EXPLANATORY STATEMENT
STATUTORY RULES 1990 No. 346
Issued by the authority of the Treasurer
SALES TAX ASSESSMENT ACTS (Nos 1-9) 1930 and
SALES TAX ASSESSMENT ACT (No. 10) 1985
SALES TAX REGULATIONS (AMENDMENT)
These Regulations are made under the authority of section 73 of the Sales Tax Assessment Act (No. 1) 1930 and subsection 12(1) of each of the Sales Tax Assessment Acts (Nos. 2-9) 1930 and of the Sales Tax Assessment Act (No. 10) 1985.
Section 73 of the Sales Tax Assessment Act (No. 1) empowers the Governor-General to make regulations - provided they are consistent with the Act - prescribing all matters that are required or permitted to be prescribed, or that are necessary or convenient to be prescribed, in order to give effect to the Act. Subsection 12(1) of each of the Sales Tax Assessment Acts (Nos. 2-10) adopt and apply by reference section 73 of Sales Tax Assessment Act (No. 1) for the purposes of the imposition, assessment and collection of the sales tax chargeable under the relevant Assessment Act.
Of particular relevance to these Regulations is subsection 12(1) of Sales Tax Assessment Act (No. 1), which requires a manufacturer or wholesale merchant who is registered for sales tax purposes to quote the certificate issued by the Commissioner of Taxation on registration. Subsection 12(1) of each of the Sales Tax Assessment Acts (Nos. 2-9) and subsection 12(1) of the Sales Tax Assessment Act (No. 10) also adopt and apply by reference subsection 12(1) of Sales Tax Assessment Act (No. 1) for the purposes of the imposition, assessment and collection of the sales tax chargeable under the relevant Assessment Act.
One of the general principles of the sales tax law is that, where goods are subject to sales tax, any goods that are always or mainly to be used in manufacturing the taxable goods are exempt from sales tax. Without such an exemption, there would be an element of double taxation of the manufactured goods. On this basis, up until the enactment of the Sales Tax (Exemptions and Classifications) (Computer Programs) Amendment Act 1989, any goods for use exclusively, or principally, in embodying computer programs in goods were free of sales tax as “aids to manufacture”.
The Sales Tax Laws (Computer Programs) Amendment Act 1989 removes sales tax on computer programs, other than those on microchips, with effect from 23 December 1988. Consistent with that measure, the Sales Tax (Exemptions and Classifications)
(Computer Programs) Amendment Act alters the definition of “aids to manufacture” in the Sales Tax (Exemptions and Classifications) Act 1935 in order to remove some of the exemptions for goods for use in embodying computer programs in goods, except where the goods are for use exclusively, or principally, in embodying programs in microchips that are goods themselves or are a component of goods. To remove the remaining sales tax exemptions for such goods required the amendment of the definition of “aids to manufacture” in the Sales Tax Regulations.
With the definition in the Sales Tax Regulations of the term “aids to manufacture” until that definition was amended by these Regulations, a manufacturer or wholesale merchant who was registered for sales tax purposes is required, by paragraph 12(1)(c) of the Sales Tax Regulations, to quote a registration certificate when acquiring goods for the manufacturer’s own use in embodying computer programs in goods because the former goods were “aids to manufacture”. The effect of so quoting was that the person could acquire the goods free of sales tax.
That definition also resulted in a registered manufacturer or wholesale merchant who applied to own use goods for use in embodying computer programs in goods being entitled to exemption of the former goods from sales tax - under the combined operation of section 5 of, and item 113C of the First Schedule to, the Sales Tax (Exemptions and Classifications) Act - in relation to that application to own use.
The purpose of the amending Regulations is to alter the “aids to manufacture” definition in the Sales Tax Regulations so as to deny sales tax exemption, in the circumstances just described, for goods for use in embodying computer programs in goods other than where the goods are for we wholly or mainly in embodying programs in microchips (whether the microchips are goods on their own or are components of goods). The change takes effect from 23 December 1988, consistent with the commencement date for the equivalent amendment of the “aids to manufacture” definition in the Sales Tax (Exemptions and Classifications) Act that was made by the Sales Tax (Exemptions and Classifications) (Computer Programs) Amendment Act.
The amendment of the Sales Tax Regulations applies from 2 3 December 1988. However, the effect of subsection 48(2) of the Acts Interpretation Act 1901 is that, unless Parliament provides otherwise, regulations cannot take effect from a date before the date on which the making of the regulations is notified in the Commonwealth of Australia Gazette if the regulations would prejudicially affect a person’s rights as at the date of notification in the Gazette. Restricting the “aids to manufacture” exemption from 23 December 1988 is prejudicial to manufacturers of goods embodying computer programs. For this reason, section 4 of the Sales Tax (Exemptions and Classifications) (Computer Programs) Amendment Act specifically
overrides the general rule in subsection 48(2) of the Acts Interpretation Act. The section states that regulations amending the Sales Tax Regulations in order to make a similar change to that made by section 3 (which amended the “aids to manufacture” definition in the Sales Tax (Exemptions and Classifications Act), as already described) may take effect from before the day on which the making of the regulations are notified in the Gazette, but no earlier than 23 December 1988.
A detailed explanation of each regulation in the amending Regulations is given in Attachment A.
ATTACHMENT A
SALES TAX REGULATIONS (AMENDMENT)
Paragraph 48(1)(b) of the Art Interpretation Act 1901 states that, where a date other than the date of notification in the Gazette is specified in regulations, the regulations take effect from the date specified. By regulation 1, the amending Regulations are to be regarded as having commenced on 23 December 1988.
Regulation 2; Principal Regulations
Regulation 2 facilitates references to the Sales Tax Regulations, which are referred to in these amending Regulations as the “Principal Regulations”.
Regulation 3: Interpretation
Regulation 4 of the Principal Regulations is an interpretative provision that defines words and expressions used in those Regulations.
By regulation 3, the definition of “aids to manufacture” in subregulation 4(1) of the Principal Regulations was narrowed by the addition of a new paragraph (o) to the list of goods specifically excluded from the definition unless the goods are of a kind ordinarily manufactured by the registered person for sale and are to be used by her or him exclusively and directly in carrying out certain scientific research.
The effect of the new paragraph is, subject to the scientific research qualification just described, that goods for use exclusively, or primarily and principally, in copying or reproducing a computer program - or in converting a computer program to another language, code or notation - so as to embody the program in goods are, with one exception, not exempt from tax as “aids to manufacture” under item 113C of the First Schedule to the Sales Tax (Exemptions and Classifications) Act 1935 or as a consequence of the quotation of a sales tax certificate number under paragraph 12(1)(c) of the Principal Regulations. The exception is where the goods are to be used either exclusively, or primarily and principally, in embodying programs in microchips (whether the microchips are goods on their own or are components of goods).
Subregulation 4(1) of the Principal Regulations also defines the term “auxiliaries to aids to manufacture”. That definition expressly excludes goods which are of any of the kinds expressly
excluded from the definition of “aids to manufacture” Consequently, new paragraph (o) in the latter definition has a similar impact on the exemptions from sales tax available for “auxiliaries to aids to manufacture” under item 113C of the First Schedule.
Regulation 4; Application
By regulation 4, the amendment of the definition of “aids to manufacture” in subregulation 4(1) of the Principal Regulations made by regulation 3 applies to transactions, acts and operations effected or done in relation to goods on or after 23 December 1988.