENT
STATUTORY RULES 2000 No. 363
Issued by Authority of the Assistant Treasurer
Subject - A New Tax System (Goods and Services Tax) Act 1999
A New Tax System (Goods and Services Tax) Amendment Regulations 2000 (No. 6)
The Governor General may make regulations under section 177-15 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) for the purposes of that Act.
These Regulations amended the A New Tax System (Goods and Services Tax) Regulations 1999 to ensure that an interest in a time-sharing scheme is treated as a financial supply. Section 40-5 of the GST Act permits the regulations to specify those supplies that are financial supplies.
A typical time-sharing scheme involves the acquisition of an interest in a scheme by way of contribution of monies to a scheme operator, who in turn acquires property, the use of which is shared between the scheme participants. A person who holds an interest in a time-sharing scheme is able to have access to the scheme property for a specified time period.
Pursuant to item 10 of Subregulation 40-5.09(3) of the Principal Regulations, the acquisition, provision or disposal of an interest in a security was treated as an input taxed financial supply. However, item 10(b) of Subregulation 40-5.09(3) excluded a time-sharing scheme from coming within the meaning of securities. This was because an interest under a time-sharing scheme is more akin to an interest in real property than to a security. The exclusion was inserted in the Regulations by amendment on 26 May 2000. As a result, the supply of an interest in a timesharing scheme was a taxable supply, and the supplier was entitled to claim input tax credits in respect of acquisitions of things that relate to making the supply.
The government accepted representations that an interest in a time-sharing scheme should be treated as a security for GST purposes, as it is treated as a security under the Corporations Law. The amendment removed the exclusion, and allows the acquisition, provision or, disposal of an interest in a time-sharing scheme to be treated as a security for GST purposes. [Schedule 1, item 1, new Subregulation 40-5.09(3), item 10]
As a result, the acquisition, provision or disposal of an interest in a time-sharing scheme is an input taxed financial supply. This means that there is no GST on the supply and the supplier is not entitled to input tax credits on acquisitions relating to the making of the supply.
The Regulations commenced on date of notification.
Overview
The A New Tax System (Goods and Services Tax) Amendment Regulations 2000 (No. 6) were enacted to address the treatment of interests in time-sharing schemes under the GST Act. These regulations, issued by authority of the Assistant Treasurer, amend the A New Tax System (Goods and Services Tax) Regulations 1999. The primary issue these amendments sought to resolve was the classification of time-sharing scheme interests for GST purposes. Initially, these interests were not considered securities and were thus subject to GST, contrary to their treatment under the Corporations Law. The policy objective of these amendments was to align the GST treatment of time-sharing scheme interests with their legal classification as securities, thereby ensuring consistency and fairness in the taxation framework.
Scope and Application
The A New Tax System (Goods and Services Tax) Amendment Regulations 2000 (No. 6) amends the A New Tax System (Goods and Services Tax) Regulations 1999, addressing the treatment of interests in time-sharing schemes for GST purposes. These regulations apply to entities and individuals who are involved in the acquisition, provision, or disposal of interests in time-sharing schemes, which are arrangements where participants contribute funds to a scheme operator in exchange for access to property for a specified period. By ensuring that these interests are treated as financial supplies, the Regulations impact the tax treatment of such transactions under the GST Act. The amendment aligns the treatment of time-sharing scheme interests with securities for GST purposes, removing an earlier exclusion that had classified these interests as akin to real property rather than securities. Consequently, the supply of interests in time-sharing schemes now falls under the category of input taxed financial supplies, meaning there is no GST on these supplies, and the supplier is not entitled to input tax credits related to these transactions. These Regulations have a national reach, applying across all states and territories of Australia, as they are subordinate instruments of the Commonwealth-administered GST Act.
Key Provisions
The main operative sections of the A New Tax System (Goods and Services Tax) Amendment Regulations 2000 (No. 6) are found in Subregulation 40-5.09(3) of the A New Tax System (Goods and Services Tax) Regulations 1999. Specifically, item 10 of Subregulation 40-5.09(3) has been amended to include the acquisition, provision, or disposal of an interest in a time-sharing scheme as a security for GST purposes. This change ensures that such transactions are treated as financial supplies, which are input taxed, meaning there is no GST on the supply and the supplier is not entitled to claim input tax credits for related acquisitions. This amendment aligns the treatment of time-sharing schemes with the Corporations Law, where such interests are treated as securities.
The obligations and requirements imposed by these Regulations on the parties or entities they govern are primarily related to the reporting and compliance with the new classification of time-sharing scheme interests as securities. Businesses involved in the acquisition, provision, or disposal of these interests must now classify these transactions as financial supplies under the GST Act. This classification affects how they account for GST, including the inability to claim input tax credits for related acquisitions. Furthermore, businesses must ensure their records and financial statements accurately reflect this change in classification to comply with GST regulations.
The legislation outlines that any breach of the provisions under the GST Act and these Regulations can lead to civil or criminal consequences. For businesses, failing to correctly classify transactions or to claim input tax credits where they are not entitled can result in financial penalties. The maximum penalties for providing false or misleading information can be severe, including fines of up to $11,100 for individuals and up to $55,500 for corporations, as stipulated by the GST Act. Additionally, ongoing non-compliance or deliberate evasion may lead to criminal charges, which could result in substantial fines or imprisonment, depending on the severity and intent of the breach.