This article was written by Anthony Mourginos and Tegan Camm.
Unsurprisingly, there were no major GST reforms in the Budget. The key change was to extend GST to offshore sellers of hotel accommodation in an effort to level the playing field for local sellers. The Government also introduced 2 excise measures aimed at providing additional support to craft brewers and distillers. In addition, minor changes have been announced to the luxury car tax, as well as significant measures to combat illicit tobacco trade.
Online hotel bookings
The Government will extend the GST by ensuring that offshore sellers of hotel accommodation in Australia calculate their GST turnover in the same way as local sellers from 1 July 2019.
Currently, unlike GST registered businesses in Australia, offshore sellers of Australian hotel accommodation are exempt from including sales of hotel accommodation in their GST turnover. This means that offshore sellers of Australian hotel accommodation are often not required to register for and charge GST on their mark up over the wholesale price of the accommodation. The exemption was introduced in 2005, when most offshore sales of Australian hotel rooms were to foreigners booking through offshore tour operators, and the online booking market was relatively small.
Both Australian and foreign consumers are increasingly booking Australian hotel rooms through online services based offshore, which are taking advantage of the exemption designed for offshore tour operators. Removing the exemption will level the playing field for local sellers by ensuring the same tax treatment of Australian hotel accommodation, whether booked through a domestic or offshore company.
The measure will apply to sales made on or after 1 July 2019. Sales that occur before 1 July 2019 will not be subject to the measure even if the stay at the hotel occurs after this date.
This measure follows the Government’s decision to extend the GST to digital products (e.g. streaming or downloading of movies) and other services from 1 July 2017 and to low value imported goods from 1 July 2018. The measure will require the unanimous agreement of the States and Territories prior to the enactment of legislation.
Alcohol excise changes – craft brewers and distillers
The Government will increase the alcohol excise refund scheme cap to $100,000 per financial year, as well as extending the current concessional draught beer excise rates to 8 litre or greater kegs, from 1 July 2019.
Currently, the alcohol excise refund scheme provides eligible domestic alcohol producers with a refund of excise paid on certain alcoholic beverages (such as beer, spirits or other fermented beverages) up to a cap of $30,000 per financial year. The Government will increase this cap to $100,000 per financial year. The measure will provide additional support to domestic brewers, distillers and producers of other fermented beverages.
The Government will also extend the concessional draught beer excise rates, which currently apply to individual containers of beer exceeding 48 litres, to 8 litre or greater kegs. This will benefit craft brewers who typically use smaller sized kegs, and level the playing field with large breweries who typically use 50 litre kegs and therefore are currently taxed at lower rates.
Luxury Car Tax
The Government has announced a measure to remove Luxury Car Tax (LCT) on cars re-imported into Australia following a refurbishment overseas.
The LCT is a tax on cars with a GST-inclusive value above a certain threshold (for the 2018-18 financial year the threshold was $75,526 for fuel-efficient vehicles and $65,094 for all other vehicles). The current rate is 33%.
Under current law, cars that are refurbished in Australia (and subsequently exceed the relevant LCT threshold) are not subject to LCT. However, the LCT applies to cars exported from Australia for refurbishment and subsequently reimported into Australia, at a time when its value exceeds the relevant LCT threshold.
The change will ensure the same tax treatment applies, regardless of where the car is refurbished.
The Government has also announced a significant crackdown in the illicit tobacco trade with the introduction of five new components:
1. Collecting tobacco duties and taxes at the border
Under Australia’s current system, tobacco products can be imported into Australia and stored in licensed warehouses prior to tax and duties being paid on those imports. The delayed taxing point creates an incentive for illegal tobacco market operators to source tobacco for distribution on the black market.
Under the Government’s announced measure, from 1 July 2019 importers of tobacco products will be required to pay all duty and tax liabilities upon importation. The Government has flagged that transitional measures will apply for tobacco products that are held in licensed warehouses at the commencement of the measure on 1 July 2019, allowing eligible affected entities to pay the liability on the warehoused stock within 12 months.
The taxing point for any future domestic manufacture of tobacco will also be changed to be consistent with the new taxing point for tobacco imports (this is less relevant due to the fact that there is currently no licensed commercial tobacco production in Australia).
Current weekly settlement arrangements (which require importers to lodge excise returns detailing the deliveries made during the settlement period (usually weekly), and pay duty on those goods) will no longer apply to imported tobacco.
2. Creation of the Illicit Tobacco Task Force
From 1 July 2018, a multi-agency Illicit Tobacco Task Force will be formed, comprising members from a number of law enforcement and border security agencies, to increase the resources and capabilities dedicated to combatting illicit tobacco smuggling. The new Task Force will have additional powers and capabilities to enhance intelligence gathering and proactively target, disrupt and prosecute serious and organised crime groups at the centre of the illicit tobacco trade.
3. Additional resources to combat domestic tobacco crops
From 1 July 2018, the ATO will be provided ongoing funding to bolster its capabilities to detect and destroy domestically grown illicit tobacco crops.
4. Introducing a prohibited import control for tobacco
From 1 July 2019, permits will be required for all tobacco imports (except for tobacco imported by travellers within duty free limits). This will make it easier for the Australian Border Force to take enforcement action and seize tobacco where no duty has been paid, increasing the deterrent against illicit tobacco smuggling.
5. ATO excise systems upgrade
The ATO will upgrade and modernise its excise and excise equivalent goods payment systems beginning 2020-21 to replace the outdated paper lodgement system.
For a full analysis of this year's Budget measures, please see Australian Federal Budget 2018-19.