EXPLANATORY STATEMENT

Taxation Administration (Defence Related International Obligations and Other Matters– Indirect Tax Refunds) Determination 2022

Issued by the Authority of the Minister for Defence

Taxation Administration Act 1953

Authority for the Taxation Administration (Defence Related International Obligations and Other Matters—Indirect Tax Refunds) Determination 2022 (the Determination)

The Determination is made by the Minister for Defence under section 105-120 of Schedule 1 to the Taxation Administration Act 1953.

Section 105-120 provides for the Commissioner of Taxation to refund the amount of Goods and Services Tax, wine tax or luxury car tax (Indirect Tax) paid in respect of certain acquisitions made by or on behalf of visiting forces, by members of visiting forces, or by other persons determined by the Minister for Defence.

A refund of Indirect Tax is payable if the Minister for Defence has made a determination under section 105-120. The Minister for Defence may determine:

• the entities covered by the determination, to which an Indirect Tax refund is payable;
• the acquisitions covered by the determination, and by whom those acquisitions are made;
• the intended uses of the covered acquisitions;
• any conditions and limitations on refunds made under the determination; and
• the period and manner in which refunds made under the determination will be paid.

Under subsection 33(3) of the Acts Interpretation Act 1901, where an Act confers a power to make, grant or issue any instrument of a legislative or administrative character, the power shall be construed as including a power exercisable in a like manner and subject to the like conditions (if any) to repeal, rescind, revoke, amend, or vary any such instrument. The repeal of earlier determinations made under section 105-120 is therefore authorised by section 105-120.

Purpose of the Determination

The purpose of the Determination is for the Minister for Defence to make the specific decisions as permitted by section 105-120 in relation to a range of acquisitions by the visiting forces or governments of the Independent State of Papua New Guinea (PNG), the Republic of Singapore (Singapore) and the United States of America (United States) engaged in defence-related activities. This will enable a refund of Indirect Tax that is applicable to those activities.

The Defence Department (Defence) either:

• pays amounts of Indirect Tax to suppliers on behalf of the relevant foreign government or its visiting force; or
• reimburses the relevant foreign government or its visiting force for amounts of Indirect Tax paid to suppliers.

Defence subsequently claims refunds from the Commissioner of Taxation, equivalent to the Indirect Tax amounts paid to, or on behalf of, the relevant foreign government or its visiting force. This process reduces compliance costs and payment delays for foreign governments and their visiting forces.

The provisions in the Determination relating to PNG, Singapore (other than section 8) and the United States implement Australia’s obligations and commitments regarding indirect taxes under the:

• Agreement between Australia and Papua New Guinea regarding the Status of Forces of each State in the Territory of the other State, and Agreed Minute, which entered into force on 26 January 1977 (the PNG Status of Forces Agreement 1977);
• Exchange of Notes constituting a Status of Forces Agreement between the Government of Australia and the Government of the Republic of Singapore, which entered into force on 10 February 1988 (the Singapore Status of Forces Agreement 1988);
• Agreement between Australia and the Government of the United States of America concerning the Status of Forces in Australia, and Protocol, which entered into force on 9 May 1963 (the USA Status of Forces Agreement 1963);
• Agreement between the Government of Australia and the Government of the United States of America relating to the Establishment of a Joint Defence Facility - Pine Gap, which came into force on 9 December 1966, together with amendments entering into force on 19 October 1977, 16 November 1988, and 18 August 2000 (the Pine Gap Agreements);
• Agreement between the Government of Australia and the Government of the United States of America relating to the Operation of and Access to an Australian Naval Communication Station at North West Cape in Western Australia, which entered into force on 24 November 2011 (the Joint Naval Communication Station Agreement 2011); and
• Memorandum of Understanding among the Department of Defence of Australia and the Minister of National Defence of Canada and the Ministry of Defence of Denmark and the Ministry of Defence of the Italian Republic and the Minister of Defence of the Kingdom of the Netherlands and the Ministry of Defence of the Kingdom of Norway and the Secretary of State for Defence of the United Kingdom of Great Britain and Northern Ireland and the Secretary of Defence on behalf of the Department of Defence of the United States of America Concerning the Production, Sustainment and Follow-On Development of the Joint Strike Fighter (JSF PSFD MOU), which entered into effect on 30 September 2021.

These agreements (other than the JSF PSFD MOU) are all publicly available on the Australian Treaties Database (http://dfat.gov.au/international-relations/treaties/pages/treaties.aspx).

Section 8 of the Determination relating to Singapore and the Australia Singapore Military Training Initiative (ASMTI) provides for an Indirect Tax refund on the basis that the acquisitions are made by, or on behalf of, a visiting force of Singapore (see section 105-120(1)(c)(i)-(ii) of Schedule 1 to the Taxation Administration Act 1953). 

The Determination repeals and replaces the Taxation Administration (Defence Related International Obligations – Indirect Tax Refunds) Determination 2018 (the 2018 Determination), with the following amendments:

• changes to clarify that the provisions for Indirect Tax refunds regarding official use by United States visiting forces (section 10) and the Joint Defence Facility Pine Gap and Harold E Holt Naval Communication Station (sections 12 and 13) extends to all ‘acquisitions’ by the United States government (including services); and
• a new provision to address Indirect Tax refunds arising from activities of the United States Government under the Joint Strike Fighter Program (section 14).

Provisions relating to PNG and Singapore are substantively the same as those in the 2018 Determination.  

Operation of the Determination

Attachment A provides a provision-by-provision description of the operation of the Determination.

Documents incorporated by reference

The Determination includes references to the Agreement between the Government of Australia and the Government of the Republic of Singapore Concerning Military Training and Training Area Development in Australia, which entered into force on 10 December 2020 (the ASMTI Agreement). The ASMTI Agreement governs the Australia-Singapore Military Training Initiative, which involves large scale Singapore military training and training area development in central and northern Queensland. The references are used in the definitions of ‘Australia Singapore Military Training Initiative’ and ‘development activities’. The effect of these references is described in relation to the relevant provisions in Attachment A. The ASMTI Agreement is publicly available on the Australian Treaties Database (http://dfat.gov.au/international-relations/treaties/pages/treaties.aspx).

The Determination also includes reference to the JSF PSFD MOU. The reference is used in the definition of JSF Program. The effect of these references is described in relation to the relevant provisions in Attachment A. The JSF PSFD MOU is not publicly available, and cannot be made publicly available without the consent of other participant nations. However, Defence will make the document available for inspection, if and as required by either House of Parliament, while the instrument is open to disallowance. Any Commonwealth agencies involved in administering the Determination, in particular the Australian Taxation Office and the Treasury, will have access to the JSF PSFD MOU.

Financial Impact Statement

The provisions of the Determination relating to Singapore and the JSF Program apply to acquisitions made before the commencement date of the instrument, but do not disadvantage any individuals or entities.

Regulatory Impact Statement

The Office of Best Practice Regulation advised that no regulatory impact statement was required as the proposal is unlikely to have a more than minor regulatory impact (OBPR ID: 22-01725).

Legislative instrument

The Determination is a legislative instrument for the purposes of the Legislation Act 2003. As the primary purpose of the Determination is to give effect to Australia’s international obligations, it is not subject to sunsetting (item 1, section 11 of the Legislation (Exemptions and Other Matters) Regulation 2015).

Commencement

This instrument commences on the day after it is registered.

Consultation

The Treasury, Australian Taxation Office and Department of the Prime Minister and Cabinet were consulted when drafting this instrument.

Attachments

A: Provisions in the Taxation Administration (Defence Related International Obligations and Other Matters—Indirect Tax Refunds) Determination 2022.

STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Taxation Administration (Defence Related International Obligations and Other Matters —Indirect Tax Refunds) Determination 2022

The Determination is compatible with the rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the Determination

The Determination provides for the Commissioner of Taxation to refund to Defence certain amounts of Indirect Tax paid by it to, or on behalf of, certain visiting forces or foreign governments.

Human rights implications

Noting the likely impact of the Determination and the nature of the human rights and freedoms, the Determination does not raise any human rights issues requiring further discussion.

Conclusion

The Determination is compatible with human rights because it does not raise any human rights requiring further discussion.

ATTACHMENT A

Part 1 – Preliminary

Section 1: Name

This section states that the Determination is to be known as the Taxation Administration (Defence Related International Obligations and Other Matters – Indirect Tax Refunds) Determination 2022.

Section 2: Commencement

This section states that the Determination commences on the day after it is registered.

Section 3: Authority

This section provides that the authority for the instrument arises from section 105-120 of Schedule 1 to the Taxation Administration Act 1953.

Section 4: Definitions

This section sets out a number of definitions used in the Determination. The defined terms include:

• Australia Singapore Military Training Initiative (ASMTI) refers to the initiative for unilateral military training activities by Singapore visiting forces in central and northern Queensland, and the acquisition of land and development of facilities and infrastructure to facilitate that training, as set out in the ASMTI Agreement.

• Commissary includes military sales facilities, exchange facilities, officers’ clubs, enlisted person’s clubs and other similar military facilities. The term commissary is used in the section 11, which provides for the refund of Indirect Taxes paid in respect of acquisitions by or on behalf of the United States for goods to be sold in commissaries.

• Development activities refers to the activities described in Part III of the ASMTI Agreement.  These activities relate to the acquisition of land and construction of facilities and infrastructure in relation to training areas at Shoalwater Bay and in the Townsville region in Queensland.  Facilities and infrastructure will include roads, debriefing facilities, field toilets and waste management facilities, camp accommodation, vehicle storage and maintenance facilities, live fire facilities, air weapons target areas, information and communications technology infrastructure and beach landing points.

• JSF Program refers to the multi-national project for the development, demonstration, production, and sustainment of the Joint Strike Fighter that is implemented under the NEW JSF PSFD MOU.

Section 5: Schedules

This section provides that instruments specified in a Schedule to the Determination are amended or repealed as set out in the Schedule, and any other item in a Schedule has effect according to its terms.

There is one Schedule to the Determination, which provides for the repeal of the 2018 Determination.

Part 2 – Papua New Guinea

Section 6: Acquisitions and payment of refund – vehicles and other goods

This section provides for a refund of the Indirect Tax paid or payable on acquisitions of vehicles, equipment, weapons, armaments, provisions, or other goods by a visiting force of PNG or a member of a PNG visiting force where the acquisition is intended to be for the official use of that visiting force or its member. In general, entitlement to the refund arises only when PNG remains the owner of the goods acquired, although the Minister for Defence does have discretion to waive this requirement.

As Defence pays the Indirect Tax in respect of the acquisition on behalf of PNG, or reimburses PNG for its payment of the Indirect Tax, the Commissioner of Taxation should pay the refund amount to Defence, on behalf of:

• the visiting force of PNG; or
• the member of the visiting force of PNG.

The system according to which the refund of taxation will work is demonstrated using the following example:

A PNG visiting force in Australia wishes to acquire a vehicle for the official use of the PNG visiting force. A member of the visiting force goes to a dealership to acquire the vehicle. The member will obtain a tax invoice which details the amount of Indirect Tax payable on the vehicle. The visiting force will pay (through the member) the Indirect Tax owed. The visiting force will forward the invoice to Defence, which will reimburse the visiting force the amount of that tax liability. Defence will then claim a refund from the Commissioner of Taxation on behalf of PNG.

Section 6 implements Australia’s obligations to PNG regarding indirect taxes under the PNG Status of Forces Agreement 1977.

Section 6 is substantively the same as in the 2018 Determination.

Part 3 – Singapore

Section 7: Acquisitions and payment of refund – fuels, oils and lubricants

This section provides for a refund of Indirect Tax paid or payable for the acquisition of fuel, oil and lubricants made by, or on behalf of, a member of a Singapore visiting force or a member of the civilian component of a Singapore visiting force on or after 1 July 2000, for use in official vehicles, aircrafts or vessels.

As Defence pays the Indirect Tax in respect of the acquisition on behalf of Singapore or reimburses Singapore for its payment of the Indirect Tax, the Commissioner of Taxation should pay the refund amount to Defence, on behalf of the Government of Singapore.

Section 7 implements Australia’s obligations to Singapore regarding indirect taxes under the Singapore Status of Forces Agreement 1988.

While this section applies to acquisitions made before the commencement of the Determination, it does not disadvantage any individuals or entities.

Section 7 is substantively the same as in the 2018 Determination.

Section 8: Acquisitions and payment of refund – development activities under the Australia Singapore Military Training Initiative

This section provides for a refund of Indirect Tax paid or payable in respect of acquisitions made by, or on behalf of, a visiting force of Singapore on or after 13 October 2016 under the ASMTI. Under the ASMTI, visiting forces of Singapore will undertake unilateral military training activities in central and northern Queensland. Australia is undertaking development activities, including the acquisition of land, and the construction of facilities and infrastructure, that will enable such training. The ASMTI is undertaken in accordance with the ASMTI Agreement.

Under the ASMTI Agreement, Singapore pays an amount (capped at $2.25 billion over the duration of the project) into an Australian account controlled by Defence as part of its acquisitions under the ASMTI. Defence will use the money in the Australian account to acquire the goods, services and real property related to the development activities under the ASMTI.

Upon completion of the development activities, Defence will supply the visiting forces of Singapore with access to the land, facilities and infrastructure to conduct unilateral military training in accordance with ASMTI Agreement. These supplies may be subject to Indirect Taxes.

As Defence will pay the Indirect Tax in respect of the relevant acquisition on behalf of Singapore, the Commissioner of Taxation should pay the refund amount to Defence, on behalf of the Government of Singapore.

Importantly, the determination applies to the acquisition by Singapore’s visiting forces from Defence of access to land, facilities and infrastructure in order to conduct unilateral military training. It does not apply to the acquisition by Defence of goods, service and real property to develop the training areas in central and northern Queensland.

While this section applies to acquisitions made before the commencement of the instrument, it does not disadvantage any individuals or entities.

Section 8 is substantively the same as in the 2018 Determination.

Part 4 – United States of America

Division 1 – General

This Division implements Australia’s obligations to the United States regarding indirect taxes under the USA Status of Forces Agreement 1963.

Section 9: Acquisitions and payment of refund – motor vehicles for members of visiting force

This section provides for the refund of the Indirect Tax paid for the acquisition of a motor vehicle by a member of a visiting force of the United States. The vehicle must be for the use of the visiting member and must not be used for commercial purposes. The refund will only be available where:

• the vehicle has been manufactured or assembled in Australia;
• the member remains the owner of the vehicle, retains possession of the vehicle, and continues to use the vehicle for two years after its acquisition (the member could, however, export the vehicle within that two year period);
• the vehicle is not transferred to any other person without the approval of the Minister for Defence; and
• the member has not imported any other vehicle into Australia in respect of which no duty was payable under the Customs Tariff Act 1995, or acquired any other vehicle in Australia for which either no sales tax was paid (for acquisitions prior to 1 July 2000) or for which an Indirect Tax refund has already been paid (for acquisitions on or after 1 July 2000).

There is one exception to the final condition. Where a member has previously imported or acquired a motor vehicle in the circumstances mentioned in that condition, the member is entitled to a refund of the Indirect Tax in respect of a second vehicle if the United States military authorities certify that the person’s domestic situation is such that it is necessary for the member to acquire the second vehicle.

A claim for a refund must be signed by or on behalf of the United States Defence Attaché and given to Defence together with the relevant tax invoice. Defence will then obtain the refund from the Commissioner of Taxation on behalf of the member who acquired the vehicle.

An example of how the system operates in respect of motor vehicles acquired for family use is demonstrated below:

A member of a visiting force from the United States in Australia goes to a dealership to acquire a vehicle for use by their spouse. Six months earlier the member acquired a motor vehicle for their own use free of Indirect Tax. Normally, a member of a visiting force could only acquire one vehicle free of Indirect Tax. However, the United States military authorities have certified to Defence that the member’s domestic circumstances are such that they require a second motor vehicle. In these circumstances, the member will not pay the Indirect Tax owing on the vehicle, but will obtain from the car dealer a tax invoice which details the amount of tax payable. The visiting force (through the member) will pay the amount of tax owing on the vehicle to the dealership. The invoice will be forwarded to Defence, which will reimburse the United States government the amount of the tax so paid. Defence will then claim a refund from the Commissioner of Taxation, on behalf of the member.

Section 9 is substantively the same as in the 2018 Determination, but the paragraphs in subsection 9(3) have been reordered to aid readability.

Section 10: Acquisitions and payment of refund – official use by a visiting force

This section provides for a refund of the Indirect Tax paid or payable on acquisitions made by or on behalf of the United States government, where the acquisition is intended for the official use of a United States visiting force.

Section 10 is substantially the same as in the 2018 Determination, but has been amended to clarify that refunds are available for all acquisitions (as defined in section 4), including acquisitions of services.

For acquisitions of equipment, materials, supplies or other property (including real property), entitlement to the refund only arises where the property acquired is not for resale and the United States government remains the owner of the item, although the Minister for Defence does have discretion to waive the latter requirement.

As Defence pays the Indirect Tax in respect of the relevant acquisition on behalf of the United States government, or reimburses the United States government for its payment of the Indirect Tax, the Commissioner of Taxation should pay the refund amount to Defence, on behalf of the United States.

Section 11: Acquisitions and payment of refund – goods for commissaries

This section provides for a refund of Indirect Tax paid in respect of the acquisition of goods for commissaries. It provides for a refund of the Indirect Tax paid or payable on goods acquired by or on behalf of a commissary where the goods are intended for use in or sale by a commissary. In order for the refund to be payable, the goods must only be sold to a member from a visiting force associated with the United States in Australia, or a member of a civilian component of a United States visiting force or a dependant of the aforementioned members. The goods acquired must not be resold on the local market.

As Defence pays the Indirect Tax in respect of the acquisition on behalf of the United States government or reimburses the United States government for its payment of the Indirect Tax, the Commissioner of Taxation should pay the refund amount to Defence, on behalf of the United States.

Section 11 is substantively the same as in the 2018 Determination.

Division 2 –Pine Gap and North West Cape

This Division implements Australia’s obligations to the United States regarding indirect taxes under the Pine Gap Agreements and the Joint Naval Communication Station Agreement 2011.

Section 12: Acquisitions and payment of refund – use in construction, maintenance or operation of Joint Defence Facility Pine Gap or Harold E Holt Naval Communication Station

This section provides for a refund of Indirect Tax paid or payable on acquisitions by or on behalf of the United States government, for use in the construction, maintenance or operation of the Pine Gap Facility or the Harold E. Holt Naval Communication Station.

Section 12 is substantially the same as in the 2018 Determination, but has been amended to clarify that refunds are available for all acquisitions (as defined in section 4), including acquisitions of services.

For acquisitions of equipment, materials, supplies or other property (including real property), entitlement to the refund only arises where the property acquired is:

• not for resale;
• the United States government certifies that the item acquired is intended for the construction, maintenance or operation of the Pine Gap Facility or the Naval Communication Station; and
• the property of the United States government prior to such use.

As Defence pays the Indirect Tax in respect of the acquisition on behalf of the United States government, or reimburses the United States government for its payment of the Indirect Tax, the Commissioner of Taxation should pay the refund amount to Defence, on behalf of the United States.

Section 13: Acquisitions and payment of refund – incorporated or wholly consumed in construction, maintenance or operation of Joint Defence Facility Pine Gap or Harold E Holt Naval Communication Station

This section provides for the refund of Indirect Tax paid or payable on acquisitions by the United States government, for incorporation in or which will be used up completely in the construction, maintenance or operation of the Pine Gap Facility or the Harold E. Holt Naval Communication Station.

Section 13 is substantially the same as in the 2018 Determination, but has been amended to clarify that refunds are available for all acquisitions (as defined in section 4), including acquisitions of services.

As Defence pays the Indirect Tax in respect of the relevant acquisition on behalf of the United States government or reimburses the United States government for its payment of the Indirect Tax, the Commissioner of Taxation should pay the refund amount to Defence, on behalf of the United States.

Division 3- Joint Strike Fighter Program

This Division implements Defence’s commitments to the United States regarding indirect taxes for activities carried out under the NEW JSF PSFD MOU. 

Section 14: Acquisitions and payment of refund – JSF Program

This section provides for a refund of Indirect Tax paid or payable on acquisitions made on or after 1 November 2021 by, or on behalf of, the United States government that are intended for use in the JSF Program.

As Defence pays the Indirect Tax in respect of the relevant acquisition on behalf of the United States government, or reimburses the United States government for its payment of the Indirect Tax, the Commissioner of Taxation should pay the refund amount to Defence, on behalf of the United States.

While this section applies to acquisitions made before the commencement of the instrument, it does not disadvantage any individuals or entities.

Schedule 1 - Repeals

Schedule 1 repeals the Taxation Administration (Defence Related International Obligations – Indirect Tax Refunds) Determination 2018.