Dunne Peter: Taxation (GST and Remedial Matters) Bill — Second Reading 
Dunne Peter: Taxation (GST and Remedial Matters) Bill — Second Reading 
[Volume:669;Page:15769] 
Hon PETER DUNNE (Minister of Revenue) 
: 
 I move  
That the Taxation (GST and Remedial Matters) Bill be now read a second time 
. May I say by way of an aside at the beginning that a debate on arcane matters relating to aspects of the GST system may seem singularly out of place at a time when the nation will be grieving along with the families of the West Coast at today’s tragic developments. I am sure everyone’s hearts go out to those people in this hour of their tragedy. 
Against that background I will now make some comments about the Taxation (GST and Remedial Matters) Bill which we are debating this afternoon. This bill aims to maintain the integrity and the fairness of the GST system by amending the Goods and Services Tax Act 1985 to strengthen the GST rules. The bill proposes significant changes to the GST system seeking to remove tax-avoidance opportunities and reduce business compliance costs while at the same time clarifying taxpayers’ obligations. 
Specifically the bill introduces new rules to prevent what have been called phoenix schemes—a fraud arrangement whose purpose is to create a GST refund when no corresponding GST payment has been made by the supplier of the transaction. Schemes of this nature exploit asymmetric aspects of the GST system between the payment of tax and the entitlement to input tax refunds. The bill addresses this matter by requiring that GST-registered vendors charge GST at a zero rate on most transactions involving land or in which land is a component if the purchaser is also GST-registered. So the capacity for one to claim the refund is reduced by the introduction of this provision. This provision was the subject of consultation last year and an issues paper from the Inland Revenue Department called for submissions upon it. 
In addition to this particular measure the bill also aims to reduce compliance costs for businesses by clarifying certain parts of the GST rules to make it easier for taxpayers to understand their GST obligations. The areas that are being clarified include the current technically complex change-in-use rules that apply when assets are used for both taxable and non-taxable purposes. The bill proposes to replace those rules with rules that will require businesses to apportion the input tax deductions according to the actual use of the goods and services in question. That will simplify the requirements for many GST-registered businesses. The GST boundary between residential accommodation which is GST-exempt and commercial accommodation which is not is also being clarified as are the GST rules relating to transactions involving nominees where the purchaser has nominated another person to receive the goods and to settle the transaction. 
In its consideration of the bill the Finance and Expenditure Committee has recommended a number of changes of a technical nature. The select committee’s recommendations include expanding the definition of the term “land” to include shares in flat-owning or office-owning companies and removing short-term leases from that definition. There are changes allowing the supplier to issue debit and credit notes to correct the GST treatment of the supply where the supply was incorrectly zero-rated or standard-rated ensuring that the supplier is not responsible for tax if the supplier has chosen a tax treatment based on incorrect information provided by the recipient and giving suppliers of financial services the option of using an alternative method of apportioning input tax for any non-taxable use when that method has been agreed on with the Commissioner of Inland Revenue. 
The committee has also recommended changing the application date of the proposed amendment that clarifies the scope of the tax exemption for fringe benefits provided on the premises of the employer. Originally this amendment was proposed to apply retrospectively. The select committee has recommended that it apply from the date of the introduction of this bill which would clarify the effect of the provision going forward while also allowing any existing disputes to run their course. 
In addition this bill proposes minor largely remedial changes in a number of other areas. These include allowing portfolio investment entities a deduction for credit impairment provisions clarifying the tax treatment of superannuation funds under the National Provident Fund clarifying the way that emissions units allocated by the Government under the emissions trading scheme are to be recognised for income tax purposes and clarifying the fringe benefit on-premises exemptions. 
Further to those changes I advise the House that I will be putting forward a Supplementary Order Paper in due course to give effect to measures that were announced in Budget 2010. Chief amongst those measures are proposals to clarify the rules for depreciation of non-residential building fit-outs and the grandparenting of depreciation loading to improve the fairness of access to social assistance programmes to prevent loss-attributing qualifying companies from passing on losses to their shareholders and to introduce new flow-through income tax rules for those closely held companies that choose to use them. All of these matters were announced in the Budget. They have been the subject of consultation subsequently and they need to be legislated for in time for the provisions to take effect from 1 April next year. 
In closing I thank the members of the committee for their deliberations and for the constructive and cooperative way in which they have progressed this bill. I now have great pleasure in commending the bill to the House.