As a service to Local Government, we intend to give a regular update in The National Perspective on developments with the Government’s tax reform package and in particular the broad-based Goods and Services Tax (GST).
There are a number of important changes to the Government’s tax reform package and a summary of the tax reforms as they affect Local Government is as follows.
- Under the changes to the tax package, the Commonwealth will retain responsibility for Local Government funding.
- Council rates, charges for water, sewerage, compulsory rubbish collection, regulatory and licensing services and council fines and penalties will be GST free.
- All councils will benefit from the removal of embedded taxes and from the saving of approximately seven cents per litre on diesel and petrol used . In addition, non metropolitan councils still have very significant transport cost savings from the payment of the diesel and alternative fuels grant for fuels used in on-road regional transport vehicles weighing between 4.5 and 20 tonnes GVM and for all vehicles over 20 tonnes GVM.
Now that many of the Tax Bills have received Royal Assent there may be impacts on future contracts that your council enters into. Contracts from now on for goods or services supplied after 1 July 2000 may attract a GST after that date. The Australian Taxation Office (ATO) has issued a fact sheet explaining the transitional arrangements that apply for contracts which span the implementation of the GST. See the contact details for the ATO below.
The GST rate is set at 10%. Local Government will operate as if they are subject to the GST legislation and pay GST equivalent payments on taxable purchases in the same way as other registered entities and be entitled to claim input tax credits on most purchases.
The Commonwealth Treasurer will determine the taxes and compulsory charges that are outside the scope of the GST, which will of course include rates and regulatory charges. State and Northern Territory governments have been consulting with the respective Local Government associations regarding the broad principles to apply to Local Government taxes and charges, with a view to the Treasurer’s determination being finalised in the near future. This will ensure that the broad principles are applied consistently to all spheres of government and across all jurisdictions.
The GST will commence on 1 July 2000 and Local Government needs to commence planning for its introduction well before then. The GST is being introduced to replace the Wholesale Sales Tax and a number of State indirect taxes.
The National Office of Local Government (NOLG) and the ATO have commenced discussions with the various Local Government Associations regarding the implementation of A New Tax System and assistance that can be provided.
The ATO has established a Tax Reform Business Education and Communication (TRBEC) area, which is responsible for educating and communicating to the business and government community and their clients on the New Tax System.
The TRBEC will establish networks with State-based Local Government associations and the IMM to manage a programme of business liaison along with communication and education activities. Local Government associations will work with the ATO to develop tailor-made written materials, seminars, the Internet and other methods that will cater for councils’ specific needs. The TRBEC is currently considering the final details of a communication strategy for Local Government and this will be announced shortly.
The ATO has established two infolines that will be able to provide general assistance to councils.
- The Tax Reform Infoline provides information on the Goods and Services Tax and the Australian Business Number. It operates from 8am to 6pm (Mon – Fri) and can be reached on 13 24 78.
- The Diesel Fuel Infoline provides information on aspects of the diesel and alternative fuels legislation. It operates from 8am to 6pm (Mon – Fri) and can be reached on 1300 657 162.
You can download information from the ATO website at www.taxreform.ato.gov.au, obtain A Fax From Tax on 13 28 60 or write to PO Box 9935 in your capital city.
The Federal Minister for Local Government, Senator Macdonald, has indicated that funding will be available from the Local Government Incentive Programme in 1999/2000 to help Local Government with the costs of complying with the GST legislation.
