EXPLANATORY STATEMENT
Select Legislative Instrument 2005 No. 24
Issued by authority of the Minister for Revenue
and Assistant Treasurer
A New Tax System (Goods and Services Tax Transition) Act 1999
A New Tax System (Goods and Services Tax Transition) Amendment Regulations 2005 (No. 1)
Section 25 of the A New Tax System (Goods and Services Tax Transition) Act 1999 (the Act) provides that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.
The amending Regulation amends the A New Tax System (Goods and Services Tax Transition) Regulations 2000 (the Principle Regulations) to specify that for the definition of ‘arbitrator’ in section 15B of the Act, a person who is a member of a body mentioned in the table is specified. The amending Regulation inserts into the Principle Regulations a table that lists four bodies; the Institute of Arbitrators and Mediators Australia, the Australian Commercial Disputes Centre, the Chartered Institute of Arbitrators Australia, and LEADR.
The Act contains rules that apply to supplies made under certain agreements. These agreements are ones entered into before 8 July 1999, or in cases where the recipient of those supplies would not be entitled to input tax credits ones entered into before 2 December 1998, and which do not have ‘review opportunities’. A ‘review opportunity’ is an opportunity that arises under the agreement allowing for one or more of the parties to change the consideration directly or indirectly because of the imposition of goods and services tax (GST); or to conduct, on or after 1 July 2000, a general review, renegotiation or alteration of the consideration; or to conduct before 1 July 2000, a general review, renegotiation or alteration of the consideration that takes into account the imposition of the GST.
To the extent these supplies are made before 1 July 2005, they are GST‑free. From that date, the supplies are subject to the GST laws in the normal way. However, as these agreements were entered into before the GST laws commenced, the prices under these agreements are likely to have been determined without regard to the GST. As a result, suppliers will have no ability under these agreements to pass that cost on to their recipients.
The Act establishes an arbitration process to determine the appropriate change to the consideration for those supplies that takes into account the impact of the GST. If the supplier chooses to commence the arbitration process, the supplier must apply to an arbitrator for the appointment of an assessor. The proposed Regulations specify that an ‘arbitrator’ is a person who is a member of the Institute of Arbitrators and Mediators Australia, or of the Australian Commercial Disputes Centre, or of the Chartered Institute of Arbitrators Australia, or of LEADR.
The Regulations commenced on the day after they were registered on the Federal Register of Legislative Instruments.
Overview
The A New Tax System (Goods and Services Tax Transition) Amendment Regulations 2005 (No. 1) were enacted to amend the A New Tax System (Goods and Services Tax Transition) Regulations 2000. These regulations were introduced to address the gap created by the implementation of the Goods and Services Tax (GST) on 1 July 2000, which affected long-term contracts and agreements that were made prior to the GST regime. This legislation aims to ensure that the prices under such agreements are adjusted to reflect the GST, thereby providing a fair transition for both suppliers and recipients. The objective is to facilitate a smooth transition by establishing an arbitration process to determine the appropriate changes to the consideration of supplies under these agreements, taking into account the GST. The regulations were issued by authority of the Minister for Revenue and Assistant Treasurer and commenced on the day after their registration on the Federal Register of Legislative Instruments.
Scope and Application
The A New Tax System (Goods and Services Tax Transition) Amendment Regulations 2005 (No. 1) amends the A New Tax System (Goods and Services Tax Transition) Regulations 2000 to refine the definition of 'arbitrator' in section 15B of the A New Tax System (Goods and Services Tax Transition) Act 1999. This Act applies to supplies made under specific agreements entered into before the implementation of the GST, either before 8 July 1999 or, in certain cases, before 2 December 1998. These agreements must lack any review opportunities that would allow for adjustments in consideration due to the imposition of GST or a review, renegotiation, or alteration of the consideration post-GST implementation. Supplies made under these agreements are GST-free until 1 July 2005, after which they are subject to normal GST laws. To address the potential disparity in prices set before GST consideration, the Act provides for an arbitration process to adjust the consideration, taking into account the GST impact. The Regulations specify that an 'arbitrator' is a person who is a member of one of four bodies: the Institute of Arbitrators and Mediators Australia, the Australian Commercial Disputes Centre, the Chartered Institute of Arbitrators Australia, or LEADR. These Regulations took effect the day after their registration on the Federal Register of Legislative Instruments.
Key Provisions
The New Tax System (Goods and Services Tax Transition) Amendment Regulations 2005 (No. 1) amend the New Tax System (Goods and Services Tax Transition) Regulations 2000 to incorporate specific changes regarding the arbitration of GST adjustments for certain pre-GST agreements. Section 25 of the Act allows the Governor-General to make regulations that are necessary for carrying out the Act. The amendment specifies that an ‘arbitrator’ is someone who is a member of one of four bodies: the Institute of Arbitrators and Mediators Australia, the Australian Commercial Disputes Centre, the Chartered Institute of Arbitrators Australia, or LEADR. These changes apply to supplies made under agreements entered into before 8 July 1999, or before 2 December 1998 in cases where the recipient would not be entitled to input tax credits, and which do not include a 'review opportunity'.
The obligations under these Regulations require that if a supplier wishes to adjust the consideration for these supplies to account for the impact of GST, they must apply to an arbitrator who is a member of one of the specified bodies. The Regulations mandate that these bodies are the only ones from which arbitrators can be appointed. This ensures consistency and standardisation in the arbitration process, as these bodies are recognised for their expertise in dispute resolution and commercial arbitration.
Failure to comply with the provisions of these Regulations may result in various consequences. The precise legal or financial penalties for non-compliance are not explicitly stated within the provided text; however, breaches of the Act or Regulations could potentially lead to disputes that would need to be settled through the specified arbitration process. Given the importance of these Regulations in ensuring fair adjustments to consideration for GST, adherence to the outlined procedures and requirements is crucial for all parties involved.
These Regulations were registered on the Federal Register of Legislative Instruments and commenced on the day following their registration, making them legally enforceable immediately upon registration. This ensures that the changes to the arbitration process are implemented without delay, allowing for timely adjustments to agreements affected by the introduction of GST.