Taxation Administration (Defence Related International Obligations - Indirect Tax Refunds) Determination 2005

EXPLANATORY STATEMENT

Issued by the Authority of the Minister for Defence

Taxation Administration Act 1953

Taxation Administration (Defence Related International Obligations - Indirect Tax Refunds) Determination 2005

Section 62B of the Taxation Administration Act 1953 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 purchases made by visiting forces or other persons to whom Australia is under an international obligation to grant tax concessions. This section specifies the areas where the Minister for Defence can determine that a refund of tax is payable. These include the bodies or persons who are entitled to the concessions, the types of acquisitions, the eligible uses of acquisitions and any conditions or limitations as determined by the Minister for Defence. The refund of tax will be made by the Commissioner of Taxation within the period and manner set out in the determination.

The purpose of the Determination is to specify the bodies or persons who are entitled to the concessions, the types of acquisitions, the eligible uses of acquisitions and any conditions or limitations.

Currently Australia is under an international obligation to grant such tax concessions for:

• visiting forces from Papua New Guinea (PNG) in accordance with the Agreement between the Government of Australia and the Government of Papua New Guinea regarding the Status of Forces of each State in the Territory of the other State done at Port Moresby on 26 January 1977;

• visiting forces from the United States of America (US) in accordance with the Agreement between Australia and the United States of America concerning the Status of Forces in Australia, and Protocol to that Agreement done at Canberra on 9 May 1963;

• the Pine Gap Facility in accordance with the 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, done at Canberra on 9 December 1966, as amended; and

• the Harold E Holt Naval Communication Station in accordance with the Interim Technical Arrangement implementing the Agreement between the Government of Australia and of the Government of the United States of America relating to the operation of a joint Australia/United States Naval Communication Station in Australia, done at Canberra on 9 May 1963, as amended, signed on 1 May 2000.

The Determination is expressed to commence retrospectively on 1 July 2000.

The retrospectivity is required to validate payments that have been made under an instrument made in 2000 that was rendered invalid due to an inadvertent failure to table. The retrospective application of this Determination does not affect the rights of any persons (other than the Commonwealth) so as to disadvantage those persons nor does it impose liabilities (other than on the Commonwealth) in respect of anything done before the date the Determination is registered.

The failure to table the earlier Determination came to notice as a result of the exercise of backcapturing Defence legislative instruments for the purpose of entering these instruments onto the Federal Register of Legislative Instruments database. The Legislative Instruments Act 2003 now gives the Attorney-General’s Department responsibility for tabling all legislative instruments. This new tabling arrangement is intended to improve administrative processes and avoid inadvertent failures to deliver documents for tabling which has been a common problem in the past.

Details of the Determination are contained in the Attachment.

ATTACHMENT

Clause 1

Clause 1 of the Determination states that the determination is to be known as the Taxation Administration (Defence Related International Obligations - Indirect Tax Refunds) Determination 2005.

Clause 2

Clause 2 states that the Determination is taken to have commenced operation on 1 July 2000.

Clause 3

Clause 3 sets out a number of definitions. In particular, the terms "Act" and "refund" are defined. In addition, notes to clause 3 highlight terms used in the Determination that are also defined in legislation.

Clause 4

Clause 4 provides for a refund of the Indirect Tax payable on purchases of vehicles, equipment, weapons, armaments, provisions, or other goods by a visiting force of Papua New Guinea (PNG) or a member of a PNG visiting force where the purchase 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 a discretion to remove this requirement.

The refund will be paid to the Australian Department of Defence as the Department pays the Indirect Tax owing in respect of the purchase on behalf 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 purchase a vehicle for the official use of the visiting force. A member of the visiting force goes to a dealership to purchase the vehicle. The member will not pay the Indirect Tax owing on the vehicle, but will obtain a tax invoice which details the amount of tax owed. The invoice will be forwarded to the Australian Department of Defence, which will pay that tax to the Commissioner of Taxation on behalf of the Government of PNG. The Department of Defence will then claim the tax back from the Commissioner of Taxation.

Clause 5

Clause 5 provides for the refund of the indirect tax paid for the purchase of a motor vehicle by a member of a visiting force of the United States of America (US). 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 and the member:

• has not imported any other vehicle into Australia or has not acquired any other vehicle in Australia, free of Indirect Tax (including free of sales tax prior to 1 July 2000). This is subject to the limited exception below;
• remains the owner of the vehicle and retains possession of it and continues to use the vehicle for two years after its purchase (the member could, however, export the vehicle within that two year period); and
• does not transfer the vehicle to any other person without the approval of the Minister for Defence.

The one exception to these conditions arises where a member who has already acquired or imported a vehicle free of Indirect Tax (including free of sales tax prior to 1 July 2000). In such a case, the member may purchase a second vehicle free of Indirect Tax, if the US military authorities certify that the person's domestic situation is such that it is necessary for the member to purchase the second vehicle.

For a refund to be claimed, it must be signed by or on behalf of the US Defence Attaché

and given to the Australian Department of Defence together with the Tax Invoice. The Department will then obtain the refund from the Commissioner of Taxation on behalf of the Defence Attaché and pay it to the individual purchaser.

Clause 6

Clause 6 provides for a refund of the Indirect Tax payable for purchases of equipment, materials, supplies, or other property, including land, made by or on behalf of the US Government, where the purchase is intended for the official use of a US visiting force. Entitlement to the refund arises only when the item purchased is not for resale and the US Government remains the owner of the item, although the Minister for Defence does have a discretion to remove the latter requirement.

Under clause 6 the refund will be paid to the Australian Department of Defence as the Department pays the Indirect Tax owing in respect of each purchase on behalf of the US Government.

An example of how the system will operate in respect of motor vehicles purchased for family use is demonstrated below:

John Black, as a member of a US visiting force in Australia, goes to a dealership to purchase a vehicle for use by his wife. Six months earlier he purchased a motor vehicle for his own use free of indirect tax. Normally, a member of a visiting force could only acquire one vehicle free of indirect tax. However, the US military authorities have certified to the Australian Department of Defence that John's domestic circumstances are such that he requires a second motor vehicle. In these circumstances John 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 owed. The invoice will be forwarded to the Australian Department of Defence, which will pay that tax to the Commissioner of Taxation on behalf of the US Government. The Department will then claim the tax back from the Commissioner of Taxation.

Clause 7

Clause 7 covers the operation of the US commissaries in Australia. It provides for a refund of the Indirect Tax payable on goods purchased by or on behalf of a commissary where the purchase is 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 of a US visiting force in Australia, or a member of a civilian component of a US visiting force or a dependant of the aforementioned members. The goods purchased under these concessions must not be resold on the local market.

Under clause 7 the refund will be paid to the Australian Department of Defence as the Department pays the Indirect Tax owing in respect of each purchase on behalf of the US Government.

Clause 8

Clause 8 provides for the refund of Indirect Tax payable on purchases of equipment, materials, supplies or other property, including land, by or on behalf of the US Government for use in the construction, maintenance or operation of the Pine Gap Facility or the Harold E Holt Naval Communication Station. The refund will only be available where the item purchased is not for resale, the item is the property of the US Government prior to such use, and the US Government certifies that the thing purchased is intended for the construction, maintenance or operation of the Pine Gap Facility or the Naval Communication Station.

Clause 9

Clause 9 provides for the refund of Indirect Tax payable on the purchase of equipment, materials, supplies, or other property including land, by the US 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.

Under clauses 8 and 9 the refund will be paid to the Australian Department of Defence as the Department pays the Indirect Tax owing in respect of each purchase on behalf of the US Government.