Chapter 3: Tax expenditures

3.7 Consumption tax benchmark

Goods and services tax benchmark

Tax expenditures for general public services

H1 GST - Financial Supplies; financial acquisitions threshold

General public services - Financial and fiscal affairs ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
*	*	*	*	*	*		*		*
Tax expenditure type:		Concessional rate				2009 TES code:		H1
Estimate Reliability:		Not Applicable				* Category		3+
Commencement date:		1 July 2000				Expiry date:
Legislative reference:		A New Tax System (Goods and Services Tax) Act 1999

Generally, financial supplies are input taxed, meaning that an entity is not entitled to input tax credits for acquisitions relating to the financial supplies made by the entity. However, an entity can be entitled to input tax credits for its financial acquisitions if it does not exceed the financial acquisitions threshold. The entitlement to input tax credits for financial acquisitions in these circumstances is regarded as a positive tax expenditure.

An entity does not exceed the financial acquisitions threshold if the input tax credits it would have been entitled to, had the acquisitions been for a creditable purpose, do not exceed $50,000 or 10 per cent of their total input tax credits for the year.

From 1 July 2012, the financial acquisitions threshold will be increased to $150,000. The 10 per cent threshold will remain unchanged.

H2 GST - Financial Supplies; input taxed treatment

General public services - Financial and fiscal affairs ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
1,750	1,900	1,900	2,050	2,200	2,350		2,550		2,750
Tax expenditure type:		Exemption, Concessional rate				2009 TES code:		H2
Estimate Reliability:		Medium
Commencement date:		1 July 2000				Expiry date:
Legislative reference:		A New Tax System (Goods and Services Tax) Act 1999

Financial supplies and acquisitions of financial supplies are input taxed. This means financial supplies are not subject to GST, but input tax credits cannot be claimed on inputs to either the supply or to the acquisition of the supply. When input-taxed supplies are made to consumers, a tax expenditure arises as less than 10 per cent of the total value added is remitted to the Australian Taxation Office. When input-taxed supplies are made to other registered businesses a negative tax expenditure arises as input tax credits cannot be claimed for this supply.

H3 GST - Financial Supplies; reduced input tax credits

General public services - Financial and fiscal affairs ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
800	860	860	920	990	1,070		1,150		1,240
Tax expenditure type:		Exemption, Concessional rate				2009 TES code:		H3
Estimate Reliability:		Low
Commencement date:		1 July 2000				Expiry date:
Legislative reference:		A New Tax System (Goods and Services Tax) Act 1999

Financial supplies are generally input taxed. However, the acquisition of certain supplies (known as reduced credit acquisitions) allows financial service suppliers to claim a credit of 75 per cent of the standard input tax credit entitlement. The entitlement to the 75 per cent credit in these instances is a tax expenditure.

H4 GST - Supplies by charitable institutions and non-profit bodies

General public services - General services ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
*	*	*	*	*	*		*		*
Tax expenditure type:		Exemption				2009 TES code:		H4
Estimate Reliability:		Not Applicable				* Category		3+
Commencement date:		1 July 2000				Expiry date:
Legislative reference:		A New Tax System (Goods and Services Tax) Act 1999

Charities and other gift deductible bodies are entitled to a higher registration threshold of $150,000. They are entitled to GST free treatment on non-commercial activities, certain retirement village services, bingo, and sale of second hand goods. Charities can elect to have fund raising treated as input taxed. This option is also available to gift deductible entities and government schools
. Simplified accounting methods may be available and a range of other concessions apply.

Certain entities have the option of separately identifying some or all of their operations and treating each as a separate entity for GST purposes.

H5 GST - Child Care Services

Housing and community amenities ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
380	440	500	530	550	580		620		650
Tax expenditure type:		Exemption				2009 TES code:		H5
Estimate Reliability:		Medium
Commencement date:		1 July 2000				Expiry date:
Legislative reference:		A New Tax System (Goods and Services Tax) Act 1999

Generally, child care will be GST free if the provider is a registered carer or approved child care service as specified under the relevant Commonwealth legislation. In addition, child care supplied at facilities eligible to receive Commonwealth government funding under the guidelines made by the Child Care Minister is also GST free. All supplies that are directly related to child care are also GST free.

H6 GST - Water, sewerage and drainage

Housing and community amenities ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
440	480	550	640	700	770		840		910
Tax expenditure type:		Exemption				2009 TES code:		H6
Estimate Reliability:		Medium
Commencement date:		1 July 2000				Expiry date:
Legislative reference:		A New Tax System (Goods and Services Tax) Act 1999

A supply of water is GST free unless it is supplied in, or transferred into a container with a capacity of less than 100 litres. The draining of storm water, the emptying of a septic tank and sewerage and sewerage-like services are also GST free.

International tax expenditures

H7 GST - GST free status to diplomats, diplomatic missions and approved international organisations

General public services - Foreign affairs and economic aid ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
7	6	6	8	8	8		9		9
Tax expenditure type:		Exemption				2009 TES code:		H7
Estimate Reliability:		High
Commencement date:		1 July 2000				Expiry date:
Legislative reference:		A New Tax System (Goods and Services Tax) Act 1999

Diplomatic missions, consulates and certain international organisations may be reimbursed the GST included in their purchases of certain goods and services, where the purchase is for the official use of the organisation. The GST included in purchases by diplomatic and consular staff, or certain staff of the international organisation for the private use of the person may also be refundable. The refund must be within the scope of the Diplomatic Privileges and Immunities Act 1967, the Consular Privileges and Immunities Act 1972, or the International Organisations (Privileges and Immunities) Act 1963.

H8 GST - Global roaming by visitors to Australia

Transport and communication ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
*	*	*	*	*	*		*		*
Tax expenditure type:		Exemption				2009 TES code:		New
Estimate Reliability:		Not Applicable				* Category		1+
Commencement date:		1 July 2000				Expiry date:
Legislative reference:		A New Tax System (Goods and Services Tax) Act 1999

Telecommunication supplies for global roaming by visitors to Australia are GST- free, consistent with Australia's treaty obligations under the International Telecommunication Regulations (the Melbourne Agreement). Under the benchmark these supplies are connected with Australia and would therefore be taxable.

H9 GST - Tourism; tourist refund scheme

Other economic affairs - Tourism and area promotion ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
*	*	*	*	*	*		*		*
Tax expenditure type:		Exemption				2009 TES code:		H8
Estimate Reliability:		Not Applicable				* Category		2+
Commencement da te:		1 July 2000				Expiry date:
Legislative reference:		A New Tax System (Goods and Services Tax) Act 1999

International travellers visiting Australia and Australians travelling overseas may be able to claim a refund of GST paid on certain goods bought in Australia if the total value of the goods is $300 or more, they are purchased within 60 days of departure, and the goods are taken with the traveller when they depart Australia.

In addition, residents of Australia's External Territories (such as Norfolk, Cocos (Keeling) and Christmas Islands) can claim refunds of goods and services tax (GST) under the tourist refund scheme. Claims can be made if Australian External Territory residents leaving Australia can show proof that the goods have been exported to their External Territory within the required period after the goods were acquired.

H10 GST - Importation Threshold

Other economic affairs - Other economic affairs, nec ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
330	360	330	410	460	500		550		610
Tax expenditure type:		Exemption				2009 TES code:		H9
Estimate Reliability:		Low
Commencement date:		1 July 2000				Expiry date:
Legislative reference:		A New Tax System (Goods and Services Tax) Act 1999

With the exception of consignments containing tobacco, tobacco products or alcoholic beverages, a GST exemption applies to imports of goods with a customs value of no more than $1000.

H11 GST - Imported services

Other economic affairs - Other economic affairs, nec ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
750	900	950	900	1,000	1,100		1,200		1,300
Tax expenditure type:		Exemption				2009 TES code:		H10
Estimate Reliability:		Low
Commencement date:		1 July 2000				Expiry date:
Legislative reference:		A New Tax System (Goods and Services Tax) Act 1999

Imported services (those that are not done in Australia as specified in section 9-25 of A New Tax System (Goods and Services Tax) Act 1999) which are not subject to a reverse charge are not subject to GST.

H12 GST - Sale of boats for export within 12 months of supply

Other economic affairs - Other economic affairs, nec ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
-	-	-	-	-	*		*		*
Tax expenditure type:		Exemption				2009 TES code:		New
Estimate Reliability:		Not Applicable				* Category		1+
Commencement date:		1 July 2011				Expiry date:
Legislative reference:		A New Tax System (Goods and Services Tax) Act 1999

Eligible supplies of boats used for recreational purposes are GST-free if the boats are exported from Australia within 12 months of delivery, with effect from 1 July 2011. Under the benchmark goods must be exported from Australia within 60 days in order to be GST-free.

H13 GST - Tourism; Domestic air or sea travel

Other economic affairs - Other economic affairs, nec ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
*	*	*	*	*	*		*		*
Tax expenditure type:		Exemption				2009 TES code:		New
Estimate Reliability:		Not Applicable				* Category		2+
Commencement date:		1 July 2000				Expiry date:
Legislative reference:		A New Tax System (Goods and Services Tax) Act 1999

Domestic air or sea travel within Australia by residents or non-residents as part of a wider international arrangement is not subject to GST. Domestic air travel within Australia by non-residents is also GST free if the ticket is purchased outside Australia. Transport insurance for the above supplies is also GST free.

H14 GST - Tourism; inwards duty free

Other economic affairs - Other economic affairs, nec ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
*	*	*	*	*	*		*		*
Tax expenditure type:		Exemption				2009 TES code:		New
Estimate Re liability:		Not Applicable				* Category		3+
Commencement date:		1 July 2000				Expiry date:
Legislative reference:		A New Tax System (Goods and Services Tax) Act 1999

Supplies made through an inwards duty free shop to inbound international travellers are not subject to GST.

H15 GST - Tourism; travel agents

Other economic affairs - Other economic affairs, nec ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
69	70	78	86	91	98		104		112
Tax expenditure type:		Exemption				2009 TES code:		New
Estimate Reliability:		Low
Commencement date:		1 July 2000				Expiry date:
Legislative reference:		A New Tax System (Goods and Services Tax) Act 1999

Travel agents in Australia arranging overseas supplies (for example holidays) where the effective use or enjoyment of which is to take place outside Australia are not subject to GST on this supply.

Tax expenditures for education

H16 GST - Education

Education ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
1,950	2,100	2,300	2,400	2,600	2,800		3,000		3,250
Tax expenditure type:		Exemption				2009 TES code:		H11
Estimate Reliability:		Medium
Commencement date:		1 July 2000				Expiry date:
Legislative reference:		A New Tax System (Goods and Services Tax) Act 1999

Certain education supplies are GST free. These include education courses, administrative services, curriculum related goods, student accommodation for students attending a primary, secondary or special education course, excursions and field trips and supplies related to the recognition of prior learning. In addition, school tuckshops and canteens can elect to be input taxed.

Tax expenditures for health

H17 GST - Health; drugs and medicinal preparations

Health ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
310	340	370	400	430	470		520		560
Tax expenditure type:		Exemption				2009 TES code:		H12
Estimate Reliability:		Medium
Commencement date:		1 July 2000				Expiry date:
Legislative reference:		A New Tax System (Goods and Services Tax) Act 1999

Most medicines for human use are GST free. GST free medicines include: medicines that can only be supplied on prescription; medicines listed on the Pharmaceutical Benefits Scheme (PBS); medicines listed on the Repatriation Pharmaceutical Benefits Scheme (RPBS); non-prescription drugs that can only be supplied by a doctor, dentist, pharmacist or other prescribed person as described by relevant state or territory law; medicines supplied under the Special Access Scheme; and medicines covered by a written determination by the Federal Health Minister.

H18 GST - Health; medical aids and appliances

Health ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
30	35	40	40	45	50		55		60
Tax expenditure type:		Exemption				2009 TES code:		H13
Estimate Reliability:		Medium
Commencement date:		1 July 2000				Expiry date:
Legislative reference:		A New Tax System (Goods and Services Tax) Act 1999

A medical aid or appliance is GST free if the medical aid or appliance is listed in Schedule 3 to the A New Tax System (Goods and Services Tax) Act 1999, or specified in the regulations and specifically designed for people with an illness or disability and not widely used by others.

The supply of cars for use by disabled persons, spare parts for medical aids and appliances and the services related to the provision of the medical aid or appliance are GST free. Goods that are the subject of a written determination by the Federal Health Minister are also GST free.

H19 GST - Health; medical and health services

Health ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
2,100	2,300	2,500	2,700	2,950	3,200		3,500		3,800
Tax expen diture type:		Exemption				2009 TES code:		H14
Estimate Reliability:		Medium
Commencement date:		1 July 2000				Expiry date:
Legislative reference:		A New Tax System (Goods and Services Tax) Act 1999

Medical services are GST free if: they are a service for which a Medicare benefit is payable under the Health Insurance Act 1973; they are supplied by, or on behalf of, a medical practitioner; and they constitute a service that is generally accepted in the medical profession as being necessary for the treatment of the patient.

Health services rendered by a recognised professional, as well as hospital treatment are also GST free. Goods supplied in the course of making GST free health care services are generally GST free.

H20 GST - Health; Private Health Insurance

Health ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
180	190	180	210	240	270		300		340
Tax expenditure type:		Exemption				2009 TES code:		H15
Estimate Reliability:		Medium
Commencement date:		1 July 2000				Expiry date:
Legislative reference:		A New Tax System (Goods and Services Tax) Act 1999

A supply of private health insurance by a private health insurer (within the meaning of the Private Health Insurance Act 2007) is GST free. In line with the GST treatment of general insurance, the tax expenditure for this item is based on the difference between the premium income of private health insurers and the value of benefits paid out.

H21 GST - Health; residential care, community care and other care services

Health ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
80	90	100	110	120	130		140		150
Tax expenditure type:		Concessional rate				2009 TES code:		H16
Estimate Reliability:		Medium
Commencement date:		1 July 2000				Expiry date:
Legislative reference:		A New Tax System (Goods and Services Tax) Act 1999

Some services provided by care and specialist disability providers are GST free. The quality of care principles found in the Aged Care Act 1997 apply in determining the tax status of specific care services. In general, publicly funded aged or disability care services are GST free, as are privately funded aged care services which meet the quality of care principles found in the Aged Care Act 1997 and are provided to those needing daily living activities assistance or nursing services.

Tax concessions for certain taxpayers

H22 GST - Religious services

Recreation and culture ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
20	20	25	25	25	25		30		30
Tax expenditure type:		Exemption				2009 TES code:		H17
Estimate Reliability:		Low
Commencement date:		1 July 2000				Expiry date:
Legislative reference:		A New Tax System (Goods and Services Tax) Act 1999

Supplies of religious services are GST free if supplied by a religious institution and the supplied service is integral to the practise of that religion. Certain religious bodies can form a 'GST religious group' which will effectively be treated as a single entity. The broad effect is that supplies made within the group are not subject to GST and acquisitions made within the group do not give rise to input tax credits.

H23 GST - Supplies of farm land

Agriculture, forestry and fishing ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
*	*	*	*	*	*		*		*
Tax expenditure type:		Exemption				2009 TES code:		H18
Estimate Reliability:		Not Applicable				* Category		2+
Commencement date:		1 July 2000				Expiry date:
Legislative reference:		A New Tax System (Goods and Services Tax) Act 1999

Specific supplies of farm land are GST free. This includes: farm land supplied for farming on which a farming business has been carried on for at least five years and upon which a farming business is intended to continue to be carried on, on the land; and subdivided farm land that is potential residential land that is supplied to associates.

Under the GST benchmark, farm land supplied to an unregistered purchaser for farming; or farm land that is potential residential land supplied to an unregistered associate for nil or inadequate co
nsideration; gives rise to a tax expenditure under this item.

No net GST would be collected under the benchmark from farm land supplied for farming to a registered business purchaser.

H24 GST - Registration thresholds (Small Business concessions)

Other economic affairs - Other economic affairs, nec ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
*	*	*	*	*	*		*		*
Tax expenditure type:		Exemption				2009 TES code:		H19
Estimate Reliability:		Not Applicable				* Category		3+
Commencement date:		1 July 2000				Expiry date:
Legislative reference:		A New Tax System (Goods and Services Tax) Act 1999

Entities with a GST turnover less than $75,000 ($150,000 for non-profit entities), are not required to register for GST. Supplies made by non-registered entities are not subject to GST.

H25 GST - Simplified Accounting Methods

Other economic affairs - Other economic affairs, nec ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
9	11	11	10	10	10		9		9
Tax expenditure type:		Concessional rate				2009 TES code:		H20
Estimate Reliability:		Low
Commencement date:		1 July 2000				Expiry date:
Legislative reference:		A New Tax System (Goods and Services Tax) Act 1999

The Commissioner of Taxation can create simplified accounting methods (SAMs) that some small businesses can choose to apply with a view to reducing their GST compliance costs. SAMs allow taxpayers to apply simple ratios to calculate their GST liabilities (or components of them) rather than accounting for each supply to determine if it is taxable or non-taxable. Being ratios, SAMs will benefit some taxpayers by reducing their GST liabilities while increasing the GST liabilities of others, relative to the amounts calculated using a full GST calculation.

While SAMs are designed to reduce compliance costs rather than provide a tax concession, entities that expect to receive a tax benefit from applying SAMs are more likely to adopt this methodology than those that do not. This would be expected to result in a net tax concession.

Tax expenditures for manufacturing and mining

H26 GST - Supply of precious metal

Mining, manufacturing and construction ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
*	*	*	*	*	*		*		*
Tax expenditure type:		Exemption				2009 TES code:		H21
Estimate Reliability:		Not Applicable				* Category		2+
Commencement date:		1 July 2000				Expiry date:
Legislative reference:		A New Tax System (Goods and Services Tax) Act 1999

The first supply of a precious metal by or on behalf of a refiner after the refining process to a precious metal dealer is GST free. Subsequent supplies of precious metals are input taxed. The importation of precious metals is a non taxable importation and as such GST will not be charged on the importation. The tax expenditure here is the loss of tax on the GST free and input taxed supplies and imports (where this would not be offset by input tax credits) reduced by any input tax credits denied for acquisitions related to the input taxed activities.

Tax expenditures for transport and communications

H27 GST - Cross-border transport supplies

Transport and communication ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
-	-	-	-	2	2		2		2
Tax expenditure type:		Exemption				2009 TES code:		H22
Estimate Reliability:		Low
Commencement date:		1 July 2010				Expiry date:
Legislative reference:		A New Tax System (Goods and Services Tax) Act 1999

From 1 July 2010, the total transport and insurance cost of imported goods will be included in the value of the taxable importation calculation. If the imported good is a non-taxable importation (for example, the supply of the good would be GST-free or the value of the good does not exceed the import threshold of $1,000), any domestic transport or insurance component of the transportation supplied will not be taxed.

Tax expenditures for other economic affairs

H28 GST - Food - uncooked, not prepared, not for consumption on premises of sale and some beverages

Other economic affairs - Other economic affairs, nec ($m)

2006-07	2007-08	2008-09	2009-10	2010-11	2011-12		2012-13		2013-14
4,800	5,100	5,400	5,600	5,900	6,300		6,600		7,000
Tax expenditure type:		Exemption				2009 TES code:		H23
Estimate Reliability:		Medium
Commencement date:		1 July 2000				Expiry date:
Legislative reference:		A New Tax System (Goods and Services Tax) Act 1999

Most food items for human consumption that are prepared and/or consumed at home are GST free. Examples of GST free food include fresh fruit and vegetables, fish, dairy products, bread and meat. Examples of GST free beverages include milk products, tea, coffee, water and fruit juices. In addition, generally the packaging used in the supply of GST free food will itself be GST free.