Principles of Taxation Law Part 7

Part
7
Indirect and State Taxes
Part 7 of this book focuses on indirect and state taxes. An indirect tax is
one generally embedded in the price of goods or services and is collected
by an intermediary from the entity that bears the ultimate responsibility
for the tax. The Income Tax Assessment Act 1997 (Cth) (ITAA 1997)
defines “indirect tax” to mean GST, wine and luxury car taxes. The most
important of these indirect taxes is GST and, as such, Chapter 25 outlines
the GST regime contained in the A New Tax System (Goods and Services
Tax) Act 1999 (Cth).
Chapter 25 explains that GST is a consumption tax for which the ultimate
economic burden falls on the private consumer. This tax was introduced
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in Australia on 1 July 2000 and is currently at the rate of 10%. The chapter
goes on to outline the registration process for GST and the rules which
give rise to a GST liability along with the various concepts contained in the
GST regime, such as taxable supply, GST-free supply, input taxed supply,
creditable acquisition and importations. Finally, Chapter 25 outlines the
administrative procedures for GST and its interaction with other taxes.
Separate to Commonwealth taxes, each of the states and territories of

Australia may impose their own taxes. Where this occurs, each jurisdiction
implements its own tax regimes based on its specific legislation and
regulations. Chapter 26 deals with the three major state taxes that students
should be aware of. First, there is stamp duty which is a tax on various
transactions such as property, motor vehicles, mortgages and insurance
policies. Second, there is land tax which is a tax imposed annually on the
holder of land where certain criteria are met. Third, employers may be
liable for payroll tax based on wages paid to employees.
Sadiq, E. A. (2020). Principles of taxation law 2021. ProQuest Ebook Central <a
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25
Goods and services tax
Key points.................................................................................................... [25.00]
Introduction................................................................................................ [25.10]
Registration................................................................................................. [25.50]
Enterprise............................................................................................. [25.60]
Registration turnover threshold.......................................................... [25.70]
Choosing to register............................................................................. [25.80]
Taxable supply............................................................................................ [25.90]
Supply................................................................................................. [25.100]
Consideration..................................................................................... [25.110]
In the course or furtherance of an enterprise................................... [25.115]
Connection to the indirect tax zone.................................................. [25.120]
Consequences of making a taxable supply...................................... [25.130]
GST-free supply........................................................................................ [25.140]

Food.................................................................................................... [25.142]
Health.................................................................................................. [25.144]
Education............................................................................................ [25.146]
Other GST-free supplies.................................................................... [25.148]
Consequences of making a GST-free supply................................... [25.150]
Input taxed supply.................................................................................... [25.160]
Financial supplies: subdiv 40-A......................................................... [25.163]
Residential rent: subdiv 40-B............................................................. [25.165]
Residential premises: subdiv 40-C.................................................... [25.167]
Consequences of making an input taxed supply.............................. [25.170]
Mixed or composite supply..................................................................... [25.175]
Supply summary....................................................................................... [25.180]
Creditable acquisition.............................................................................. [25.190]
Acquisition.......................................................................................... [25.200]
Creditable purpose............................................................................. [25.210]
Acquisitions related to input taxed supplies........................................ [25.214]
Solely or partly....................................................................................... [25.220]
Supply to the entity was a taxable supply........................................ [25.225]
Consequences of making a creditable acquisition........................... [25.230]
Special rules....................................................................................... [25.235]
Non-deductible expenses...................................................................... [25.240]
864 [25.00] PRINCIPLES OF TAXATION LAW 2021
Importation............................................................................................... [25.250]
Taxable importation........................................................................... [25.260]
Consequences of making a taxable importation.................................. [25.270]
Creditable importation....................................................................... [25.280]
Consequences of making a creditable importation.............................. [25.290]
Offshore supplies............................................................................... [25.295]
Intangible supplies................................................................................. [25.297]
Low value goods.................................................................................... [25.299]
Administration.......................................................................................... [25.300]
Timing................................................................................................. [25.304]
Tax invoice......................................................................................... [25.306]
Adjustments....................................................................................... [25.310]
Non-residents..................................................................................... [25.313]
GST groups........................................................................................ [25.315]
Interaction with other taxes.................................................................... [25.320]
Income tax.......................................................................................... [25.320]
Fringe benefits tax.............................................................................. [25.330]
Questions................................................................................................... [25.340]

Key points
[25.00]
• Goods and services tax (GST) is imposed on the consumption of goods
and services in Australia.
• The current rate of GST is 10% on the value of the goods or services.
• Registration for GST purposes is central to the imposition of GST, and

entities may be required to register for GST or may choose to register
for GST depending on their circumstances.
• Liability to pay GST is imposed on the supplier of goods or services.
• A limited number of supplies, categorised as GST-free supplies and
input taxed supplies, do not attract GST.
• Entities may be entitled to a refund of GST paid on the acquisition of
goods or services where the acquisition is for a business purpose.
• Importers of goods into Australia will be liable for GST in most cases
regardless of whether the entity is carrying on a business or whether
the goods are imported for business or private purposes. However,
importers may be entitled to a refund of GST paid on the importation
where the goods are acquired for a business purpose.
• GST is administered by the Australian Taxation Office (ATO), and
entities are required to report their GST obligations on a quarterly or
monthly basis, depending on their circumstances.
• Entities may make an adjustment where there is a change in their
circumstances which alters their GST obligations.
25: Goods and services tax [25.20] 865
Introduction
[25.10] GST came into effect in Australia on 1 July 2000. GST is a different type
of tax in that it is a tax on consumption and not, for example, on income. In fact,
one reason for its introduction was to reduce Australia’s reliance on income tax
as a source of government funding. Although GST is administered federally
through the ATO, all GST revenue is distributed to the State Governments
under an agreement between the Federal and State Governments. In return,
various State-based taxes, such as the financial institutions duty and the debits
tax, were abolished.
The current GST rate is 10%, which is imposed upon the consumption of
goods and services, including imports, in Australia. GST is a broad-based tax
as it is imposed on the consumption of most goods and services with few
exceptions. Although all consumers (whether private individuals, businesses
or companies) pay GST upon consumption, GST is effectively borne by the
final private consumer due to the ability of certain entities to obtain a refund of
GST paid on acquisitions (known as “input tax credits”).
As discussed in Chapter 3, under the Federal Constitution, taxation laws must

deal with one subject of taxation only. As such, the provisions regarding GST
are contained in separate legislation: A New Tax System (Goods and Services
Tax) Act 1999 (Cth) (GST Act) and A New Tax System (Goods and Services Tax
Administration) Act 1999 (Cth).
Further, the imposition of tax must be dealt with in separate legislation. In

the case of GST, this is through the A New Tax System (Goods and Services
Tax Imposition –General) Act 1999 (Cth); the A New Tax System (Goods and
Services Tax Imposition –Customs) Act 1999 (Cth); and the A New Tax System
(Goods and Services Tax Imposition –Excise) Act 1999 (Cth).
[25.20] Example 25.1 provides an overview as to the application of GST in

practice.
Example 25.1: GST overview
A furniture wholesaler purchases a table for $110 (including GST) from
a furniture manufacturer. The furniture wholesaler sells the table to
a furniture retailer for $220 (including GST). The furniture retailer sells
the table to a private consumer for $330 (including GST). The GST
consequences of the transaction are as outlined in the following table:
Transaction Consequences
Manufacturer sells table to Manufacturer collects $10 in GST upon
wholesaler for $110 including GST. the sale of the table and must send the
$10 to the ATO.
Wholesaler purchases table from Wholesaler has paid $10 in GST upon
manufacturer for $110 including purchase of the table but has collected
GST; sells table to retailer for $220 $20 in GST upon sale of the table.
including GST. Wholesaler can net off the two amounts
and must send $10 in GST collected to
the ATO.
Retailer purchases table from Retailer has paid $20 in GST upon
wholesaler for $220 including GST; purchase of the table but has collected
sells table to consumer for $330 $30 in GST upon sale of the table.
including GST. Retailer can net off the two amounts and
must send $10 in GST collected to the
ATO.
Consumer purchases table from Consumer has paid $30 in GST and is
retailer for $330 including GST. not entitled to a refund of the GST paid
(known as “input tax credits”).
Therefore, there is effectively $30 of GST on the “consumption” of the table,
which has been paid by the consumer and collected by the ATO progressively
from the manufacturer, wholesaler and retailer.
Source: Adapted from the example of how the GST works in the Explanatory
Memorandum to the A New Tax System (Goods and Services Tax) Bill 1998,
pp 7–8.

[25.30] In the rest of this chapter, the rules which give rise to the outcomes in
Example 25.1 are outlined. We will learn why the manufacturer, wholesaler and
retailer charged GST on the sale of the table (because it is a “taxable supply”),
why the wholesaler and the retailer were entitled to input tax credits (ie, a
refund of GST paid) on the acquisition of the table (because it is a “creditable
acquisition”) and why the private consumer was not entitled to input tax credits
on the acquisition of the table (because it is not a “creditable acquisition”).
This chapter also briefly discusses the provisions regarding importations,

administration and adjustments. Although the fundamentals of the GST are
reasonably straightforward, there are a large number of special rules which
complicate the operation of the GST in practice. Some of these special rules
are highlighted in the chapter, but an extensive discussion of them is beyond
the scope of this book.
[25.40] Figure 25.1 provides a guide to dealing with GST.
A wide range of entities, including individuals, companies, trusts and

partnerships, can register for GST. However, an entity must be carrying on an
enterprise in order to register: s 23-10 of the GST Act; see [25.60].
Registration for GST purposes is prima facie optional, but entities will be
required to register in certain circumstances: see [25.70].
Enterprise
[25.60] “Enterprise” is defined in s 9-20 of the GST Act and includes an activity
or series of activities conducted:
• in the form of a business;
• in the form of an adventure or concern in the nature of trade; or
• in the form of leasing, licensing or other grant of an interest in property
on a regular or continuous basis.
Therefore, the income tax topics on whether a taxpayer is carrying on a business
for tax purposes (see Chapter 8) or an isolated commercial transaction that
constitutes a business (such as in FCT v Whitfords Beach Pty Ltd (1983) 14 ATR
247: see Case Study [8.7]) are relevant in determining an entity’s entitlement
to register for GST.
Example 25.2: Carrying on an “enterprise”
Jesse cleans shoes for his friends and family. He is so good at it that many
people ask him to clean their shoes. He enjoys cleaning shoes, and so he
readily agrees to clean the shoes. He charges for the cost of his products
and his time, and he has found it to be a very profitable activity. He has
decided to become a full-time shoe cleaner.
The fact that Jesse performs his shoe-cleaning activities repetitively and
on a regular basis and the fact that he intends to and does make a profit
from the activity indicate that Jesse is carrying on a business for income
tax purposes: see Chapter 8.
As Jesse is carrying on a business for income tax purposes, his activities
constitute an enterprise for GST purposes. He is entitled to register for
GST if he so chooses but may be required to do so depending on his
circumstances.

Certain activities, such as the provision of labour as an employee, a private

recreational pursuit or hobby, or activities done without a reasonable expectation
of profit or gain, are specifically excluded from the meaning of “enterprise”
(s 9-20(2)), while the activities of certain entities, such as charitable and

religious institutions, are specifically included as constituting an enterprise:
s 9-20(1)(d)–(h). There is some uncertainty as to the operation of the exception
for employees following Spriggs v FCT; Riddell v FCT (2009) 72 ATR 148 (see
Case Study [8.9]), where the High Court found that employment activities can
form part of a business.
Unless there is a taxable importation (see [25.260]), GST is not relevant if the
entity is not carrying on an enterprise.
Registration turnover threshold

[25.70] Entities that are carrying on an enterprise must register for GST where
their annual turnover exceeds the registration turnover threshold: s 23-5 of the
GST Act. From 1 July 2007, the registration turnover threshold is $150,000
for non-profit organisations and $75,000 for all other entities: s 23-15; regs
23-15.01 and 23-15.02 of the A New Tax System (Goods and Services Tax)
Regulations 1999 (Cth) (GST Regulations). Prior to that date, the registration
turnover thresholds were $100,000 and $50,000, respectively.
There is one exception to the general rule which is that suppliers of “taxi
travel” are required to register for GST regardless of their annual turnover:
s 144-5. “Taxi travel” is defined in s 195-1 as “travel that involves transporting
passengers, by taxi or limousine, for fares”. In Uber BV v Commissioner of
Taxation [2017] FCA 110, the Federal Court held that the provision of UberX
services constituted the supply of “taxi travel”. As such, entities that carry
on an enterprise and provide ride-sourcing services must register for GST,

regardless of turnover. “Ride- sourcing” refers to an ongoing arrangement
where a taxpayer makes a car available for public hire; a passenger uses a
website or smart phone application provided by a third party to request a ride;
and the taxpayer uses the car to transport the passenger for payment with a
view to profit.
The meaning of “annual turnover” is outlined in Div 188. An entity’s annual

turnover is the value of all of its supplies during the relevant 12-month period
related to its enterprise, excluding any input taxed supplies (see [25.160]) and
supplies not made for consideration: s 188-15. The relevant 12-month period
includes the current-year annual turnover (ie, annual turnover for the current
month and the preceding 11 months) and the projected annual turnover (ie,
annual turnover for the current month and the following 11 months). Broadly,
an entity’s annual turnover is its GST-exclusive sales revenue arising from its
enterprise. See GST Ruling GSTR 2001/7 for further guidance on the meaning
of “annual turnover”.
Choosing to register
[25.80] Entities with an annual turnover below the registration turnover
threshold may still choose to register for GST provided that they are carrying on
an enterprise. Entities generally choose to register for GST in order to obtain a
refund of GST paid on acquisitions: see [25.190]. However, the consequences
of registration are that the entity may incur additional compliance costs in
satisfying its administrative responsibilities (see [25.300]) and that the entity
may be required to impose GST on its supplies, potentially increasing the cost
of its supplies to the customer: see [25.130].
Example 25.3: GST registration
Jesse owns a mobile shoe-cleaning business. He used to work on his
own and earned sales revenue of approximately $30,000 each year. He
has now hired two more employees as business is booming. He expects
that, with the additional employees, his sales revenue for the year will
increase to approximately $90,000.
Initially, Jesse is not required to register for GST purposes as his current
and projected annual turnover ($30,000) is below the registration turnover
threshold ($75,000). However, Jesse may choose to register for GST
purposes depending on his circumstances.
Once Jesse hires the two additional employees, he is required to register
for GST as his projected annual turnover ($90,000) exceeds the registration
turnover threshold.

Taxable supply
[25.90] Taxable supplies are central to the operation of GST as they create
the obligation to pay (and therefore charge) GST. An entity makes a taxable
supply under s 9-5 of the GST Act if:
• it makes a supply: see [25.100];
• the supply is for consideration: see [25.110];
• the supply is made in the course or furtherance of the entity’s
enterprise: see [25.60] and [25.115];
• the supply is connected with the indirect tax zone: see [25.120]; and
• the entity is registered or required to be registered for GST: see [25.50].
However, a supply is not a taxable supply to the extent that it is a GST-free
supply (see [25.140]) or an input taxed supply: see [25.160].
Supply
[25.100] Section 9-10 of the GST Act defines “supply” as “any form of supply
whatsoever” and specifically includes (but is not limited to) the following:
• a supply of goods;
• a supply of services;
• a provision of advice or information;
• a grant, assignment or surrender of real property;
• a creation, grant, transfer, assignment or surrender of any right;
• a financial supply: see [25.163]; and
• an entry into, or release from, an obligation to do anything, to refrain
from an act or to tolerate an act or situation.
Example 25.4: Making a supply
Jesse has his own shoe-cleaning business.
The cleaning of shoes is a supply as it is the provision of services.

This definition of “supply” is very broad, and many activities of an entity may
constitute the making of a supply. In FCT v Reliance Carpet Co Pty Ltd (2008)
68 ATR 158, the High Court considered the meaning of “supply” in the context
of the GST legislation. The Court’s decision supports a wide interpretation of
“supply”.
Case study 25.1: Meaning of supply

In FCT v Reliance Carpet Co Pty Ltd (2008) 68 ATR 158, the taxpayer
granted a purchaser an option to buy commercial property in Victoria.
The purchaser exercised the option and the parties entered into a contract
for the sale of the property for a price of A$2.975 million plus GST. The
purchaser paid a deposit of A$297,500. The purchaser subsequently
defaulted and, under the terms of the agreement, the deposit was forfeited
to the taxpayer. The Commissioner assessed the taxpayer for GST on
the forfeited deposit under s 99-10 of the GST Act, which establishes the
time of recognition for a forfeited deposit. The taxpayer argued that GST
was not applicable on the forfeited deposit as there was no supply, a
requirement for the application of s 99-10.
The High Court found that the deposit was consideration for a supply,
being the obligations undertaken by the vendor on entry into the contract.
The High Court noted that “there was upon exchange of contracts the
grant by the taxpayer to the purchaser of contractual rights exercisable

over or in relation to land, in particular of the right to require in due course
conveyance
of the land to it upon completion of the sale”.
The wide interpretation of “supply” was affirmed by the High Court in FCT v
Qantas Airways Ltd [2012] HCA 41.
Case study 25.2: Existence of a supply

In FCT v Qantas Airways Ltd [2012] HCA 41, the taxpayer was the supplier
of domestic and international air travel. GST is imposed on domestic
travel and the question arose as to whether GST was payable where a
passenger books and pays for a domestic flight but subsequently cancels
the booking or does not turn up for the flight and does not receive a
refund.
The taxpayer argued that GST was not payable as there was no “supply”
(ie, the provision of a flight). The Commissioner argued that the relevant
supply when the passenger made a booking and paid for it was the
booking itself. The AAT had found that there was a “supply” when the
booking was made being the fact that the taxpayer was “holding itself
ready” to carry the passenger at a future time.
The Full Federal Court held that the relevant supply was the provision of
travel, and it was inappropriate to artificially split the transaction into two
separate components (ie, the booking and the travel). Here, the conditions
of carriage were specifically linked with a particular flight, rather than the
booking, which further supported the conclusion that the relevant supply
was the provision of travel.
The High Court, by 4-1 majority, found that the taxpayer was liable for
GST in respect of bookings made by customers where the customer did
not travel on the booked flights. The relevant supply by Qantas was “the
promise to use best endeavours to carry the passenger and baggage,
having regard to the circumstances of the business operations of the
airline”
(para 33).
The High Court’s decision in FCT v Qantas Airways Ltd suggests that it will
generally be the case that there is a “supply” for GST purposes as most
transactions involve the formation of a contract and the granting of rights
under the contract will constitute a “supply”. A broad view of “supply” was also
adopted by the High Court in FCT v MBI Properties Pty Ltd [2014] HCA 49. The
Commissioner discusses the meaning of “supply” in Ruling GSTR 2006/9. The
only exclusion to the definition of “supply” is the supply of money or digital

currency, unless the money or digital currency is provided as consideration for
a supply that is a supply of money or digital currency: s 9-10(4). For example,
the provision of money on the acquisition of a table will not constitute a
“supply”. However, the provision of money in a foreign exchange transaction
will constitute a “supply”.
Consideration
[25.110] “Consideration” is defined in s 9-15 of the GST Act as including any
payment or any act or forbearance in connection with the supply. As such,
consideration is not limited to the provision of money, but includes anything of
value, such as the provision of services or goods.
Note that the consideration does not have to be voluntary or even provided by
the recipient of the supply: s 9-15(2).
Example 25.5: Consideration
Adam is an accountant. He recently assisted Jesse in completing his tax
return for his shoe-cleaning business. Adam would normally charge $110
for his services, but in this case, he decided to accept Jesse’s offer of one
year of free shoe-cleaning services, which would normally be worth at
least $300.
The free shoe-cleaning services would constitute consideration for Adam’s
supply of accounting services. Further, the accounting services would

constitute consideration for Jesse’s supply of shoe-cleaning services.

In the course or furtherance of an enterprise

[25.115] The meaning of “enterprise” is discussed at [25.60]. The expression
“in the course or furtherance of” is not defined in the legislation. FCT v Reliance
Carpet Co Pty Ltd (2008) 68 ATR 158 (see Case Study [25.1]) suggests that
a wide approach is to be adopted and any supply that is connected to the
enterprise will be made “in the course or furtherance of” that enterprise.
Connection to the indirect tax zone

[25.120] Section 9-
25 of the GST Act details when a supply would be
connected with the indirect tax zone. The “indirect tax zone” is defined in
s 195-1 of the GST Act and in essence refers to Australia. The term “Australia”
was replaced in the GST Act with “indirect tax zone” from 1 July 2015 to ensure
consistency of terminology across the tax legislation. There was no change in
policy with the change in terminology, and the term “Australia” is used here for
readability. Examples of supplies connected to Australia include where:
• the goods are delivered or made available to the recipient in Australia;
• the supply involves goods being removed from Australia;
• the supply is of Australian land;
• the supply is done in Australia;
• the supply is made through an enterprise carried on in Australia; or
• the recipient of the supply is an Australian consumer (see [25.297]).
The Commissioner has published Ruling GSTR 2018/1 on when supplies of
real property will be connected with Australia, Ruling GSTR 2018/2 on when
supplies of goods will be connected with Australia and Ruling GSTR 2019/1 on
when supplies of anything other than goods or real property (ie, intangibles)
will be connected with Australia.
Consequences of making a taxable supply

[25.130] An entity that makes a taxable supply is liable to pay GST on the
taxable supply: s 9-40 of the GST Act. It is therefore important to note that,
although in practice it is often the recipient of a taxable supply who pays
GST, the imposition of the liability to pay GST under the law is actually on the
supplier.
The amount of GST payable on the taxable supply is 10% of the value of the
taxable supply: s 9-70. The value of a taxable supply is equal to ten-elevenths
of the price of the supply: s 9-75. Generally, the price of a supply is equal
to the consideration for the supply. Remember that consideration can be
monetary or non-monetary in nature (see [25.110]), and the price is the sum of
any monetary consideration and the GST-inclusive value of any non-monetary
consideration: s 9-75(1).
Example 25.6: Consequences of making a taxable supply

Jesse has his own shoe-cleaning business, which is registered for GST
purposes. Jesse charges his customers $22 per cleaning.
The cleaning of shoes is a taxable supply as it meets all of the requirements
of a taxable supply in s 9-5. As a consequence of providing a taxable
supply, Jesse must pay GST of 10% on the value of the taxable supply.
The value of the taxable supply is ten-elevenths of the price of the supply.
The price of the supply is equal to the consideration received, which in

this case is $22.
Therefore, GST payable by Jesse on the provision of shoe-
cleaning
services = 10% × (10/11 × $22) = $2.

GST-free  supply
[25.140] Certain goods and services are exempt from being a taxable supply
if they are listed in Div 38 of the GST Act as “GST-free supplies”.
The list of items which are GST-free supplies is limited and generally relates to
goods or services which are considered essential living expenses, necessary
to maintain the international competitiveness of Australian businesses or
charitable activities.
The following items are listed in Div 38 as GST-free supplies:

• food –subdiv 38-A: see [25.142];
• health –subdiv 38-B: see [25.144];
• education –subdiv 38-C: see [25.146];
• child care –subdiv 38-D: see [25.148];
• exports –subdiv 38-E: see [25.148];
• religious services –subdiv 38-F;
• non-commercial activities of charitable institutions, etc –subdiv 38-G;
• raffles and bingo conducted by charitable institutions, etc –subdiv  38-H;
• water, sewerage and drainage –subdiv 38-I;
• supplies of going concerns –subdiv 38-J: see [25.148];
• transport and related matters –subdiv 38-K;
• precious metals –subdiv 38-L;
• supplies through inward duty free shops –subdiv 38-M;
• grants of land by governments –subdiv 38-N;
• farm land –subdiv 38-O;
• cars for use by disabled people –subdiv 38-P;
• international mail –subdiv 38-Q: see [25.148];
• mobile global roaming services provided in Australia –subdiv 38-R;
• eligible emissions units –subdiv 38-S; and
• inbound intangible consumer supplies –subdiv 38-T: see [25.297].
Some of the more common categories of GST-free supplies are discussed in

further detail below.
Food
[25.142] Section 38-2 of the GST Act stipulates that a supply of food is GST-
free. Food is defined in s 38-4 as:
• food and beverages for human consumption;
• ingredients for food and beverages for human consumption;
• goods to be mixed with or added to food for human consumption
(including condiments, spices, seasonings, sweetening agents or
flavourings); and
• fats and oils marketed for culinary purposes.
Under s 38-4, “food” does not include live animals (other than crustaceans or
molluscs); unprocessed cow’s milk; grain, cereal or sugar cane that has not
been subject to any process or treatment; or plants under cultivation that can
be consumed as food for human consumption without being subject to further
process or treatment.
The broad exemption from GST for food is narrowed by s 38-3, which specifies
when food is not GST-free. Food is not GST-free where it is:
• for consumption on the premises from which it is supplied (eg,
restaurant food);
• hot food for consumption away from those premises; and
• food specified in Sch 1 of the GST Act as not being GST-free.

A wide range of food is listed in the Schedule as not being GST-free. Food that
is not GST-free includes:
• prepared food (eg, quiches, sandwiches, pizzas, prepared meals but
not including soup, burgers);
• confectionary (eg, muesli bars, popcorn);
• savoury snacks (eg, potato crisps, processed seeds or nuts);
• bakery products (eg, cakes, pies, scones, bread with a sweet filling or
coating); and
• ice-cream food and biscuit goods.
Despite the detailed list in Sch 1, the question as to whether a particular item
of food is GST-free or not continues to arise in practice. In Lansell House Pty
Ltd v FCT (2011) 79 ATR 22, the Full Federal Court considered whether “mini
ciabatte” (Italian flat bread) is “bread”, which is GST-free, or a “cracker”, which
is not GST-free. Based on the evidence presented (the appearance of the mini
ciabatte, the ingredients and manufacturing process, as well as the treatment
by stockists who sold it as a cracker or in the company of crackers), the Court
concluded that “mini ciabatte” is a cracker and therefore not a GST-free supply.
The High Court refused the taxpayer’s application for special leave to appeal.
Beverages that are GST-free are listed in Sch 2 and include milk products;
soy milk and rice milk; tea and coffee (but not in ready-to-drink form); fruit
and vegetable juices; beverages for infants and invalids and natural, non-
carbonated water without any additives.
A broad rule of thumb is that only fresh, unprocessed food will be GST-free.
Note that, under s 38-6, the packaging in which food is supplied is also GST-
free if the supply of the food is GST-free.
Health
[25.144] Under s 38-7 of the GST Act, the supply of a medical service is GST-
free. “Medical service” is defined in s 195-1 as a service for which a Medicare
benefit is payable or any other service supplied by or on behalf of a medical
practitioner or approved pathology practitioner that is generally accepted in
the medical profession as being necessary for the appropriate treatment of the
recipient of the supply. Under s 38-7(2), certain medical services, such as those
provided for cosmetic reasons for which a Medicare benefit is not payable, are
not GST-free. Any goods supplied in the course of supplying medical services
are GST-free if the medical services are GST-free: s 38-7(3).
Section 38-10 extends GST- free treatment to the supply of other health
services, such as acupuncture, chiropractic, dental, nursing, podiatry and so
forth, where the requirements of the section are satisfied. Broadly, the service
must be supplied by a person who is a recognised professional in services of
that kind, and the service provided would be accepted in the profession as
appropriate treatment for the patient.
Under s 38-45, medical aids and appliances which are listed in Sch 3 of the
GST Act are GST-free if the thing supplied is specifically designed for people
with an illness or disability and is not widely used by people without an illness
or disability. Examples of medical aids and appliances listed in Sch 3 include
heart monitors, pacemakers, orthotics, nebulisers and prescription contact
lenses. Section 38-50 specifies that drugs and medicines are GST-free if the
supply is on prescription, and certain other conditions are specified.
In addition, subdiv 38-B also lists other government-funded health services

(s 38-15), hospital treatment (s 38-20), residential care (s 38-25), community
care (s 38-30), flexible care (s 38-35), specialist disability services (s 38-40)
and private health insurance (s 38-55) as being GST-free supplies where the
necessary conditions are satisfied. Determination GSTD 2012/4 sets out the
Commissioner’s views as to when the supply of hospital treatment will be GST-
free under s 38-20.
Education
[25.146] The supply of an education course and any administrative services
directly related to the supply of such a course which are provided by the
supplier of the course are GST-free supplies under s 38-85 of the GST Act.
“Education course” is defined in s 195-1 as being:
• a pre-school course;
• a primary course;
• a secondary course;
• a tertiary course;
• a Masters or Doctoral course;
• a special education course;
• an adult and community education course;
• an English language course for overseas students;
• a first aid or life saving course; and
• a professional or trade course or a tertiary residential college course.
Each of these courses is separately defined in s 195-1.
In addition, excursions or field trips (s 38-90), course materials (s 38-95) and

leases of curriculum-related goods (s 38-97) are also GST-free where they relate
to an education course and satisfy the conditions specified in those sections.
Accommodation at boarding schools may be GST-free under s 38-105, while
certain services provided in recognising prior learning may be GST-free under
s 38-110.
Aside from course materials (s 38-95) and those items covered by s 38-97, a
supply of any other goods related to an education course (eg, textbooks) and
membership in a student organisation are not GST-free under s 38-100.
Other GST-free supplies

[25.148] Other GST-free supplies that are worth noting are child care, exports,
going concerns and international mail.
Broadly, child care is GST- free when provided by a registered carer, an

approved child care service or a carer eligible for Commonwealth funding for
prescribed care: subdiv 38-D.
Exports are generally GST-free under subdiv 38-E. A supply of goods will
be GST-free if exported from Australia within 60 days after the earlier of
the day the consideration is received or the day a tax invoice is provided
by the supplier: s 38-185(1); Ruling GSTR 2002/6. The GST-free status will
be lost if the goods are reimported into Australia: s 38-185(2). The supply
of things, other than goods or real property, will be GST-free where the
supply is connected with property outside Australia, made to a non-resident
outside Australia or used or enjoyed outside Australia: s 38-190(1), Items
1-3. Where the supply is made in relation to rights, the supply will be GST-
free where the rights are for use outside Australia or the supply is made
to a non-resident of Australia who is outside Australia when the supply is
made: s 38-190(1), Item 4. Repairs of goods from outside Australia will be
GST-free if the final destination of the goods at the time the repairs are done
is outside Australia: s 38-190(1), Item 5.
The supply of a going concern is GST-free under subdiv 38-J. The supply
must satisfy the requirements in s 38-325(1) to be GST-free. The requirements
are that the supply must be for consideration; the recipient of the supply
must be registered or required to be registered for GST; and the supplier
and the recipient must have agreed in writing that the supply is of a going
concern. In Midford v DFCT (2005) 60 ATR 1009, the Administrative Appeals
Tribunal (AAT) stated that the last requirement meant that the agreement
“when reasonably read, must identify the relevant supply and express a
mutual understanding that it is a supply of a going concern”. A supply will be
a supply of a going concern where the supplier supplies to the recipient all
of the things that are necessary for the continued operation of an enterprise
and the supplier carries on, or will carry on, the enterprise until the day of
the supply: s 38-325(2). The question of when the supplier has provided “all
things necessary” for the business to continue is a difficult issue in practice
and will depend on the particular circumstances of the supply: see Ruling

GSTR 2002/5.
The supply of international mail (ie, mail posted overseas) is GST-free under
s 38-540. It is therefore important when purchasing stamps to ensure that
the correct stamps are purchased. Stamps for domestic mail include GST in
their price, while stamps for international mail (marked “international”) do not
include GST.
Consequences of making a GST-free supply

[25.150] An entity that supplies GST-free supplies is not required to pay GST
on the making of the supply: s 38-1 of the GST Act. This is because GST-free
supplies are excluded from the definition of “taxable supply” in s 9-5.
Note that the making of a GST-free supply does not impact upon the entity’s
entitlement to a refund of GST paid on any creditable acquisitions related to
the making of the GST-free supply: see [25.190].
Example 25.7: GST-free supplies
Rob runs a fruit and vegetable stall in the local market. He is registered for
GST purposes. Rob sells packs of five apples for $5 per pack. He pays $66
(including GST) per week for rental of his stall.
The supply of the apples for $5 per pack is a GST-free supply as it meets
the requirements for the exemption on food in subdiv 38-A. As a result,
Rob does not have to pay GST on the supply of the fruit.
Rob may be entitled to a refund of GST paid on the stall rental if it is a
“creditable acquisition”: see [25.190].

Input taxed supply
[25.160] Another category of goods and services which are exempt from
being taxable supplies are input taxed supplies. There are only a limited
number of goods and services which are input taxed supplies, and these are
listed in Div 40 of the GST Act as:
• financial supplies: subdiv 40-A;
• residential rent: subdiv 40-B;
• residential premises: subdiv 40-C;
• precious metals: subdiv 40-D;
• school tuckshops and canteens: subdiv 40-E;

• fund- raising events conducted by charitable institutions: subdiv
40-F;  and
• inbound intangible consumer supplies: subdiv 40-G (see [25.297]).
Where a supply is both an input taxed supply and a GST-free supply (eg,
financial supplies to an overseas customer), the GST- free characterisation
prevails: s 9-30(3).
Financial supplies: subdiv 40-A
[25.163] The term “financial supplies” is defined in s 40-5 of the GST Act by
reference to the GST Regulations. Regulation 40.5.09 of the GST Regulations
specifies those supplies that are “financial supplies”. The broad categories of
financial supplies include the provision, disposal or acquisition of an interest
in or under a bank account; a loan arrangement; a superannuation fund; an
insurance agreement; and shares or derivatives.
Regulation 40.5.11, by reference to Sch 7 of the GST Regulations, provides a

non-exhaustive list of examples of each of the categories of financial supplies
in reg 40.5.09. These include opening, keeping, operating, maintaining and
closing of cheque, debit card, deposit and savings accounts for account
holders; cashing cheques and payment orders; electronic funds transfer;
supply of credit cards; a mortgage over land, premises or chattel; various
types of contracts of insurance; foreign currency, and so forth.
Regulation 40.5.12 of the GST Regulations specifies the broad categories

of supplies that are not financial supplies such as professional services in
relation to a financial supply; a payment system; certain store value cards;
broking services, and so forth. Regulation 40.5.13, by reference to Sch 8 of
the GST Regulations, provides a non-exhaustive list of examples of supplies
that are not financial supplies. These include advice by a legal practitioner or
accountant in the course of professional practice; taxation or actuarial advice;
health insurance, and so forth.
Where an item is listed as both a financial supply and not a financial supply,
it will not be a financial supply: Note 1 to reg 40.5.12. The Commissioner’s
guidance on financial supplies is in Ruling GSTR 2002/2.
Residential rent: subdiv 40-B
[25.165] The supply of premises by way of lease, hire or licence (including
renewals and extensions) is an input taxed supply where the premises are:
• residential premises that are not commercial residential premises; or

• commercial accommodation that would be subject to Div 87 of the GST
Act but for a choice made by the supplier under s 87-25.
“Residential premises” is defined in s 195- 1 as land or a building that is
occupied or intended to be occupied or capable of being occupied as a
residence or for residential accommodation (including a floating home). The
period of occupation or intended occupation is irrelevant. In Vidler v FCT
(2009) 74 ATR 520, the Federal Court held that vacant land is not “residential
premises” (affirmed by the Full Federal Court in Vidler v FCT (2010) 75 ATR
825). The taxpayer argued that the land is “capable of being occupied as a
residence or for residential accommodation”. In South Steyne Hotel Pty Ltd v
FCT (2009) 71 ATR 228, Stone J held that this meant that the premises must
be capable of being occupied as such at the time and not merely have the
potential to be developed to have that capacity. Residential premises must
have the “element of shelter and basic living facilities such as provided by a
bedroom and bathroom”. This view was affirmed by the Full Federal Court in
South Steyne Hotel Pty Ltd v FCT (2009) 74 ATR 41. It is clear from Ruling GSTR
2012/5 that the Commissioner will focus on the physical characteristics of the
premises to determine whether it is “residential premises”. Accommodation
provided in an office building, private hospital, residential care facility or a shop

will generally not be considered the supply of residential premises.
“Commercial residential premises” is defined in s 195-1 as:

• a hotel, motel, inn, hostel or boarding house;
• premises used to provide accommodation in connection with a school;
• a ship that is mainly let out on hire in the ordinary course of a business
of letting ships out on hire;
• a ship that is mainly used for entertainment or transport in the ordinary
course of such a business;
• a marina at which one or more of the berths are occupied or are to be
occupied by ships used as a residence; or
• a caravan park or camping ground.
Premises that are similar to these will also be “commercial residential premises”,
except for premises used to provide accommodation to students in connection
with an education institution that is not a school. The Commissioner’s views on
when premises will be considered “commercial residential premises” for GST
purposes are set out in Ruling GSTR 2012/6.
“Commercial accommodation” is defined in s 87-15 as the right to occupy

in whole or in part “commercial residential premises”, including the supply
of cleaning and maintenance; electricity, gas, air-conditioning or heating; or
telephone, television, radio or similar if provided. Division 87 applies to the
supply of long- term (more than 28 days continuously) accommodation in
commercial residential premises. Suppliers of long-term accommodation in
commercial residential premises have the choice of treating the supply as a

taxable supply subject to concessional GST rates in Div 87 (GST is charged but
the supplier is entitled to input tax credits on acquisitions) or as an input taxed
supply under Div 40 (no GST is charged but the supplier is not entitled to input
tax credits on acquisitions). The Commissioner’s views on when “long-term
accommodation” is provided in commercial residential premises are set out in
Ruling GSTR 2012/7.
The distinction between “residential” and “commercial residential premises”

has been considered in several cases, including Sunchen Pty Ltd v FCT (2010)
78 ATR 197; South Steyne Hotel Pty Ltd v FCT (2009) 74 ATR 41; Meridien
Marinas Horizon Shores Pty Ltd v FCT (2009) 74 ATR 787; and Toyama Pty Ltd
v Landmark Building Developments Pty Ltd (2006) 62 ATR 73.
Residential premises: subdiv 40-C
[25.167] The sale (s 40-65(1) of the GST Act) and long-term lease (s 40-70(1))
of “residential premises” ([25.165]) is input taxed where it is to be used
predominantly for residential accommodation (regardless of the term of

occupation). However, the sale or long-term lease is not treated as input taxed
if the premises are “commercial residential premises” (see [25.165]) or “new
residential premises”: ss 40-65(2) and 40-70(2).
“Long-term lease” is defined in s 195-1 as a lease, hire or licence for a period

of at least 50 years.
“New residential premises” is defined in s 40-75 as residential premises:

• which have not previously been sold as residential premises and have
not previously been the subject of a long-term lease;
• have been created through substantial renovations of a building; or
• have been built or contain a building that has been built to replace
demolished premises on the same land.
Premises will not be treated as “new residential premises” if:
• they were used for residential accommodation before 2 December
1998, regardless of the term of occupation (s 40-65(2)); or
• if they have only been used as residential rental premises for a period
of at least five years since they first became residential premises; were
last substantially renovated or were last built: s 40-75(2).
The determination as to what constitutes “substantial renovations” can be
difficult in practice, and the Commissioner provides some guidance on this
issue in Ruling GSTR 2003/3.
Consequences of making an input taxed supply

[25.170] An entity that makes input taxed supplies is not required to pay GST
on the making of the supply: s 40-1 of the GST Act. This is because input taxed
supplies are excluded from the definition of “taxable supply” in s 9-5.
A further consequence of making input taxed supplies is that the entity is not
entitled to a refund of GST paid on any acquisitions related to the making of
that supply as the acquisition would not satisfy the requirements of “creditable
acquisition”: see [25.190] and [25.210]–[25.217].
Example 25.8: Input taxed supplies

Guido owns eight houses which he rents out to students at the nearby
university. He charges rental of $110 per week for each house. Guido
recently paid $66 (including GST) to a plumber for repairs in one of the
houses. Guido is registered for GST purposes.
The rental of the houses would constitute input taxed supplies as it is

residential rent. Guido does not have to pay GST on the $110.
Guido is not entitled to a refund of the GST paid to the plumber as the
acquisition relates to the provision of an input taxed supply and would
therefore not satisfy the requirements of creditable acquisition: see
[25.190] and [25.210]–[25.217].

Mixed or composite supply
[25.175] An entity may also make a supply that is partly a taxable supply
and partly GST-free or input taxed. Such supplies fall into two categories –
mixed supplies and composite supplies. A mixed supply is a supply that can be
unbundled into separately identifiable parts, and each part is treated separately
for GST purposes. A composite supply is one that is made up of a dominant
part and something that is integral, ancillary or incidental to that part. A number
of examples of mixed and composite supplies are discussed in Ruling GSTR
2001/8.
In the case of a mixed supply, the value of the supply is to be apportioned

between the taxable supply and the GST- free or input taxed supply:
s 9-80. The Commissioner considers a number of different direct and indirect
apportionment methods in Ruling GSTR 2001/8.
Example 25.9: Consequences of making a mixed supply

Jill sells a property that consists of commercial and residential premises on
a single title. Commercial premises are taxable supplies while residential
premises are input taxed supplies. Therefore, the sale of the property is a
mixed supply. Jill is registered for GST purposes. The property was sold
for $200,000. Jill estimates that the commercial premises comprise 70%
of the property area, while the residential premises comprise 30% of the
property area.
As a consequence of making a taxable supply, Jill must pay GST of 10%
on the value of the taxable supply. The value of the taxable supply is
apportioned to take into account the fact that the value also relates to
an input taxed supply. Jill may calculate the value of the commercial
premises as 70% × $200,000 = $140,000.
Therefore, GST payable by Jill on the sale of the commercial
premises = 10% × (10/11 × $140,0000) = $12,727.
Note that property area is only one example of a method Jill could use
to determine the proportionate value of the commercial premises. She
could also determine the value using other bases, such as the rentals
received on each premises or a professional valuation.

In FCT v Luxottica Retail Australia Pty Ltd [2011] FCAFC 20, the Full Federal
Court held that taxpayers can choose to only discount the taxable component
of a mixed supply and not the GST-free or input taxed component (ie, a discount
does not have to be apportioned across both supplies). In FCT v Luxottica,
the taxpayer had offered its customers a discount on spectacle frames (which
are taxable supplies) if they purchased full-price lenses (which are GST-free
supplies). The Court rejected the ATO’s argument that the discount had to be
applied to the whole package and accepted the taxpayer’s treatment of the
transaction.
Composite supplies are treated as a single supply, and it is necessary to

ascertain which is the dominant part of the supply to determine the GST
consequences of the supply. It is not always easy to distinguish the dominant
part of a supply from that part of a supply that is integral, ancillary or incidental
to the dominant part. The Commissioner discusses a number of ways in which
this determination can be made in Ruling GSTR 2001/8.
Supply summary
[25.180] Table 25.1 provides a summary of the GST consequences for an

entity of the three different categories of supplies:
Table 25.1 GST consequences of making a supply
GST payable on supply?

Taxable supply 3
GST-free supply 7
Input taxed supply 7
Where the supply comprises a combination of taxable and GST-free or input

taxed supplies, it is necessary to determine whether the supply is a mixed or
composite supply. The GST consequences are determined accordingly.
As mentioned earlier, the basic rules regarding taxable supplies, GST-free

supplies and input taxed supplies are generally quite straightforward. However,
it should be noted that there are a large number of special rules that may alter
the treatment of a supply. These special rules include:
• supplies to associates: Div 72;
• margin scheme for sale of real property: Div 75;
• insurance claims or settlements: Div 78;
• offshore supplies other than goods or real property: Div 84;
• vouchers: Div 100;
• supplies in satisfaction of debts: Div 105; and
• agents: Div 153.
Discussion of these special rules is beyond the scope of this book.
Creditable acquisition
[25.190] So far in this chapter we have looked at the consequences, for an
entity that is registered for GST, of making a supply. The second key concept in
GST is “creditable acquisition”, which governs an entity’s entitlement to “input
tax credits” (refund of GST paid on acquisitions).
Under s 11-5 of the GST Act, an entity makes a creditable acquisition if:

• the entity makes an acquisition: see [25.200];
• the acquisition was solely or partly for a creditable purpose: see
[25.210]–[25.220];
• the supply to the entity was a taxable supply: see [25.225];

• the entity provided or was liable to provide consideration for the
supply: see [25.110]; and
• the entity is registered or required to be registered for GST purposes: see
[25.50].
Acquisition
[25.200] Similar to the definition of “supply” (see [25.100]), “acquisition” is
defined very broadly in s 11-10 of the GST Act as “any form of acquisition
whatsoever” and includes:
• an acquisition of goods;
• an acquisition of services;
• a receipt of advice or information;
• an acceptance of a grant, assignment or surrender of real property;
• an acceptance of a grant, transfer, assignment or surrender of any right;
• an acquisition of something the supply of which is a financial supply;  and

• an acquisition of a right to require another person to do anything or to
refrain from an act or to tolerate an act or situation.
Example 25.10: Meaning of “acquisition”
Jesse bought shoe polish from the local supermarket for his shoe-cleaning
business. Jesse paid his accountant $110 for preparing his tax return for
the year.
The purchase of the shoe polish is an acquisition as Jesse has
acquired goods.
The payment for the preparation of the tax return is an acquisition as
Jesse has acquired services.

Creditable purpose
[25.210] Establishing that an acquisition is for a creditable purpose
is generally the key issue in satisfying the requirements of “creditable
acquisition”. Creditable purpose is defined in s 11-15 of the GST Act; see also
the Commissioner’s guidance in Ruling GSTR 2008/1. An acquisition would
be for a creditable purpose where the acquisition relates to the carrying on
of the entity’s enterprise. Generally, an acquisition would be for a creditable
purpose where it is made for a business purpose. Section 11-15(2)(b) expressly

states that an acquisition will not be for a creditable purpose if it is private
or domestic in nature. However, acquisitions which relate to the provision of
fringe benefits that are for an employee’s private use are taken to be for a
creditable purpose: see Ruling GSTR 2001/3.
Example 25.11: Acquisition for a creditable purpose

Jesse has his own shoe-cleaning business. He recently purchased shoe
polish for the business. While he was at the store, he also purchased
various cleaning products for use in his home and a digital camera to
provide as a gift to his employee. The provision of the digital camera
constitutes the provision of a fringe benefit.
The acquisition of the shoe polish is for a creditable purpose as Jesse
purchased the shoe polish for use in his business.
The acquisition of the cleaning products is not for a creditable purpose as
they were purchased for use in his home and were therefore not related
to the carrying on of his enterprise. Further, they are specifically excluded

under s 11-15(2)(b) of the GST Act as they are private or domestic in
nature.
The acquisition of the digital camera is for a creditable purpose as it relates
to the provision of a fringe benefit. It does not matter that the employee
may
use the digital camera for private purposes.
Acquisitions related to input taxed supplies

[25.214] As mentioned at [25.170], acquisitions related to the making of input
taxed supplies are not creditable acquisitions. This is because of s 11-15(2)(a)
of the GST Act, which states that an acquisition is not for a creditable purpose
where it relates to the making of input taxed supplies. In Rio Tinto Services
Pty Ltd v FCT [2015] FCAFC 117, the Full Federal Court held that acquisitions
were not for a creditable purpose because they are related to the provision
of input taxed supplies (residential accommodation), notwithstanding that the
input taxed supplies were provided as part of a broader enterprise which made
taxable supplies.
Example 25.12: Acquisition for a creditable purpose and input taxed

supplies
Guido owns various investment properties which he rents out to students
at a nearby university. Guido recently paid $66 (including GST) to a

plumber for repairs in one of the houses. Guido is registered for GST
purposes.
The acquisition of plumbing services is not for a creditable purpose as it
relates to the provision of residential rental premises, which is an input
taxed supply.

[25.217] Financial supplies. Where the input taxed supplies are financial
supplies, the supplier may nonetheless be entitled to input tax credits on
acquisitions related to the making of those supplies in certain circumstances.
Under s 70-5 of the GST Act, suppliers may be entitled to a partial input tax
credit (75%: reg 70-5.03) for certain acquisitions listed in regs 70-5.02 and
70-5.02A. Examples include acquisitions related to cheque clearing services,
loan services, debt collection services and transaction processing services. The
reduced input tax credit was introduced to address the bias between financial
suppliers performing certain functions in-house or outsourcing those services.
The operation of the reduced input tax credit (including examples) is discussed
in Ruling GSTR 2004/1.
Under s 11-15(4), any acquisitions related to the making of financial supplies

are treated as being for a creditable purpose where the entity does not exceed
the “financial acquisitions threshold”. Generally, an entity will not exceed
the financial acquisitions threshold where the amount of its input tax credits
on acquisitions related to the making of financial supplies does not exceed
$150,000 (since 1 July 2012; $50,000 prior to that date), and its input tax credits
on acquisitions related to the making of financial supplies is less than 10% of
its input tax credits on all acquisitions: ss 189-5 and 189-10. The test requires
a determination of current and future acquisitions –that is the preceding
and following 11 months. The Commissioner’s guidance on the financial
acquisitions threshold is contained in Ruling GSTR 2003/9.
Example 25.13: Acquisition for a creditable purpose and the financial

acquisitions threshold
J Pty Ltd runs a furniture manufacturing business. During the year, it
provided customers with various loan arrangements to finance the
purchase of furniture. Its expenses relating to the loan arrangements
totalled $33,000 (including GST), while its total expenses were $2 million
(including GST). J Pty Ltd is registered for GST purposes.
Although some of J Pty Ltd’s acquisitions relate to the provision of input
taxed supplies (loans are financial supplies), the acquisitions are for a
creditable purpose because the input taxed supplies are financial supplies,
and the amount of J Pty Ltd’s input tax credits on these acquisitions for the
year would be $3,000, which is below the financial acquisitions threshold
of $150,000. Further, its input tax credits on those acquisitions are less
than 10% of its input tax credits on all acquisitions.

Solely or partly
[25.220] The expression “solely or partly” for a creditable purpose in
s 11-5 of the GST Act ensures that an acquisition will still be treated as
being for a creditable purpose even though the entity may have had a non-
business purpose as well as a business purpose in making the acquisition. The
Commissioner’s guidance on determining the extent of creditable purpose is
in Rulings GSTR 2006/3 (for providers of financial supplies) and GSTR 2006/4
(for providers of supplies other than financial supplies).
Example 25.14: Partial creditable purpose

Jesse has his own shoe-cleaning business. He purchased shoe polish
which he uses for the business as well as to clean his own shoes at home.
The acquisition of the shoe polish is for a creditable purpose even though
Jesse also had a non-business purpose (home use) for the shoe polish at
the time of acquisition.

Although the acquisition is still a creditable acquisition, the consequences will

differ where it is partly for a creditable purpose: see [25.230].
Supply to the entity was a taxable supply

[25.225] This element ensures that input tax credits are only available where
GST was in fact paid on the acquisition. Where the information provided
states that the amount paid for an acquisition includes GST, this is clearly the
acquisition of a taxable supply by the entity. However, where it is not clear that
the amount paid includes GST, it will be necessary to go through the analysis
at [25.90] from the supplier’s perspective to determine whether the supplier
has or should have charged GST on the supply. This includes deliberation as to
whether the supplier is or should be registered for GST purposes and whether
the supply is a GST-free or input taxed supply.
Example 25.15: Acquisition was a taxable supply

Jesse runs his own shoe- cleaning business. He recently purchased
shoe polish for $22 (including GST). He also purchased a shoe polishing
machine for $5,500 from the manufacturer, Big Machines Pty Ltd, which is
located in Perth. Big Machines Pty Ltd is one of the largest manufacturers
of shoe polishing machines in the world and has an annual turnover of
$2 million.
The acquisition of the shoe polish is clearly the acquisition of a taxable
supply as the information states that the price paid includes GST. The
acquisition of the shoe polish will be a creditable acquisition if all of the
other elements are satisfied.
To determine whether Jesse’s acquisition of the machine is the acquisition
of a taxable supply, it is necessary to consider whether the supply of
the machine is a taxable supply from Big Machines’ perspective. Big
Machines is clearly carrying on an enterprise and, with an annual turnover
of $2 million, is required to be registered for GST. Big Machines is located
in Perth, and therefore the supply is connected to Australia. The supply
is made for consideration. The machine is not a GST-free or input taxed
supply. Therefore, the supply of the machine to Jesse is a taxable supply,

and the $5,500 includes GST. The acquisition of the machine by Jesse will
be a creditable acquisition if all of the other elements are satisfied.

Consequences of making a creditable acquisition

[25.230] An entity that makes a creditable acquisition is entitled to input tax
credits on the acquisition: s 11-20 of the GST Act.
The amount of input tax credits on a creditable acquisition is the amount equal
to the GST payable on the supply of the thing acquired: s 11-25. As discussed
at [25.130], the amount of GST payable on a taxable supply is 10% of the value
of the taxable supply: s 9-70. The value of a taxable supply is equal to ten-
elevenths of the price of the supply: s 9-75. Generally, the price of a supply is
equal to the consideration for the supply.
Example 25.16: Consequences of making a creditable acquisition

Jesse has his own shoe-cleaning business, which is registered for GST
purposes. Jesse purchased a bottle of shoe polish for $22 for use in the
business.
The acquisition of the shoe polish is a creditable acquisition as it satisfies
all of the requirements in s 11-5 of the GST Act.

As a consequence of having a creditable acquisition, Jesse is entitled to
input tax credits in relation to the acquisition. The amount of the input tax
credits is equal to the GST payable on the taxable supply.
The GST payable on the supply is calculated as follows:
• The value of the taxable supply is ten-elevenths of the price of the
supply.
• The price of the supply is equal to the consideration received,
which in this case is $22.
• The GST payable on the supply is 10% × (10/11 × $22) = $2.
Therefore, Jesse is entitled to input tax credits of $2 on the acquisition of
the shoe polish.

Where the acquisition was only partly for a creditable purpose, the amount of
input tax credits on the acquisition is limited to the extent that the acquisition
was for a creditable purpose: s 11-30.
Example 25.17: Consequences of making an acquisition partly for a

creditable purpose
Following on from Example 25.16, assume that Jesse expects to use
the shoe polish 80% for business purposes and 20% for private use on
cleaning his own shoes.
We established that Jesse is entitled to input tax credits of $2 on the
acquisition of the shoe polish.
The amount of input tax credits on the acquisition where Jesse only has
a partly creditable purpose is calculated by multiplying the amount of the
input tax credits on the acquisition by the creditable purpose percentage
(ie, the extent to which the acquisition is for a creditable purpose).
In this case, the amount of Jesse’s input tax credits on the acquisition
would be $2 × 80% = $1.60.

Special rules
[25.235] As with taxable supplies, the entitlement to input tax credits for
creditable acquisitions may be varied under the operation of various special
rules in the GST Act. These rules include:
• Div 60 in relation to pre-establishment costs;
• Div 137 relating to stock on hand when an entity becomes registered;  and
• Div 153 in relation to agents.

A particularly important override to the general creditable acquisition rules is
Div 69, relating to non-deductible expenses.
Non-deductible expenses
[25.240] Even where all of the elements of “creditable acquisition” are
satisfied, an acquisition will not be a creditable acquisition if it is a non-
deductible expense: s 69-5 of the GST Act. A “non-deductible expense” refers
to an expense which is not deductible for income tax purposes. However, for
GST purposes, only the following non-deductible expenses are treated as not
being creditable acquisitions under s 69-5:
• penalties: s 26- 5 of the Income Tax Assessment Act 1997 (Cth)
(ITAA 1997);
• relative’s travel expenses: s 26-30 of the ITAA 1997;
• family maintenance expenses: s 26-40 of the ITAA 1997;
• recreational club expenses: s 26-45 of the ITAA 1997;
• expenses for a leisure facility or boat: s 26-50 of the ITAA 1997;

• entertainment expenses: Div 32 of the ITAA 1997;
• non-compulsory uniforms: Div 34 of the ITAA 1997; and
• agreements for the provision of non- deductible non- cash business
benefits: s 51AK of the Income Tax Assessment Act 1936 (Cth)
(ITAA 1936).
Note that some of these expenses (eg, entertainment expenses) may be
deductible for income tax purposes where they relate to the provision of a
fringe benefit: see [12.220]–[12.230]. Where a non- deductible expense is
deductible for income tax purposes because it relates to the provision of a
fringe benefit, the restriction in s 69-5 of the GST Act does not apply, and the
acquisition will be treated as a “creditable acquisition” if all the elements of
“creditable acquisition” are satisfied.
Example 25.18: Input tax credits on entertainment expenses

Jesse took his two employees out to dinner to celebrate the end of a
successful year. The dinner cost $110 (including GST). Assume that Jesse
chooses to treat the meal as a meal entertainment fringe benefit and
uses the 50/50 split method to calculate the taxable value (see [7.230]–
[7.240]). Also assume that all of the elements of “creditable acquisition”
are satisfied.
By choosing the 50/50 split method, Jesse only pays fringe benefits tax
on half of the cost of the fringe benefit. As such, Jesse is entitled to a
deduction for income tax purposes for that half of the meal expense
($55): s 32-20 of the ITAA 1997 and s 51AEA of the ITAA 1936. The other
half of the meal entertainment expense is a “non-deductible expense”
and does not give rise to a creditable acquisition: s 69-5(3A) of the GST
Act. Therefore, Jesse is only entitled to input tax credits of $5 for the
half of the expense that is deductible. Note that Jesse’s deduction will be
reduced from $55 to $50 because of the $5 of input tax credits: s 27-5 of
the ITAA 1997 (see [25.320]).

Further, as mentioned at [14.125], the amount of input tax credits in relation

to a car is generally limited to 1/11 of the “car limit”: s 69-10. The “car limit”
is $59,136 for the 2020–2021 income year: “Car cost limit for depreciation” on
ATO website.
Importation
[25.250] The rules regarding importations are covered in Div 13 of the GST
Act and are different to the general rules regarding GST as they:
• apply regardless of whether an entity is registered for GST purposes;

• only apply to the importation of goods and not other types of
importations; and
• impose the liability to pay GST on the importer of goods, not the
supplier.
These special rules are necessary because, in the case of an importation, the
supplier is located outside Australia, and it would be administratively difficult to
collect GST from an entity located outside Australia. The rules also ensure that
goods consumed in Australia are subject to GST regardless of whether they
are acquired in or out of Australia, thereby maintaining the competitiveness of
Australian businesses.
The general rules regarding importations in Div 13 is supplemented by the

special rules in Div 84 which imposes GST on certain offshore supplies not
covered by Div 13: see [25.295].
Taxable importation
[25.260] Liability for GST is imposed on an entity which makes a taxable
importation. Under s 13- 5 of the GST Act, an entity makes a taxable
importation where:
• goods (excluding the importation of money: s 13-5(4)) are imported;  and
• the goods are entered for home consumption.
“Entered for home consumption” is an expression used in customs law and
essentially means that goods are brought into Australia for consumption or
use in Australia (ie, the goods are not in Australia in transit). An entity does not
have to be carrying on an enterprise or be registered for GST purposes to make
a taxable importation. Similarly, a taxable importation will exist regardless of
whether the goods are being imported for business or private purposes.
However, an importation is not a taxable importation to the extent that it is a

non-taxable importation. The following are non-taxable importations:
• goods that would have been GST-free or input taxed supplies if they
were supplies (ie, supplied in Australia) (s 13-10(b));
• goods exported from Australia and returned to Australia unchanged
(s 42-10); and
• goods that qualify for certain customs duty concessions (s 42-5).
A wide range of goods qualify for customs duty concessions and would
therefore be non- taxable importations. The most relevant category in this
range is low value goods, which are goods that have a customs value of less
than $1,000. However, from 1 July 2018, importations of low value goods are
subject to GST under different provisions: see [25.299].
Example 25.19: Non-taxable importations
Paul moved to Australia from New Zealand. He purchases fresh kiwifruit
and New Zealand chocolates online directly from a New Zealand supplier.
The chocolates and kiwifruit are delivered to him in Australia by the seller’s
representative. He purchases the items for himself as he misses the taste
of New Zealand and cannot get the same quality items in Australian
shops. The customs value of the chocolates is $1,200, and the customs
value of the kiwifruit is $3,000.
The purchase of the chocolates from New Zealand and brought into
Australia will be a taxable importation (as confectionary, chocolates are
not GST-free food: Sch 1 of the GST Act). The chocolates are not low
value goods as they have a customs value in excess of $1,000.
The purchase of the fresh kiwifruit will not be a taxable importation as it
would have been a GST-free supply had it been a supply (ie, purchased
in Australia).

Consequences of making a taxable importation

[25.270] GST is payable on the making of a taxable importation by the person
making the taxable importation: ss 13-1 and 13-15 of the GST Act.
The amount of GST payable on the making of a taxable importation is 10% of the
value of the taxable importation: s 13-20(1). The value of a taxable importation

is the customs value of the goods plus any costs incurred in transporting and
insuring the goods to bring them into Australia: s 13-20(2). Generally, the
customs value of goods is the cost of the goods in Australian dollars.
Example 25.20: Consequences of making a taxable importation

Jimmy purchased a new mobile phone from the United States as he could
not wait for it to be sold in Australia. The phone cost him approximately
A$1,500 plus A$100 in postage and insurance costs.
The purchase of the mobile phone is a taxable importation as goods are
being imported into Australia for home consumption. The mobile phone
would not fall into any of the categories of non-taxable importations.
The value of the taxable importation is the customs value of the mobile
phone ($1,500) plus the freight and insurance costs ($100), which is
$1,600.
Therefore, GST payable by Jimmy on the importation of the mobile

phone is 10% × $1,600 = $160. If Jimmy brings the phone into Australia
personally after travelling to the United States, he is required to declare
the taxable importation and pay tax at the airport when he enters into
Australia. If the phone is shipped to him by post or courier, the post office
or courier company will collect the GST from Jimmy and remit it to the
ATO on his behalf.

Creditable importation
[25.280] The making of a taxable importation gives rise to a liability to pay
GST, whereas the making of a creditable importation gives rise to an entitlement
to input tax credits. Under s 15-5 of the GST Act, a creditable importation
exists where:
• an entity imports goods solely or partly for a creditable purpose: see
[25.210]–[25.220];
• the importation is a taxable importation: see [25.260]; and
• the entity is registered or required to be registered for GST purposes: see
[25.50].
These elements of “creditable importation” preserve the general rule that
GST is imposed on final, private consumers. Entities will be entitled to input
tax credits on importations that are for a business purpose, provided that the
entity is registered for GST purposes.
Even where all of the elements of “creditable importation” are satisfied, an

importation will not be a creditable importation if it is a non-deductible
expense: s 69-5. See [25.240] for a list of non-deductible expenses.
Consequences of making a creditable importation

[25.290] An entity that makes a creditable importation is entitled to input tax
credits on the importation: ss 15-1 and 15-15 of the GST Act.
The amount of input tax credits on a creditable importation is the amount equal
to the GST payable on the importation: s 15-20. As discussed at [25.270], the
amount of GST payable on a taxable importation is 10% of the value of the
taxable importation.
Example 25.21: Consequences of making a creditable importation

Following on from Example 25.20, assume that Jimmy purchased the
new mobile phone from the United States for business purposes only.
Jimmy is registered for GST purposes.
As established in Example 25.20, the purchase of the mobile phone is
a taxable importation, and Jimmy is liable to pay GST of $160 on the
importation.
As the mobile phone was purchased for a creditable purpose (for Jimmy’s
business) and Jimmy is registered for GST purposes, the importation of
the phone is also a creditable importation and Jimmy is entitled to input
tax credits of $160 on the importation. In practice, the two amounts would
generally arise in the same GST period (see below) and Jimmy would be
able to net off the two amounts, so that there is no amount payable or
receivable in relation to the importation.

Offshore supplies
[25.295] The general importation rules in Div 13 are supplemented by the
special rules in Div 84 which extend the imposition of GST on importations
to the importation of intangible supplies and to the importation of low value
goods. A detailed examination of the special rules is beyond the scope of this
book, and only a brief outline is provided here. The consequence of the different
sets of rules is that the liability for GST on the importation of non-low value
goods (taxable importations) is imposed on the importer of such goods, while
the liability for GST on importations of intangible supplies and low value goods
is generally imposed on the overseas supplier. Further, the rules regarding
offshore inbound intangible supplies and the importation of low value goods
refer to supplies made to Australian consumers. As such, supplies made to
Australian businesses (B2B transactions) generally fall outside the scope of
these measures. Under subdiv 84-A, where the offshore supply of intangibles
or low value goods is made to a recipient carrying on an enterprise in Australia
but the acquisition was not solely for a “creditable purpose” (see [25.210]),
or the supplier reasonably believed that the recipient was not a consumer,
the supplies are treated as taxable supplies and a “reverse charge” applies
(GST on the supply is payable by the recipient of the supply, not the supplier).
A “reverse charge” can also apply to taxable supplies made by non-residents
where the recipient agrees to such an arrangement: Div 83.
Intangible supplies
[25.297] From 1 July 2017, offshore inbound intangible supplies, such as
the provision of services (eg, consultancy or professional services) or digital
products (eg, movie streaming or downloading services, music, apps, games,
ebooks), are treated as being connected to Australia for GST purposes if the
recipient of the supply is an Australian consumer: s 9-25(5)(d). An “Australian
consumer” is an Australian- resident entity (refer to the residency tests in
Chapter 4) that is not registered for GST in Australia or, if GST-registered, the
supply is acquired for a non-business purpose: s 9-25(7). Under s 84-100, an
entity may treat a supply as not being made to an Australian consumer (and
not subject to GST) if the entity took reasonable steps to obtain information
as to whether the recipient of the supply was an Australian consumer, or,
had business systems and processes which provide a reasonable basis for
identifying if the recipient in an Australian consumer, and, having taken such
steps or had such processes, reasonably believed that the recipient was not an
Australian consumer. Where this is later found not to be the case, a “reverse
charge” may apply, as discussed at [25.295], and the Australian consumer may
be subject to administrative penalties if they have made false or misleading
statements. Ruling GSTR 2017/1 provides guidance on how overseas suppliers
can determine whether a recipient of a supply is an “Australian consumer”.
Where the supplies are to be used or enjoyed outside Australia, the supplies
will continue to be GST-free supplies under s 38-190.
Unlike the general rules regarding importations, which impose the liability for
GST on the importer (see [25.260]), the liability for GST on the importation
of intangible supplies is placed on the offshore supplier of such supplies.

Broadly, a non- resident supplier is required to register for GST (and pay
GST on the supply) if it is carrying on an enterprise and the “registration
turnover threshold” (see [25.70]) is met. However, in determining whether
the “registration turnover threshold” is satisfied, any supplies that are not
connected with Australia are disregarded: ss 188-15(3) and 188-20(3). Where
an inbound intangible consumer supply is made through an “electronic
distribution platform” (EDP) (eg, an app store), the operator of the EDP
is treated as the supplier and required to comply with the GST obligations
(register for GST if it meets the “registration turnover threshold” and pay GST
on the supply): s 84-55.
Low value goods
[25.299] As mentioned at [25.260], GST also applies to offshore supplies of
low value goods from 1 July 2018. Low value goods are goods with a customs
value of $1,000 or less and the goods are not tobacco, tobacco products
or alcoholic beverages: s 84-79(3). An offshore supply of low value goods
is treated as being connected to Australia if the recipient of the supply is a
consumer of the supply and the goods are brought into Australia: ss 84-75
and 84-77. Broadly, a non-resident supplier is required to register for GST (and
pay GST on the supply) if it is carrying on an enterprise and the “registration
turnover threshold” (see [25.70]) is met. However, in determining whether
the “registration turnover threshold” is satisfied, any supplies that are not
connected with Australia are disregarded: ss 188-15(3) and 188-20(3). Where
low value goods are supplied through an EDP or a redeliverer, the operator
of the EDP or the redeliverer may be treated as the supplier and required to
comply with the GST obligations (register for GST if it meets the “registration
turnover threshold” and pay GST on the supply): s 84-81.
Administration
[25.300] GST is administered by the ATO. Entities that are registered or
required to be registered for GST are required to complete and lodge a GST
return (known as a “Business Activity Statement” or BAS) on a quarterly
basis: ss 27-5, 31-5 and 31-8 of the GST Act. However, entities with an annual
turnover in excess of $20 million, entities that will be carrying on business
in Australia for less than three months or entities that have a bad history of
compliance must complete the BAS on a monthly basis: ss 27-15, 31-5 and
31-10. Other entities have the option of choosing to report on a monthly basis
(s 27-10) and may return to quarterly reporting whenever they wish as long as
they do not have to report on a monthly basis: s 27-10.
Entities must report the amount of any GST payable (ie, GST on taxable
supplies or taxable importations) and GST refundable (ie, input tax credits on
creditable acquisitions or creditable importations) for the period on the BAS.
The two amounts are netted off, and the entity is either in a net GST payable
or refundable position (known as the “net amount”) for the period: s 17-5(1).
Taxpayers who have made an error in working out their net GST amount
in a particular period may correct that error in a later period where the
circumstances set out in GST Errors Determination 2013 are satisfied. Anti-
avoidance provisions similar to Pt IVA of the ITAA 1936 (see [23.180]–[23.260])
are contained in Div 165.
Timing
[25.304] Entities are generally required to report their GST obligations on an
accruals basis unless they choose to account for GST on a cash basis. Section
29-40 specifies that entities may choose to account for GST on a cash basis in
certain specified circumstances (eg, the entity is a “small business entity”): see
also Ruling GSTR 2000/13. In this context, a “small business entity” is a sole
trader, partnership, company or trust that operates a business for all or part
of the income year and has an aggregated turnover of less than $10 million.
Broadly, “aggregated turnover” is the entity’s turnover plus the annual turnover
of any business that is connected or affiliated to the entity.
For entities that account for GST on an accruals basis, GST payable is attributed
to the tax period when any consideration is received or an invoice is issued in
relation to the supply: s 29-5. Entities that account for GST on a cash basis
account for GST payable in proportion to the cash received. For example, if an
entity invoices a customer for a supply on 20 June but only receives payment
on 5 July, the entity will be required to include the GST amount in its GST
payable for the period ending 30 June if it accounts for GST on an accruals
basis. However, if it accounts for GST on a cash basis, it will only include the
GST amount in its GST payable for the next period, once the amount is actually
received.
Where the GST payable relates to a taxable importation, GST is payable when
the customs duty is payable, regardless of whether the entity accounts for GST
on a cash or accruals basis: s 33-15(1)(a).
In relation to acquisitions, s 29-10 provides that, for accruals basis entities,

input tax credits are attributable to the period when the entity provides any
consideration or an invoice is issued in relation to the acquisition. Entities that
account for GST on a cash basis are entitled to input tax credits in proportion
to the consideration provided: s 29-10(2). The Commissioner’s guidance on
the attribution rules for GST payable, input tax credits and adjustments is
contained in Ruling GSTR 2000/29.
Input tax credits due to creditable importations are attributable to the tax period
when the entity actually pays GST on the importation, regardless of whether
the entity accounts for GST on a cash or accruals basis: s 29-15(1).
In response to a recommendation by the Board of Taxation in its report into the

Review of the Legal Framework for the Administration of GST, the government
has introduced a four-year limitation period, subject to certain exceptions, to
claim input tax credits: s 93-5. The four-year period commences from the day
on which a taxpayer is required to give the Commissioner a return for the tax
period to which a credit would be attributable under the basic attribution rules
in s 29-10.
Tax invoice
[25.306] For both cash and accruals taxpayers, the entity must have a tax
invoice to be entitled to input tax credits: s 29-10(3) and (4). Where the entity
does not possess a tax invoice, the input tax credits are attributable to the
period in which the entity holds a tax invoice.
Section 29-70 sets out the requirements that must be satisfied for a document
to be a “tax invoice”. These requirements were amended with effect from
1 July 2010 by replacing the existing requirements with equivalent but flexible
principles. A document will be a tax invoice if it:
• is issued by a supplier or a recipient in the case of a recipient created
tax invoice;
• is in the approved form;
• contains the required information;
• was intended to be a tax invoice, which must be clearly ascertained
from the document; and
• contains any other matters specified by the GST Regulations.
The required information that must be contained in the document includes the
supplier’s identity and ABN, the recipient’s identity or ABN if the consideration
for the supply is $1,000 or more, the thing supplied including the quantity and
price of the thing, the extent to which the supply is taxable, and the date the
document is issued. Under these requirements, a collection of documents can
constitute a tax invoice. The Commissioner has published Ruling GSTR 2013/1
which sets out the minimum information requirements for a tax invoice under
s 29-70(1).
Under s 29-80(1), tax invoices are not required for low value transactions
(currently transactions with a value of less than $75 (excluding GST): reg
29-80.01).
Adjustments
[25.310] The net amount calculated under s 17- 5 of the GST Act is
increased or decreased for any adjustments: s 17-5(2). An entity can make an
adjustment to its GST obligations on supplies or acquisitions under Div 19:
see also Ruling GSTR 2000/19. An adjustment may arise because the supply
or acquisition is cancelled, there is a change to the consideration for a supply
or acquisition, or the supply or acquisition becomes or stops being a taxable
supply or creditable acquisition: s 19-10. Adjustments relating to a change in
the extent of creditable purpose are dealt with in Div 129, while adjustments
relating to goods applied solely to private or domestic use are dealt with in
Div 130. Adjustments for bad debts are dealt with in Divs 21 and 136: see also
Ruling GSTR 2000/2.
Where an adjustment is necessary, the entity must compare its obligations

following the adjustment with its previously reported GST obligations and
include an adjustment to increase or decrease its GST liability on its BAS.
The adjustment is attributable to the tax period when the entity becomes
aware of the adjustment: s 29- 20(1). However, adjustments for entities

which account for GST on a cash basis are attributable in accordance
with consideration paid or received: s 29-20(2). Similar to the requirement
that entities must possess a tax invoice to be entitled to input tax credits,
entities making a decreasing adjustment must have an adjustment note
when making the adjustment, otherwise the adjustment is attributable to
the first period when the entity has an adjustment note: s 29-20(3). The
requirements of an adjustment note (essentially an amended tax invoice)
are set out in s 29-75. The Commissioner has published Ruling GSTR 2013/2
which sets out the requirements for adjustment notes under Div 29. An
adjustment note is not required for decreasing adjustments of $75 or less:
s 29-80(2), reg 29.80.02.
Example 25.22: Adjustments
Dino purchased a table for his office on 1 June for $330 (including GST).
Dino accounts for GST on an accruals basis. The acquisition of the table
was a creditable acquisition, and Dino included his entitlement to $30
input tax credits in his June quarter BAS as he possessed a valid tax
invoice at the time. The table was delivered to Dino on 16 July, but
it was not in the colour he had ordered. The supplier offered Dino a
20% discount on the price if Dino would accept the delivered table.
Dino accepted the discount as the colour of the table did not make any
difference to him.
Dino must make an adjustment as there has been a change in the
consideration of a creditable acquisition. He has received a 20%

discount on the price, which means that the new consideration is $264
(including GST). Dino originally claimed input tax credits of $30, but
he is now only entitled to input tax credits of $24 and therefore he
has an increasing adjustment of $6. The adjustment is attributable
to the September quarter as that is when Dino became aware of the
adjustment.

Non-residents
[25.313] Non-residents which are required to register for GST can choose to
be a limited registration entity under Div 146. In the absence of such an election,
a non-resident will be a standard registration entity. Table 25.2 outlines the
differences between the two systems:
Table 25.2 Standard GST-registration and Limited GST-registration
Standard GST-registration Limited GST-registration

Entity uses an Australian Business Number Entity uses an ATO Reference
(ABN). Process for non-residents to obtain Number (ARN). Process for non-
an ABN may take some time and requires residents to obtain an ARN should
additional documentation and proof of be quicker and less onerous than
identity. obtaining an ABN.
Entity can claim input tax credits. Entity cannot claim input tax credits.
Entity can account and report for GST on Entity must lodge GST returns and
monthly or quarterly basis. pay GST quarterly.
Entity not required to issue tax invoices or
adjustment notes on inbound intangible Entity cannot issue tax invoices or
consumer supplies and offshore supplies of adjustment notes.
low value goods: ss 84-50, 84-87.
GST groups
[25.315] Generally, transactions between companies which are part of the
same corporate group will be subject to GST in accordance with the rules
discussed in this chapter. In other words, a company making a “taxable supply”
is required to pay GST on that supply, and a company making a “creditable
acquisition” is entitled to input tax credits on that acquisition. This is the case
even where the companies may have formed a tax consolidated group for
income tax purposes: see [21.650].
To reduce GST compliance costs, companies are permitted to form a

GST group under Div 48 of the GST Act if they satisfy the membership
requirements. Broadly, the effect of forming a GST group is that the group is
treated as a single entity for GST purposes, and most transactions between
group members are disregarded for GST purposes. One member of the
group is nominated as the responsible member and deals with the group’s
GST obligations on transactions with non-group members and lodging the
group’s GST return.
Interaction with other taxes

Income tax
[25.320] Entities include the GST-exclusive amount of their supplies in their
assessable income: s 17-5 of the ITAA 1997. The amount to be included as a
deduction will depend on the entity’s entitlement to input tax credits on the
acquisition. Where the entity is entitled to input tax credits, the deduction
amount will be the GST-exclusive amount: s 27-5 of the ITAA 1997. On the
other hand, if the entity is not entitled to input tax credits, the deduction amount
will be the GST-inclusive amount.
Example 25.23: GST and income tax

Jesse has a shoe- cleaning business. Last year he earned $220,000
(including GST) from providing shoe-cleaning services and spent $110,000
(including GST) on shoe polish and special cloths for the business. Jesse
is registered for GST purposes.
Jesse will include $200,000 in his assessable income for the year as it is
income from business. The GST component of Jesse’s sales revenue is
10% × 10/11 × $220,000 = $20,000.
Jesse will include $100,000 in his deductions for the year as they are
ordinary business expenses. The GST component of Jesse’s expenses is
10% × 10/11 × $110,000 = $10,000.

Fringe benefits tax
[25.330] Where an entity’s acquisition relates to the provision of a fringe
benefit, the entity’s fringe benefits tax (FBT) liability in relation to the provision
of the fringe benefit will depend on the entity’s entitlement to input tax credits.
This is because the gross-up factor to be used in calculating the fringe benefits
taxable amount depends on whether the entity is entitled to input tax credits
on the acquisition: see [7.400].
Note that reimbursements of an employee’s expenses (ie, an expense payment

fringe benefit) are taken to have been made by the employer for GST purposes
under s 111-5 of the GST Act. This ensures that the employer is entitled to
any input tax credits in relation to the acquisition as long as the elements of
“creditable acquisition” are satisfied: see Ruling GSTR 2001/3.
Questions
[25.340]
25.1 Advise whether the following would be considered “taxable supplies”,
“GST-free supplies” or “input tax supplies” (you may assume that the
supplies are made by an entity located in Australia and registered for
GST purposes and that the supplies are made for consideration in the
furtherance of an enterprise):
(a) Sale of t-shirts by a retailer.
(b) Sale of a new residential house by a property developer.
(c) Loan set-up fees charged by a bank.
(d) Sale of fresh fruit by a grocer.
(e) Airline ticket from Adelaide to Perth.
(f) Painting a house.
(g) Sale of herbal tea by a café.
(h) Home-delivered pizza with separate charges for the pizza and the
delivery.
(i) Airline ticket from Melbourne to London (return).
(j) Sale of an existing residential house owned as an investment
property.
(k) Interest on a loan to buy shares.
(l) Sale of shares in an ASX listed company.
(m) Sale of Australian souvenirs to purchasers located overseas.
25.2 Audrey is a talented artist. Her paintings of Australian scenery sell for
$50,000 to $100,000 each. She sells at least one painting a month to
buyers in Australia and overseas. Her paintings are highly sought after
and she uses only premium paints and canvasses for her paintings.
She purchases these items at a large local retailer.
Advise Audrey as to her GST consequences arising out of the above

information.
25.3 Big Boats Pty Ltd is a large company incorporated in Australia. Big
Boats is registered for GST purposes. The company sells boats for
$330,000 each (including GST) to customers in Australia. The boats
are purchased from a company in France at a cost of approximately
$200,000 each. However, Big Boats pays an additional $20,000 per boat
for shipping and insurance. Big Boats is the exclusive supplier of these
boats for the Asia Pacific region. The company also sold two boats
to customers in Indonesia and five boats to customers in Singapore.
These boats are sold for $300,000 and are shipped directly from France
to the customers in Indonesia and Singapore. The customers pay for
the shipping and insurance costs.
Advise Big Boats as to its GST consequences arising from the above
information.
25.4 Big Bank Ltd operates nationally with more than 50 branches, a 10-
storey head office and numerous call centres. It is registered for GST
purposes. Big Bank has for many years provided loans and deposit
facilities to customers in Australia. Last year it launched a new product,

Big Bank home and contents insurance policies. It was a significant
step for Big Bank and required it to change some of its computerised
accounting systems due to the fact that GST needed to be charged on
the new product.
Big Bank budgeted to spend $1,650,000 (including GST) on advertising
campaigns last year. Of that sum, $550,000 was allocated to a
television advertising campaign specifically promoting Big Bank home
and contents insurance policies. The other $1,100,000 was allocated
to a general advertising campaign, including television, radio and print
media advertisements promoting Big Bank to the public as the bank
that is “Here for You”.
When Big Bank Ltd launched Big Bank home and contents insurance
policies, it forecast that its home and contents insurance business
would constitute 2% of its entire enterprise. Big Bank has been proved
correct in its forecasts. The other 98% of its enterprise is made up of its
traditional loans and deposit facilities businesses.
Last month, the advertising consultants issued their tax invoice for
$1,650,000.
Discuss Big Bank’s ability to claim input tax credits with respect to its
advertising expenditure of $1,650,000.
25.5 New Developments Pty Ltd (New Developments) is a property
investment and development company. Recently, New Developments
purchased an old warehouse which it is converting into apartments
for sale. New Developments also owns an established apartment
building, which it rents out to tenants. In the course of its activities,

New Developments negotiates many contracts. It engages a busy
independent lawyer, Rumpole Richardson, to assist in drafting and
negotiating these contracts. Rumpole Richardson has a number of
clients and turns over $250,000 per year in his legal advisory business.
New Developments offered to allow Rumpole Richardson to live in one
of its apartments rent-free in exchange for his legal work. Rumpole
Richardson agreed to this arrangement. Normally, the rent payable on
the apartment would be $22,000 per annum.
Advise New Developments and Rumpole Richardson of their GST
obligations and any input tax credit entitlements they may have.
Assume that New Developments is registered for GST purposes.
25.6 Following on from Question 25.5, New Developments sold one of the
apartments in the newly converted warehouse for $550,000. It also
sold one of the apartments in the established apartment building for
$500,000.
Advise New Developments of its GST obligations arising from the sale
of the apartments.
25.7 Windows R Us is a large window manufacturing company in Australia.

The company accounts for GST on an accruals basis and submits its
BASs monthly. The company supplies windows for office buildings
across Australia. On 15 March, the company sold windows valued at
$44,000 (including GST) to be used in an office building in Sydney.
A tax invoice was issued on that day. The windows were manufactured
in Adelaide and shipped to the customer in Sydney on 10 April.
When the customer received the windows, it was discovered that the
windows had been made in white whereas the customer had ordered
black windows. After some negotiation, the customer agreed to
accept the white windows for a 20% discount. Windows R Us issued
a refund of $8,800 to the customer on 15 April. Unfortunately, April
was not a good month for the company, and it received a penalty of
$11,000 (including GST) from the Environmental Protection Agency for
breaching Australia’s environmental protection laws.
Advise Windows R Us as to its GST consequences arising out of the
above information.
25.8 Gemma is a university student. She recently purchased a new computer
from a retailer in Singapore as the computer was not yet available in
Australia. The computer is for her personal use. The computer cost
A$3,000 and was shipped directly to Gemma’s home. Gemma also
purchased a book from Amazon US for $50.
What are the GST consequences arising from the above information?
26
State taxes
Key points.................................................................................................... [26.00]
Introduction................................................................................................ [26.10]
Stamp duty.................................................................................................. [26.20]
Duty tax base........................................................................................ [26.40]
Transfer (conveyance) duty................................................................. [26.60]
Dutiable property................................................................................. [26.70]
Location of dutiable property and apportionment................................. [26.80]
Dutiable transactions........................................................................... [26.90]
Dutiable value..................................................................................... [26.110]
Related parties....................................................................................... [26.115]
Aggregation............................................................................................ [26.120]
Calculating the duty payable............................................................. [26.130]
Foreign purchasers of residential property.......................................... [26.135]

Failing to lodge documents for stamping............................................. [26.140]
Duty concessions and exemptions................................................... [26.150]
Concessions........................................................................................... [26.152]
Exemptions............................................................................................. [26.154]
COVID-19 relief measures.................................................................. [26.155]
Landholder duty................................................................................. [26.160]
Landholding entities........................................................................... [26.170]
Constructive ownership......................................................................... [26.180]
Relevant acquisition........................................................................... [26.190]
Acquisition.............................................................................................. [26.192]
Significant interest................................................................................. [26.194]
Other duties........................................................................................ [26.200]
Land tax..................................................................................................... [26.210]
Landholder......................................................................................... [26.220]
Taxable value of land......................................................................... [26.230]
Aggregation of landholdings............................................................. [26.240]
Grouping............................................................................................. [26.250]
Joint ownership.................................................................................. [26.260]
Surcharge rates.................................................................................. [26.270]
Ownership of land by trusts in Victoria and South Australia.............. [26.270]
Absentee/foreign owners...................................................................... [26.275]

Vacant residential land tax in Victoria................................................... [26.278]
Exemptions and concessions............................................................ [26.280]
Principal place of residence................................................................... [26.282]
Primary production exemption.............................................................. [26.284]
Other exemptions................................................................................... [26.286]
Calculation of land tax liability........................................................... [26.290]
Payroll tax................................................................................................. [26.300]
Taxable wages................................................................................... [26.320]
Rates and thresholds......................................................................... [26.330]
Rebates............................................................................................... [26.340]
Grouping............................................................................................. [26.350]
Employee versus independent contractor........................................ [26.360]
Control.................................................................................................... [26.362]
Contractual relationship......................................................................... [26.364]
Risk�� [26.366]
Tools and equipment............................................................................. [26.368]
Other indicia........................................................................................... [26.369]
Contractor provisions........................................................................ [26.370]
Exemptions............................................................................................. [26.380]
Exempt organisations........................................................................ [26.390]
Questions................................................................................................... [26.400]

Key points
[26.00]
• Australian taxes comprise Commonwealth taxes, state taxes and
municipal taxes.
• For state taxes, the specific rules, regulations and tax rates of each tax
vary in each jurisdiction.
• Stamp duty was traditionally a tax on instruments but now operates as
a duty on various transactions. It applies to transfers of various types
of property and interests in such property and is often now referred to
as “transfer duty”. Other types of duties include motor vehicle duty and
insurance duty.
• Most jurisdictions have re-written their stamp duty laws (the re-write
jurisdictions), the exceptions being South Australia and the Northern
Territory.
• Transfer duty arises in the re- write jurisdictions when a “dutiable
transaction” occurs in respect of “dutiable property”. What constitutes a
“dutiable transaction” or “dutiable property” varies in each jurisdiction.
26: State taxes [26.10] 911
•
All jurisdictions have a “landholder duty”. Acquiring a “relevant interest”
in a particular “landholder” may trigger a liability to transfer duty.
•
Land tax is an annual tax imposed on persons or entities holding land,
either solely or jointly, in a particular jurisdiction where the site value is
above a certain threshold.
•
Land tax is assessed on the aggregated taxable value of land holdings
in a particular jurisdiction. Various land tax exemptions exist in each
jurisdiction, the primary one being for a principal place of residence.
•
Payroll tax is assessed on employers based on “taxable wages” paid to
employees.
•
Contractors may be deemed to be employees and their payments
deemed as “taxable wages” when they engage in principal/independent
contractor relationships and principally provide labour services.
•
Employers may be grouped to ensure they do not structure their
businesses to avoid or minimise their payroll tax obligations.
•
In response to the COVID- 19 crisis, new and largely temporary
concessions have been introduced in relation to transfer duty, land
tax and payroll tax. The types of measures adopted vary across each
jurisdiction.
Introduction
[26.10] We saw in Chapter 3 that the Australian Constitution distributes taxing
rights between the Commonwealth and State Governments. The six states
make laws under their own State Constitutions in areas that are not under the
control of the Commonwealth. The two territories do not have constitutions

but possess a limited right of “self-government” that has been granted to
them by the Commonwealth. This right allows the territories to handle certain
governmental matters under a locally elected parliament.
The powers conferred on the states and territories results in these jurisdictions
being responsible for areas they administer. These areas include education,
health, public transport, infrastructure and justice. To fund this expenditure,
the jurisdictions require a source of revenue, which comes from two main
forms. The first form of revenue is Commonwealth Government grants and
appropriations, but the states and territories often face budgetary pressures
that exceed the quantum of funding provided to them by the Commonwealth.
Consequently, the second source of revenue is the imposition of their
own taxes. For 2018–2019, the total taxation revenue collected at the state
government level amounted to $86,412 million: 5506 –Taxation Revenue,
Australian Bureau of Statistics. As noted at [3.20], the states’ and territories’
powers to tax is limited by the Australian Constitution and no state or territory
has imposed income tax since 1942, resulting in the taxes imposed often
having a relatively narrow tax base. Consequently, to ensure sufficient levels

of revenue, these jurisdictions have imposed up to 25 different taxes.
This chapter provides an overview of the three key state taxes regimes: stamp
duty, land tax and payroll tax. Broadly, stamp duty is imposed on various
transactions, the most common being the transfer of certain types of property
(eg, land and certain business assets). Land tax is imposed on the site value
of landholdings at a particular date, and payroll tax is charged on various
payments to employees and certain independent contractors.
Each jurisdiction has its own powers to impose these taxes. As such, the
specific rules and the administration of each tax in each jurisdiction vary. The
scope of this chapter is to provide a broad framework for the operation of
these three types of state taxes and to highlight common issues. It is therefore
necessary to analyse the jurisdiction-specific legislation, revenue rulings and
tax consequences in respect of any given transaction.
The administration of these taxes is also under the power of each jurisdiction-
specific Revenue Commissioner, operating their own revenue office
(equivalent to the Australian Taxation Office for Commonwealth taxes). The
revenue authorities administer state and territory tax legislation pursuant
to their own tax administration legislation. The revenue authorities for each
jurisdiction are:
Jurisdiction Revenue authority
Australian Capital Territory ACT Revenue Office
New South Wales Revenue NSW

Northern Territory Territory Revenue Office
Queensland Office of State Revenue (Qld)
South Australia Revenue SA
Tasmania State Revenue Office (Tas)
Victoria State Revenue Office (Vic)
Western Australia Office of State Revenue (WA)
All states and territories have announced a range of temporary relief measures
to assist taxpayers facing financial hardship as a result of the COVID-19 crisis.
These range from deferrals to discounts to exemptions. There are measures
that relate to stamp/transfer duty, land tax and payroll tax. In many cases, the
concessions were originally intended to only be available for a short period
but have been extended. In some cases, the concessions are automatically
available while in others the taxpayer must show a significant economic impact
due to the COVID-19 pandemic.
26: State taxes [26.40] 913
Stamp duty
[26.20] Stamp duty (or “duty”) was historically a tax imposed on various
instruments (paper documents evidencing certain transactions) since the
1800s. Over time the stamp duty tax base has broadened to include a wider
range of transactions, whether or not recorded on paper. The tax base and
triggers for the imposition of duties are governed by the respective laws of
each state and territory:
Jurisdiction Legislation
Australian Capital Territory Duties Act 1999 (ACT)
New South Wales Duties Act 1997 (NSW)
Northern Territory Stamp Duty Act 1978 (NT)
Queensland Duties Act 2001 (Qld)
South Australia Stamp Duties Act 1923 (SA)
Tasmania Duties Act 2001 (Tas)
Victoria Duties Act 2000 (Vic)
Western Australia Duties Act 2008 (WA)
[26.30] There have been various attempts to harmonise the stamp duty
legislation to create a uniform regime among the jurisdictions. The broad
aim is to create a more consistent approach to the treatment of transactions
across Australia. To date, the Australian Capital Territory, New South Wales,
Queensland, Tasmania, Victoria and Western Australia have participated in
harmonisation by re-enacting their stamp duty laws and these jurisdictions are
referred to as the “re-write jurisdictions”. South Australia and the Northern
Territory have retained their historic stamp duty laws. However, South
Australia commenced a consultation process in mid-2019 aimed at rewriting
the stamp duty and the intention was to get a final bill to the Parliament in
early 2020, but this has been delayed. While the re-write jurisdictions have
in principle harmonised, significant differences still remain. These differences
include different types of duties, dutiable property, rates and thresholds,
apportionment methodologies for multi-jurisdictional transactions/assets, and
lodgement requirements.
Duty tax base
[26.40] A common misconception is that stamp duty only applies to the
acquisition of land; however, the tax base is broader. Duty may also apply
to other transactions, for example, on the transfer of certain business assets,
registration of vehicles and issuing of insurance policies.
Some jurisdictions adopt a broad meaning for dutiable property and most
include business assets. For example, Queensland includes as dutiable
business assets goodwill, statutory business licences, the business name,
a right under a franchise agreement, business debts, and intellectual and
personal property of the business. Western Australia, New South Wales and
the Northern Territory also include goodwill but no other jurisdiction includes
trade debtors. In all jurisdictions other than South Australia (which has the
narrowest duty base), transfers of plant and equipment are dutiable when
transferred with another type of dutiable property. The underlying rationale is
that the purchase of the goods forms part of substantially one transaction with
the purchase of the land.
As the jurisdictions continue with the abolition of some state taxes, it is possible
that the “scope” of what constitutes dutiable property may change over time.
For example, New South Wales abolished duty on business assets (other than
land and certain goods when transferred together with other dutiable property
(eg, land)) on 1 July 2016. South Australia abolished duty on non-residential,
non-primary production real property from 1 July 2018.
Example 26.1: Sale of business
Fred owns and runs two bakeries. The first is located in Victoria and the
second in Queensland. Fred wishes to retire and sell both his businesses
by selling his business assets. The types of assets involved in both
businesses comprise goodwill, trading stock, plant and equipment and
premises. For Fred’s business in Victoria, the types of assets that will
constitute dutiable property will be the premises and the plant and
equipment, as the latter is being sold with the premises. In Queensland,
all assets will constitute dutiable property.

Location of dutiable property and apportionment

[26.80] The location of the dutiable property determines which state or
territory jurisdiction has the right to impose duty. For tangible assets, the
jurisdictional nexus is the physical location of the asset itself.
For intangible assets, jurisdictional nexus is determined by legal rules and

specific duty laws in each jurisdiction. For example, a trade debt is taken to be
located where the debtor resides. For other intangibles, such as goodwill, an
apportionment exercise may need to be performed based on a jurisdiction’s
specific rules. For example, in Queensland, goodwill is broadly taken to be
proportionally located in that state to the extent that goods are supplied or
services provided in Queensland to customers, as a proportion of total gross
26: State taxes [26.90] 917
sales amounts, over the preceding three completed financial years: ss 26 and
27 of the Duties Act 2001 (Qld).
Example 26.2: Jurisdictional nexus of trade receivables

Daniel carries on a trading business based in Victoria and makes sales to
customers throughout Australia. Daniel has decided to sell his business
by way of asset sale. The sale includes the assignment of trade receivables
to the purchaser. Some customers of the business who are trade debtors
reside in Queensland and others reside in Victoria. To the extent that the
trade debtors:
• are located in Queensland, the value of those Queensland trade
receivables will constitute Queensland dutiable property (ss 10(1)
(d) and 35(1)(f) of the Duties Act 2001 (Qld));
• are located in Victoria, the value of those Victorian trade
receivables will not constitute Victorian dutiable property.
Dutiable transactions
[26.90] A transfer of dutiable property will prima facie constitute a dutiable
transaction. A “dutiable transaction” is often broadly drafted to capture a wide
array of circumstances that could lead to the change in the legal or beneficial
ownership of the dutiable property. The common types of dutiable transactions

include:
• a transfer of dutiable property;
• an agreement for the sale or transfer of dutiable property;
• a declaration of trust over dutiable property; and
• a surrender of dutiable property.
Example 26.3: Declaration of trust over dutiable property

Bob is the registered owner of a property located in Sydney. Bob
establishes a discretionary trust with himself as trustee and Jessica and
Jimmy, being his children, as the beneficiaries (students can revise trust
law concepts at [20.20]). Bob subsequently declares that he holds the
property in Sydney on trust pursuant to the discretionary trust deed, for
the benefit of his two children. This declaration of trust by Bob over the
property will trigger a liability to transfer duty in New South Wales, at
transfer duty rates based on the dutiable value of the property at the time
of the trust declaration: see [26.110].

The specific types of “dutiable transactions” vary in each jurisdiction and can
be more expansive than the types outlined above. The legislative provisions
defining a “dutiable transaction” where such definition exists are outlined
in Table 26.2. For South Australia, the starting point is to review the duty
imposition provisions (ie, Sch 2 of the Stamp Duties Act 1923 (SA)).
Table 26.2 Dutiable transaction provisions
NSW Vic Qld WA ACT Tas NT

Dutiable transaction s8 s7 s9 s 11 s7 s6 s4
[26.100] A “dutiable transaction” may occur in any form and includes written
agreements, oral agreements or electronic transactions. This overcomes the
historic issue when stamp duty was only charged on paper instruments and
taxpayers avoided duty by not evidencing transactions in writing. In some
jurisdictions, if the dutiable transaction is not in writing, a written statement on
the revenue authority’s approved form must be provided.
Dutiable value
[26.110] Having triggered a liability to transfer duty, the next step is to
ascertain the dutiable value upon which duty will be assessed. The general rule
is that dutiable value is the greater of any consideration and the unencumbered
market value of the dutiable property.
Example 26.4: Sale of land subject to mortgage for less than

market value
Ellison owns a property in Manly, New South Wales. She purchased the
property six years ago for $1.2 million and currently owes $750,000 to the
bank. The current market value of the property is $1.8 million. The bank
has a registered mortgage over the title of the property. Ellison is in great
need to sell the property and sells the property to the first willing buyer
for $1 million as the buyer offered a quick settlement. The dutiable value
of the property will be $1.8 million, as the market value of the property is
higher than the consideration.

Related parties
[26.115] Where a transaction occurs between related parties and the
consideration (if any) is less than the market value, the dutiable value will be
26: State taxes [26.120] 919
based on the market value. The substantiation requirements to evidence market

value differ in each jurisdiction. For example, for a transfer of real property (eg,
land) and goods between related parties in Victoria, a valuation from a suitably
qualified person such as a certified practicing valuer may be required when
the total value of the assets exceeds $1 million: Revenue Ruling DA 029, SRO
(Victoria).
Aggregation
[26.120] The transfer duty tax rates in most jurisdictions are progressive,
meaning the duty tax rate increases as the dutiable value increases: see
Appendix for examples of transfer duty rates. It would therefore be beneficial
to taxpayers to split essentially one transaction into parts to obtain the
benefit of a lower duty tax rate. To deter this duty minimisation conduct, the
aggregation provisions may treat two or more separate transactions as one
single transaction where they are substantially one arrangement: for example,
see s 25 of the Duties Act 1997 (NSW).
The specific aggregation “triggers” which will cause transactions to be

aggregated vary across jurisdictions. For example, in New South Wales, the
aggregation “triggers” include where there is a substantially one transaction,
for example, transferring a block of land in subdivided parts, and the dutiable
transactions:
• occur within 12 months;
• have the same transferor (seller/ vendor), or the transferors are
associated persons; and
• have the same transferee (purchaser), or the transferees are associated
persons.
Example 26.5: Aggregation of substantially one arrangement

Charlie purchased a block of land in New South Wales on 1 August 2020
for $500,000. On 1 October of the same year, he purchased an adjacent
block of land from the same vendor for $550,000. The transactions are
substantially one arrangement.
26: State taxes [26.135] 921
Table 26.3 General transfer duty rates for New South Wales (s 32 of the
Duties Act 1997 (NSW)) and premium transfer duty rates for
residential NSW land (s 32A)
Dutiable value Rate

$0–$14,000 $1.25 for every $100 or part of the value
$175 + $1.50 for every $100 or part, that the value
$14,001–$31,000
exceeds $14,000
$31,001–$83,000
exceeds $31,000
$1,340 + $3.50 for every $100 or part, that the value
$83,001–$310,000
exceeds $83,000
$310,001–$1,033,000
exceeds $310,000
Over $1,033,000
exceeds $1,033,000
Premium Property $155,560 + $7.00 for every $100 or part, that the value
Duty: over $3,101,000 exceeds $3,101,000
Duty must be paid within a certain timeframe of a dutiable transaction occurring.

For example, in Victoria, the timeframe is 30 days, and in New South Wales,
the timeframe is 90 days. Under the ACT’s “Barrier Free” rules, liability for duty
arises on registration of the property transfer and must be paid within 14 days.
Foreign purchasers of residential property

[26.135] Recently, many jurisdictions have introduced a duty surcharge
applicable to foreign purchasers of residential land. The additional duty rates
are 8% of the dutiable value of the property being transferred in New South
Wales, Victoria and Tasmania and 7% in Queensland, South Australia and
Western Australia. However, New South Wales and Western Australia have
since removed the surcharge in relation to Australian-based developers that
are foreign persons in relation to land used for the construction and sale of
new homes or sold for new home construction: s 104ZJA of the Duties Act
1997 (NSW). From 1 July 2020, a new exemption has been added for build-
to-rent properties transferred to foreign persons: s 104ZJB of the Duties Act
1997 (NSW).
Tasmania also applies a 1.5% surcharge on the transfer of primary production

land to foreign purchasers.
For these purposes, a foreign purchaser will often include foreign natural
persons, foreign companies and foreign trusts, as defined under the relevant
legislation.
Failing to lodge documents for stamping

[26.140] If documents have not been lodged for stamping and consequently
duty is unpaid, the consequences include:
• interest and penalty tax may apply to the late lodgement;
• the document that effects a dutiable transaction may not be presented
as evidence in civil court proceedings (exceptions apply); and
• the registration of ownership of the dutiable property is prohibited.
The process for lodging and stamping documents is changing with the move
to electronic lodgement systems. For example, in Victoria, a Digital Duties
Form became compulsory for all transactions from 1 October 2018. This
works in conjunction with the move to electronic lodgement of conveyancing
transactions in Victoria.
Example 26.6: Failing to stamp documents

Jacqueline purchased a home in Victoria on 1 March 2018. On settlement
one month later, she handed over moneys to the seller (the vendor) for
the purchase price and in return, the seller provided Jacqueline with a
signed “Transfer of Land” form (the Form). The Form constitutes a dutiable
transaction upon which duty is payable. Jacqueline takes the Form to the
Land Victoria Office to register her name as the registered proprietor of
the home on the property Title.
The Land Victoria Office is unable to register Jacqueline’s interests in the
home as the Form is unstamped. Jacqueline will need to first lodge the
Form with the Victorian State Revenue Office to have the Form assessed
and to pay the transfer duty, and second, lodge the Form at the Land
Victoria Office to have her name registered as the new proprietor of
the home.

Duty concessions and exemptions

[26.150] Each jurisdiction provides duty concessions and exemptions aimed
to subsidise certain taxpayers, activities or assets.
26: State taxes [26.154] 923
Concessions
[26.152] Some of the common duty concessions include:
• Principal place of residence (PPR): Concessional rates of duty may
apply on the acquisition/ownership of a home which is used as a PPR.
The availability of the concession is based on the value of the PPR not
exceeding a certain threshold.
• First home purchase: To assist with affordability for first home buyers,
a reduction in duty is available in most jurisdictions when certain criteria
are met (eg, home is used as a PPR). An example is the first home
buyer assistance scheme in New South Wales where the purchase
of an existing home valued up to $650,000 is exempt from transfer
duty, and duty concessions exist for an existing home valued between
$650,000 and $800,000. From 1 August 2020, higher threshold levels
of $800,000 and $1 million apply to new homes. Victoria has similar
measures, where a transfer duty exemption is available for a home
valued up to $600,000, and duty concessions for a home between
$600,001 and $750,000.
• Regional land: Victoria introduced a new concession from 1 July 2019
for purchases of land and land use entitlements used for commercial,
industrial or extractive industries, where the land is located in one of
the listed regional council areas or in one of the alpine resort areas.
The concession is a 10% reduction in the duty payable for the 2019–
2020 year and a 20% reduction for contracts entered into between 1
July 2020 and 31 December 2020. As part of the package of COVID-19
measures, the proposed phase-in to reach 50% for contracts entered

into on or after 1 July 2023 has been moved forward and will apply to
contracts entered into from 1 July 2021.
Exemptions
[26.154] An exemption from duty results in no duty being applied in respect
of a dutiable transaction. The documents evidencing an exempt transaction
are still required to be assessed and stamped “exempt”. The Australian Capital
Territory has abolished stamp duty in relation to commercial property valued
at $1.5 million or less from 6 June 2018. Certain categories of landowners are
usually exempt from duty, such as charities and public hospitals and primary
producers. Other common exemptions include:
• Spouses: Transfers of certain dutiable property between spouses and
domestic partners are exempt from duty. For example, in Victoria from
1 July 2017, a transfer of a PPR is exempt from duty, subject to the
transfer being for no consideration and at least one spouse must live
in the PPR continuously for 12 months commencing within 12 months

from the date of the transfer. Transfers of non-PPR property between
spouses and domestic partners are no longer exempt in Victoria (from
1 July 2017). However, transfers of dutiable property between spouses
and domestic partners remain exempt where they are a result of
relationship breakdown.
• Deceased estates: A transfer of dutiable property from an executor or
legal personal representative to a beneficiary to satisfy any entitlements
arising pursuant to a will of a deceased or in an intestacy may be
exempt from duty or subject to only a concessional duty ($50 in New
South Wales).
• Corporate reconstructions: Transfers of dutiable property between
eligible members of a corporate group may also be exempt from duty
when certain conditions are met.
COVID-19 relief measures

[26.155] In response to the COVID- 19 crisis, a few jurisdictions have
instituted temporary transfer duty concessions. For one year from 1 August
2020, in New South Wales, the threshold above which transfer duty will be
charged on new homes for first home buyers has increased from $650,000 to
$800,000, with the concession reducing on higher values before phasing out
at $1 million, and the stamp duty threshold on vacant land has been raised
from $350,000 to $400,000, phasing out at $500,000. The Australian Capital
Territory has instituted a temporary stamp duty concession for sales of vacant
residential land and off-the-plan units. Victoria has brought forward a 50%
stamp duty discount for commercial and industrial property across regional
Victoria from 1 January 2021 (the original date of effect was to have been
1 July 2023).
Landholder duty
[26.160] Prior to landholder duty, the jurisdictions had land- rich duty
which was introduced as an anti-avoidance mechanism. Taxpayers could
gain control of land by acquiring the shares in a company that owned land
or acquiring the units in a unit trust that owned land. As the ownership of
the land itself remained unchanged, there was effectively no trigger of the
conveyance rates of duty. Instead, taxpayers would have been liable only
to the now former marketable securities duty (also formerly known as share
transfer duty) which attracted a significantly lower tax rate (eg, in New South
Wales, marketable securities duty was at a rate of 0.6% when it was abolished
on 1 July 2016).
Jurisdiction Landholding threshold

Queensland $2 million or more of Qld land.
Any interest in residential or primary production
South Australia
SA land.
Tasmania $500,000 or more of Tas land.
Victoria $1 million or more of Vic land.
Western Australia $2 million or more of WA land.
“Land” takes a broad definition and includes and is not limited to buildings, fixtures
to the land and easements (a right to use land without owning it). Jurisdictions also
have a statutory definition of “landholder” which can include holding rights that
enhance the value of land: for example, see s 167 of the Duties Act 2001 (Qld).
By way of example, in New South Wales the relevant value is the unencumbered
value of the interest in land and this includes anything fixed to the land whether
or not such items are fixtures at law (before 24 June 2020 the relevant value was
the unimproved value of the land). The entities subject to the landholder regime
encompass many different types of entities, including private companies and
private unit trusts. This differs to the treatment of land owned by a partnership,
where the transfer of a partner’s interest in the partnership is at law the transfer
of an equitable chose in action and not a transfer of any interests in the land held
by the partnership (and therefore not dutiable): Commr of State Revenue (Vic) v
Danvest Pty Ltd [2017] VSCA 382. However, the effect of this decision has been
overridden in Victoria by recent amendments so that each partner is, for duty
purposes, considered to hold a beneficial interest in each item of partnership
property that corresponds to the partner’s partnership interest: s 3H of the

Duties Act 2000 (Vic). This issue may also be dealt with by treating an interest
in a partnership that is holding dutiable property as itself dutiable property: see
s 11(1)(i) of the Duties Act 1997 (NSW). The nature of the interest of partners
in partnership property was recently revisited by the High Court: Commr of
State Revenue (WA) v Rojoda Pty Ltd [2020] HCA 7. In that case, a partner
holding assets on behalf of a partnership that had been dissolved but not yet
fully wound up made a declaration of trust to the effect that the property would
be held on trust for the benefit of the partners in shares reflecting their shares
in the partnership. The High Court concluded that the nature of the equitable
interests that partners hold in partnership property is distinguishable to the
interests of beneficiaries under a fixed trust and, as a result, this was a dutiable
transaction.
The appropriate method for valuing land, other assets and goodwill in order to
determine if a company is a landholder was recently considered by the High
Court in Commissioner of State Revenue (WA) v Placer Dome Inc [2018] HCA
26: State taxes [26.200] 929
• the acquisition when aggregated with existing interests or with the interests
held by “associated persons” (eg, related persons such as relatives being
children, brothers, parents) amounts to a significant interest.
Example 26.9: Acquisition of significant interest by aggregation

Juliet owns 30% of the units in a private unit trust, which owns $5,000,000
of land located in New South Wales. The private unit trust is therefore a
landholder in New South Wales.
Juliet purchased a further 10% of the units in the unit trust and, at the
same time, Juliet’s son Matthew purchased 10% of the units in the same
trust. Juliet would be deemed to have acquired a “significant interest”
in the trust of 50% by aggregating her original interest of 30% with
her purchase of 10% and her son’s interest of 10% (her son being an
associated person).

A relevant acquisition could also be triggered when a person or entity that

already holds a “significant interest” acquires a “further interest” in the
landholder entity. The value of the “further interest” acquired would be subject
to duty.
Concessions and exemptions are available in limited circumstances in relation

to an acquisition of a significant interest or a further interest. For example, if
the acquisition of the land itself could have been exempt from duty, then the
acquisition of the significant interest may similarly be exempt.
Other duties
[26.200] This chapter has focused on the two duties that relate to transfers of
dutiable property. The jurisdictions impose other forms of duties on different
types of transactions and assets. Examples of other types of stamp duties are
outlined below, although with the exception of motor vehicle duty, they do not
all still apply in all jurisdictions.
• Motor vehicle duty. Such duty is imposed upon the first registration
of a motor vehicle, upon the transfer of registration of a motor vehicle
to another person, and upon certain imported second-hand vehicles
in certain jurisdictions. The motor vehicle duty rates and thresholds
vary between jurisdictions. As with transfer duty, exemptions and
concessions may be available. In the Australian Capital Territory, the
rate of motor vehicle duty varies with the environmental performance of
the vehicle, with environmental leading-edge models exempt from duty.
• Lease duty. Such duty, as payable upon the “rent” of a lease, has
been abolished in all jurisdictions. Officially while not “lease duty”,
some jurisdictions (eg, New South Wales, Northern Territory and the
26: State taxes [26.230] 931
Landholder
[26.220] The liability to land tax is ordinarily imposed annually on the
“owner” of land. The owner is ordinarily the registered proprietor on the title
of the property. Each jurisdiction has their own statutory definition of what
constitutes an “owner”. The statutory definition widens the tax base, as it may
include persons entitled to possess the land, whether jointly or severally; a
person who is entitled to receive rents and profits from the land; or certain
beneficiaries of trusts. Possession of land also extends to “de facto possession”
which occurs when a purchaser of land has physical control of the land while
not yet having a legal right to possess the land due to the contract of sale being
uncompleted: Kameel Pty Ltd v Commissioner of State Revenue (Vic) [2016]
VSCA 83.
The “owner” of land may include persons entitled to land under a Crown lease
(s 10 of the Land Tax Act 2005 (Vic)). In the case of Living & Leisure Aus Ltd
v Commissioner of State Revenue (Vic) [2018] VSCA 237, the Court of Appeal
held that rights granted under the Alpine Resorts Act 1983 (Vic) were sufficient
for these purposes even though the leases included public access provisions.
Taxable value of land

[26.230] The “owner” of the land is charged land tax based on the “taxable
value” of their landholdings, when the landholdings at a particular point in
time exceed a jurisdiction-specific threshold. Some jurisdictions use different
names for “taxable value” such as “land value” in Tasmania; however, the
concept remains the same.
The “taxable value” is based on the value of the land, which is usually the site
value/unimproved capital value (ie, excludes capital improvements such as the
value of any building on the land). This value is provided by the respective
state valuation offices (such as the Valuer General) or municipal councils. It is
not the market value of the property (ie, the amount the property would sell
at arm’s length). If a landholder is dissatisfied with the valuation, they must
lodge their objection with the valuer. Table 26.5 lists the relevant point in time
in which landholdings are counted for the impost of land tax and the “tax-free”
thresholds for some jurisdictions as available at time of writing.
Each jurisdiction has its own method to calculate “taxable value”. For example,
Victoria uses the site value: s 19 of the Land Tax Act 2005 (Vic). New South
Wales uses the average land value from the current tax year and the previous
two tax years: ss 9 and 9AA of the Land Tax Management Act 1956 (NSW).
The “taxable value” is assessed by the respective revenue authorities and not
by the landholder itself. If landholders are dissatisfied with the “taxable value”
provided, they are able to raise an objection within the time limits specified in
each jurisdiction.
Table 26.5 Point in time land value is measured and general “tax-

free
thresholds”
Jurisdiction Date and time “Tax-free threshold”

New South
1 July $734,000 for 2020 calendar year
Wales
$599,999 for individual residents; $349,999 for
Midnight on 30 companies, trustees and absentees (people
Queensland
June who do not usually live in Australia) for 2019–
2020 financial year
Midnight on 30 $450,000 for 2020–2021 financial year; $25,000
South Australia
June for trusts
Tasmania 1 July $24,999 for 2020–2021 financial year
Midnight on 31 $249,999 ($24,999 for trusts: see [26.270]) for
Victoria
December 2020 calendar year
Western Midnight on 30
$300,000 for 2020–2021 financial year
Australia June
The land tax liability is levied on the “owner” for the forthcoming calendar
or financial year, depending on the jurisdiction. For example, in Victoria, the
“owner” of a parcel of taxable land as at midnight on 31 December 2019 will
be levied with land tax for the 2020 calendar year. Similarly, in Queensland, the
“owner” of a parcel of taxable land as at midnight on 30 June will be liable for
land tax for that financial year.
Aggregation of landholdings
[26.240] The land tax rates are progressive in every land tax jurisdiction: see
Appendix for some land tax rates. Land tax is assessed upon the total (ie,
aggregate) land holdings of a taxpayer in a particular jurisdiction. Where an
“owner” of a parcel of land holds more than one parcel (whether solely or
jointly), the total taxable value of all landholdings of that owner in respect of the
same jurisdiction will be aggregated. This ensures taxpayers do not obtain the
benefit of lower tax rates by holding multiple lower value properties.
Example 26.10: Aggregation
Diane owns three parcels of land. The first two parcels are in Victoria
and the third is in New South Wales. The taxable values of the land
are $350,000, $200,000 and $700,000, respectively. The taxable value
of Diane’s Victorian landholdings is $550,000 and of New South Wales
landholdings is $700,000. Land tax liabilities will be calculated on these
values in Victoria and New South Wales, respectively.

added to the value of other landholdings for each owner, upon which land tax
will be assessed. Each jurisdiction uses a specific formula or process in which
they calculate the land tax liability of owners that hold joint land. For example,
Victoria also assesses each combination of joint owners as if they were one
person.
Surcharge rates
Ownership of land by trusts in Victoria and South Australia
[26.270] We have considered the aggregation of landholdings and the
grouping of related corporations. The common purpose of these provisions
is to ensure that taxpayers are assessed on all their landholdings at the
jurisdiction-specific progressive tax rates. In 2006, Victoria introduced special
rules that apply to trusts. These rules, contained in Div 2A of Pt 3 of the Land
Tax Act 2005 (Vic), were enacted because landholders achieved the benefit
of the lower progressive tax rates by owning land in multiple trusts, albeit the
trusts were related (eg, use of the same trustee). There are no provisions to
group related trusts, unlike in the case of corporations. South Australia has
recently introduced a similar regime, with effect from the 2020–2021 financial
year. The rules have two consequences:
1. Trustees (as the legal owners) of certain types of trusts that own Victorian
or South Australian land are assessed at surcharge land tax rates. This
is effectively 0.375% higher than the general rates for Victoria and 0.5%
higher for South Australia when landholdings are valued over $25,000.
A phase out of the Victorian surcharge rate applies for landholdings

valued between $1.8 million and $3 million, so that over $3 million the
surcharge rate is the same as the general rate. In South Australia, the
rates are aligned once the value of the land exceeds $1,350,000.
2. The impost of land tax starts when the taxable value of landholdings
is $25,000 or greater. This is a deviation from the general land tax-free
threshold in Victoria of $250,000 and in South Australia of $450,000.
The surcharge rates are not imposed when a trust is an “administration trust”
(eg, deceased estate but only for up to three years), “excluded trust” (eg,
charitable trust) or the land is held in a discretionary trust and used as a PPR
by a beneficiary.
Absentee/foreign  owners
[26.275] In Victoria and Queensland, a land tax surcharge applies to taxable
land owned by “absentee owners”. For the surcharge of 2% (up from 1.5%
in 2020) to apply in Victoria, there is a further threshold requirement that
26: State taxes [26.282] 935
the taxable value of the absentee’s land is $250,000 or greater. For the 2%
surcharge to apply in Queensland, the threshold is $350,000. The definition
of an “absentee owners” varies in each jurisdiction. However, broadly, an
individual will be an “absentee owner” if they were away from Australia for
more than six months in the preceding land tax year unless they are a citizen,
permanent visa holder or ordinarily reside in Australia.
A surcharge of 0.75% applies in the Australian Capital Territory to foreign

owners of residential land from 1 July 2018 (unless the land is the foreign
owner’s PPR). New South Wales has a similar surcharge land tax that is applied
to foreign persons who own residential New South Wales land. The surcharge
is 2% from the 2018 land tax year onwards. A special PPR exemption operates
in relation to the surcharge and has separate requirements, including that the
owner uses and occupies the home as a PPR for a continuous period of at least
200 days in the land tax year.
Vacant residential land tax in Victoria

[26.278] From 1 January 2018, residential dwellings in certain areas of
Melbourne that are unoccupied for more than six months in the preceding
calendar year are subject to a vacant residential land tax of 1% of the capital
improved value of the land (so the value of the land and buildings). There
are exemptions from the vacant residential land tax, for example, when the
property is used as a holiday home and occupied by the owner for at least four
weeks in the preceding calendar year, provided that the owner has a different
PPR in Australia.
Exemptions and concessions

[26.280] Each jurisdiction has land tax exemptions and concessions in their
respective land tax legislation. When satisfied, the taxable value of the land may
be wholly or partly reduced. The common exemptions are the PPR exemption
and primary production exemption. In the Australian Capital Territory, from 1
July 2018, land tax is only imposed on residential land that is not used as a PPR
of one of the owners (ss 9 and 11A of the Land Tax Act 2004 (ACT)).
Principal place of residence

[26.282] The general rule is that land used as an individual’s PPR is exempt
from land tax regardless of the value or size of the land. To be eligible for
this exemption, in most jurisdictions, the PPR must have the characteristics of
residential property (eg, a home) and be owned by natural person(s), and those
persons must reside in the PPR for a particular minimum length of time.
Ordinarily, only one PPR can be exempt, but the exemption may be extended
for other reasons. For example, two homes may be exempted when the
landholder is in the process of changing their PPR.
Where land is used partly as a PPR and partly for business activities, the full
exemption may be reduced to a partial exemption. For example, in South
Australia, when business activities comprise between 25% and 75% of the
total floor area of all buildings on the PPR, a partial exemption is applied: s 5 of
the Land Tax Act 1936 (SA).
Example 26.12: Principal place of residence –partial exemption

Joseph is the registered owner of his private home in South Australia.
The building on the land in which Joe resides has the characteristics of a
residential home. Joseph uses 30% of the total floor space of his home
for his private architectural consulting business. In such circumstances,
Joseph will be entitled to receive a partial PPR land tax exemption. The
taxable value of his land will be reduced by 70%.

Primary production exemption

[26.284] Land used for primary production (eg, agriculture, poultry and dairy
farming) is generally exempt from land tax. The specific definition of “primary
production” for land tax purposes varies as the landscape of each jurisdiction
differs.
In South Australia, the land must be at least 0.8 hectares and used for a primary
production business. New South Wales has rules that extend the exemption
to non-rural areas but only where additional criteria are met, such as where
the land is used mainly for primary production and the use has a significant
commercial purpose or character. An example of a qualifying use is when
the dominant use of the land is for “cultivation, for the purpose of selling the
produce of the cultivation”: s 10AA of the Land Tax Management Act 1956
(NSW); Chief Commissioner of State Revenue v Metricon Qld Pty Ltd [2017]
NSWCA 11; Leppington Pastoral Co Pty Ltd v Chief Commissioner of State
Revenue [2017] NSWSC 9.
Other exemptions
[26.286] Jurisdictions have other exemptions available when land is used for
certain purposes, such as land used primarily as a boarding house or other low
In Western Australia, an additional tax called the Metropolitan Region

Improvement Tax (MRIT) applies when land tax is levied on an “owner” in
respect of taxable land and the land is situated in the metropolitan Perth area.
The rate of the MRIT is 0.14 cents per dollar of the aggregated taxable value of
the land above $300,000.

[26.295] In response to the COVID-19 crisis, a measure common to Victoria,
New South Wales, Queensland, South Australia, Tasmania and the Australian
Capital Territory is a partial waiver of land tax where the property owner is
providing the tenant with rent relief. Eligible owner-occupiers can also qualify
for land tax relief in many states and deferrals have been made broadly
available. Victoria has also waived the 2021 Vacant Residential Land Tax for
properties in inner and middle Melbourne that were vacant in 2020 for more
than six months.
Payroll tax
[26.300] Payroll tax is imposed on employers when their costs of remunerating
employees and payments to certain contractors that provide labour are above
a particular threshold. As a state tax, the power to impose payroll tax rests with
the individual jurisdictions; however, unlike the other taxes discussed in this
chapter where significant variations can exist from jurisdiction to jurisdiction,
the concepts of payroll tax are in principle similar. The reason for the uniformity
is due to the harmonisation of payroll tax legislation which commenced in
2007. Since then, jurisdictions have enacted in substance identical legislation,
although some minor differences continue to exist such as different tax rates,
thresholds and exemptions. Some revenue authorities have adopted the same
secondary sources of law (eg, rulings), albeit “rebadged” for their jurisdiction.
The relevant payroll tax legislation for each jurisdiction is as follows:
Jurisdiction Legislation
Australian Capital Territory Payroll Tax Act 2011 (ACT)
New South Wales Payroll Tax Act 2007 (NSW)
Northern Territory Payroll Tax Act 2009 (NT)
Queensland Payroll Tax Act 1971 (Qld)
South Australia Payroll Tax Act 2009 (SA)
Tasmania Payroll Tax Act 2008 (Tas)
Victoria Payroll Tax Act 2007 (Vic)
Western Australia Pay-roll Tax Act 2002 (WA)
Pay-roll Tax Assessment Act 2002 (WA)
a PPR, the taxing right is allocated to the jurisdiction where the employer has
its Australian Business Number registered address.
Rates and thresholds

[26.330] Each jurisdiction maintains its own payroll tax rates and tax-free
(maximum deduction) thresholds. For the period 1 July 2020 to 30 June 2021,
these are as follows:
Jurisdiction Rate (%) Annual threshold
Australian Capital 6.85 $2,000,000
Territory
New South Wales 5.45 $1,000,000
Northern Territory 5.5 $1,500,000
Queensland 4.75 (4.95 for larger employers) (3.75 $1,300,000
for regional employers)
South Australia Up to 4.95* $1,500,000
Tasmania 4 or 6.1** $1,250,000
Victoria 4.85 or 2.02 for regional employers $650,000
from 1 July 2020
Western Australia 5.5*** $1,000,000
* In South Australia, from 1 January 2019, payrolls below $1.5 million are exempt
and the rate gradually increases from 0% to 4.95% for taxable wages between
$1.5 million and $1.7 million.
** In Tasmania, the rate of 4% applies to employers with taxable wages between

$1.25 million and $2 million and the rate of 6.1% applies to wages above $2 million
(from 1 July 2018).
*** From 1 July 2018 until 30 June 2023, payroll tax in Western Australia will be
calculated on a tiered rate scale with a top marginal rate of 6.5% applying to wages
of more than $1.5 billion. The annual threshold rises to $1 million on 1 January 2021.
The “maximum deduction” amounts in Queensland and the Northern Territory

are reduced by $1 for every $4 over the threshold. The impact of this reduction
sees employers being fully liable to payroll tax on all taxable wages when
their annual Australia-wide taxable wages cost is $6.5 million in Queensland
and $7.5 million in the Northern Territory. Similarly, Western Australia has
a “gradual diminishing tax-free threshold”. The threshold amount is phased
out on a pro-rata basis for annual taxable wages between $1,000,000 and
$7.5 million.
The annual threshold is pro-rated when an employer has taxable wages in more
than one jurisdiction based on the percentage of taxable wages in a jurisdiction
over total Australia-wide taxable wages. For example, if an employer has
26: State taxes [26.350] 941
taxable wages of $500,000 in Victoria and $500,000 in New South Wales, the
employer will be entitled to claim half of the threshold in each jurisdiction.
The threshold is also adjusted if the employer did not employ staff for the full
period.
There is a requirement to register for payroll tax, generally within seven

days from the end of the month when an employer’s taxable wages exceeds
a monthly threshold. This is broadly calculated by the annual threshold,
divided by 12. Some jurisdictions (eg, Queensland) have a weekly threshold.
An annual adjustment is made upon lodgement of the final payroll tax return
for the year.
Example 26.14: Calculation of payroll tax liability

A Victorian employer pays wages of $75,000 in the month of January
2021 for services performed wholly in Victoria. The employer has not
paid wages in any other jurisdiction. The monthly threshold in Victoria
is $54,166 (being, $650,000 divided by 12). The employer’s payroll tax
liability for January 2021 will be:
($75,000 − $54,166) × 4.85% = $1,101.45.

Rebates
[26.340] Payroll tax rebates apply in certain circumstances. For example,

certain jurisdictions allow a payroll tax rebate for employers hiring apprentices
and trainees. In Queensland, the rebate is currently calculated as 50% of
wages paid to apprentices and trainees then multiplied by the payroll tax rate.
The wages paid to the apprentice and trainee are also generally exempt from
payroll tax.
Grouping
[26.350] The grouping provisions are integrity measures designed to prevent
employers from avoiding their payroll tax liabilities. As discussed in [26.310]
and [26.330], a liability to payroll tax arises when the employer’s taxable
wages in a particular jurisdiction exceeds a “tax-free” threshold amount. To
receive the benefit of the threshold amount, an employer might use multiple
entities to employ its employees, where each entity paying “taxable wages”
takes advantage of the threshold amount. The grouping provisions counteract
this behaviour by treating multiple entities as a single employer in certain
circumstances.
The key consequences of treating a group as a “single employer” are:

• the “taxable wages” of each entity are added together and payroll tax
is based on the total wages of the group;
• the group is entitled to one threshold amount; and
• each group member remains individually responsible to lodge their
own payroll tax return from an administrative perspective; however,
each group member is jointly and severally liable for the payroll tax
liability of each other. In some states, such as New South Wales, one
member of the group may nominate to be the group single lodger.
The circumstances in which entities may be grouped may vary in each
jurisdiction. Examples of the common situations in which grouping may occur
are when they are “related bodies corporate” under s 50 of the Corporations
Act 2001 (Cth), they use common employees between businesses or the same
person or persons have controlling interests in the businesses. In this context,
“person” includes natural persons, trustees and companies. For example, see
Corrosion Control Engineering (NSW) Pty Ltd v Chief Commissioner of State
Revenue [2017] NSWCATAD 20.
Example 26.15: Common employees used
“Service Pty Ltd employs Sam to perform duties solely for another
business, Receipt Pty Ltd, operating out of the same block of offices. Sam
takes instruction from Receipt Pty Ltd and receives and distributes goods,
answer phone calls and responds to general requests from Receipt Pty
Ltd. In this case, Receipt Pty Ltd and Service Pty Ltd are grouped”.
Source: Office of State Revenue (Qld) (website)


[26.355] In response to the COVID-19 crisis, all jurisdictions have waived
payroll tax on wages subsidised by the Commonwealth’s JobKeeper program,
though some of the details of the schemes differ, and many jurisdictions have
provided a general payroll tax waiver for smaller employers and deferrals
for medium- size employers. Some states have also extended payroll tax
concessions to specific, harder effected industries: Tasmania has provided a
payroll tax waiver for the hospitality, tourism and seafood industries and the
Australian Capital Territory has provided a deferral for the construction industry.
Western Australia and New South Wales brought forward the effective date for
the raising of the payroll tax threshold to $1 million.
Kay classifying them as “independent contractors”. The issue before the

Court was whether the consultants were true independent contractors,
in which case the commissions would not constitute “wages” for payroll
tax purposes.
The sales technique used by the consultants involved a “party plan
system”. The system involved a beauty consultant showing the products
to a customer. The customer would organise a function inviting their
friends or contacts. At the function, the beauty consultant showcased the
beauty products and made sales.
The Court held that the beauty consultants were independent contractors.
Its decision focused on the lack of control by Mary Kay over the
consultants. The consultants were considered “independent” in the sense
that Mary Kay could not direct them to perform any specific tasks and
the consultants were free to run their own operations, akin to separate
businesses. Although a manual was provided to all consultants, this
was seen as merely providing suggestions rather than requiring that the
business be carried out in a particular way. It was also relevant that the
consultants were able to delegate work to others and financially incurred
the
costs of their own business activities.
Example 26.16: Ability to exercise control over an employee

“A project management firm engages a worker as a site supervisor. The

site supervisor is responsible for overseeing all things that happen on-
site. In this example, the site supervisor could be either a professional
or a highly skilled or experienced tradesperson. The general manager
of the firm may not have the technical skills and experience to tell the
site supervisor how to actually go about performing the work. However,
the project management firm may be able to control or direct the site
supervisor in relation to the general nature of the work to be undertaken,
as well as incidental or collateral matters such as the hours of their
attendance at the work site, the records they must maintain and the
format of any progress reports”.
In this example, the firm’s ability to exercise control in this context
suggests an employer/ employee relationship, rather than that of a
principal/independent contractor.
Source: Commissioner of State Revenue (Qld), Public Ruling PTA038.1

26: State taxes [26.368] 945
Contractual relationship
[26.364] An individual that is contracted to provide labour services is more
likely to be considered an employee. This could be evidenced by employment
agreements which specify rates of pay, defined working hours and leave
entitlements.
In contrast, an independent contractor is usually engaged to produce a given

result for a prescribed payment. Importantly, a contractor may possess the right
to subcontract work to others. Where this occurs, a contractor is responsible
for the work and payment of the subcontractor: Australian Air Express Pty
Ltd v Langford [2005] NSWCA 96; (2005) 147 IR 240. This right to delegate
can be distinguished from an employment arrangement, where an employee
may request assistance from a colleague, or a boss may delegate work to a
subordinate.
Example 26.17: Contractual relationships and right to delegate

Georgia is seeking to purchase a new computer with particular high-
performance specifications. The computer specifications Georgia seeks
are not available in the shops and she engages Harry to build the computer
for her. Harry charges Georgia on an hourly rate of $200 per hour and
Harry estimates he will take three hours to build the computer. Harry
asks his friend Kane to install the software on the computer once the
hardware is assembled. While Harry is paid on a per hour basis, the fact
that Harry provides a job estimate and is able to delegate tasks to external
parties indicates an independent contractor relationship between Georgia

and Harry.

Risk
[26.366] An employer would normally possess insurance policies covering
risks associated with work or work-related matters (eg, professional indemnity).
Consequently, an employer is ordinarily liable and responsible for the way in
which work is carried out, and for the end output of an employee. Conversely,
an independent contractor would normally be liable for these same risks and
possess their own relevant insurance policies.
Tools and equipment

[26.368] An employer normally engages an employee for their labour. As
such, an employer would normally provide any tools and equipment required
to carry out expected tasks, as assigned. However, an independent contractor

is ordinarily responsible for supplying their own tools and equipment, as
necessary to carry out the task for which they have been engaged.
Other indicia
[26.369] The courts have noted that other relevant factors to consider in the
context of ascertaining whether an employment relationship exists, or one of
principal/independent contractor, include whether:
• the individual is integrated with the business (eg, wearing the uniform
of the business) or operates separately;
• PAYG withholding is deducted from pay and superannuation
entitlements paid; and
• the individual can set their own hours of work and place of work.
Case study 26.2: Employee

The case of Hollis v Vabu Pty Ltd involved a bicycle courier engaged
by Vabu (operating under the business name “Crisis Couriers”) that by
his negligence injured Hollis. If the bicycle courier was an employee of
Vabu, then Vabu would be liable for the courier’s negligence, and if an
independent contractor, the courier would be liable.
The High Court assessed the totality of the relationship between the
courier and Vabu and held that the courier was an employee. Particular
emphasis was placed on the fact that the couriers were not independent
in terms of not providing any specialist skill that would allow any one
courier to generate goodwill; Vabu controlled the manner in which they
worked; Vabu managed the finances of the couriers; and the couriers
were “integrated” into Vabu’s business as they wore uniforms. It was
noted by the High Court that the couriers were required to provide and
maintain their own bicycles, being their tools of trade, but Vabu provided
the radios and uniforms. The High Court also noted that the cost of the
bicycles was a relatively small capital outlay and that the bicycles could
be
used for private purposes.
Contractor provisions
[26.370] If a principal/independent contractor relationship exists and the
contract is a “relevant contract”, the contractor is deemed to be an “employee”
26: State taxes [26.380] 947
and payments made to the contractor/deemed employee will form “taxable

wages” of the deemed employer.
A “relevant contract” is defined in the payroll tax legislation and includes where
a person is carrying on a business and supplies or is supplied with services
in relation to the performance of work: for example, s 32 of the Payroll Tax
Act 2007 (Vic). The concept of “relevant contract” may also pick up contracts
where a natural person is supplied with goods which must be re-supplied in
a modified form to the business. The definition of a “relevant contract” has
an intentionally broad scope as it aims to capture all payments for labour
provided by a contractor where the contractor is engaged and operates in a
way similar to an employee. Where the contractor provides materials as part
of the contract, only the labour component is considered a “wage” and is
subject to payroll tax. However, if the supply of services is merely ancillary to
the supply of goods, the contract will not be a relevant contract: Chief Commr
of State Revenue (NSW) v Downer EDI Engineering Pty Limited [2020] NSWCA
126 (regarding the delivery and installation of Foxtel services).
The amounts that are treated as wages are those amounts paid for or in relation
to the performance of work under the relevant contract. Whether this could
include distributions made by trustees to beneficiaries (where connected to
a relevant contract) was recently tested: Commr of State Revenue (Vic) v The
Optical Superstore Pty Limited [2019] VSCA 197. In that case, optometrists
provided eye examinations at optical centres owned or operated by the trustee
and the amount distributable to the optometrists was considered to be caught
by the contractor provisions. An expansive notion of the meaning of “paid” was
adopted by the Court and the case confirms that the use of trust relationships
may not alone be sufficient to avoid payroll tax.
Exemptions
[26.380] In certain circumstances, a “relevant contract” may be exempt and
consequently, the payment to the contractor will not be subject to payroll tax.
A selection of some of the other “relevant contract” exemptions is as follows:
• Certain types of services provided: an exemption applies where the
services are not normally required by a particular business and the
contractor provides the same services to the general public.
Example 26.18: Contractor providing services not normally required

Slick Refit Pty Ltd provides office fit out and refitting services. Under a
contract, a bank hires Slick Refit Pty Ltd to refresh and refit its office once
every five years. This contract is excluded from being a relevant contract
because the bank does not ordinarily require office refitting services. The
payments under this contract are not deemed wages that form part of the
bank’s payroll tax liability.
Source: State Revenue Office (Victoria), Contractors

• Ancillary labour: an exemption applies when goods, materials or

equipment are the main supply by a contractor and the labour is
ancillary and secondary in the contracting arrangement.
• Services provided for up to 90 days: an exemption is available where
the contractor does not provide the same or similar services to the
principal for more than 90 days in the financial year.
• Certain types of services required for less than 180 days: an exemption
applies to services normally required by the business for less than
180 days in a financial year.
Example 26.19: Type of services required by designate person less

than 180 days
A ski school operator in the Victorian snowfields engages numerous ski
instructors for 120 days during the snow season. There is no need for the
business to hire ski instructors outside of the snow season. As a result,
the contracts entered into between the ski instructors and the ski school
are not “relevant contracts” as their services are of a type required for less
than 180 days in a financial year by the ski school operator. Hence, the
payments to the ski instructors will not be subject to Victorian payroll tax.
Source: State Revenue Office (Victoria), Revenue Ruling PTA020

Exempt organisations
[26.390] Certain organisations paying wages to their employees are exempt
from payroll tax. These organisations may vary across each jurisdiction and
commonly include:
• non-profit organisations with a charitable, benevolent, philanthropic or
patriotic purpose (but not a school or other educational institution);
• public benevolent institutions;
• religious institutions;
• healthcare service providers; and
• municipal councils.
26: State taxes [26.400] 949
Questions
[26.400]
26.1 Calculate the transfer duty payable in respect of the following
transactions that occurred:
(a) Jack acquires a factory in New South Wales for $1,300,000,
together with plant and equipment having a value of $750,000.
(b) Mary acquires a beauty salon business in Victoria for $2,200,000,
comprising the following: land and buildings of $1,300,000,
goodwill of $700,000 and plant and equipment of $200,000.
(c) Simon is the registered owner of a rental property located in
Victoria. He marries Fiona and decides to have Fiona’s name put
on the title, together with his name, as joint tenants. The value of
the property at the time of transfer is $430,000.
26.2 Barry is a registered builder and decides to purchase shares in a private
company registered in Victoria (X Pty Ltd). X Pty Ltd holds land in both
Queensland and South Australia. The value of the land in those states
is as follows: Queensland: $10,300,000 and South Australia: $500,000.
The total number of shares issued in X Pty Ltd is 100 shares and Barry
acquires 60 shares in X Pty Ltd, by way of execution of a standard
transfer form.
Advise Barry of his landholder duty liabilities (including amounts
payable) (if any) in Queensland and South Australia.
26.3 Following on from question 26.2, Joseph is the brother of Barry.
Joseph’s step-father owned three units in a private unit trust. The total
number of units on issue in the unit trust is four. The other unit was
held by Joseph’s uncle. It was discovered, when Joseph’s step-father
passed away, that he had bequeathed his three units in the private unit
trust to Joseph. The unit trust had an extensive property portfolio in
Victoria, with total landholdings of $6,300,000.
Advise Joseph of his liability to Victorian landholder duty (if any),
including whether any relevant duty exemptions may be available
to him.
26.4 Calculate the land tax payable (if any), in respect of the following
landholdings and outline whether any relevant exemptions from land
tax could apply:
(a) Alison owns two farms located in rural New South Wales, being
for the predominant use of growing crops for commercial sale.
The taxable value of each farm site is $2,300,000 and $3,400,000,
respectively. Alison also owns her PPR in Surry Hills, New South
Wales, where she resides with her husband and child.
(b)
Prime is an approved aged care facility service provider which
owns and runs an aged care facility in Queensland. The taxable
value of the Queensland land owned by Prime totals $7,300,000.
Prime is an approved provider of these aged care facilities under
the Aged Care Act 1997 (Cth).
(c)
Z Co Pty Ltd, J Co Pty Ltd and K Co Pty Ltd are private companies.
Z Co Pty Ltd owns 100% of the issued shares of J Co Pty Ltd. In
turn, J Co Pty Ltd owns 60% of the issued share of K Co Pty Ltd.
The taxable values of the direct landholdings of each entity in New
South Wales are as follows:
• Z Co Pty Ltd: $2,300,000;
• J Co Pty Ltd: $600,000; and
• K Co Pty Ltd: $430,000.
Advise Z Co Pty Ltd as to its total New South Wales land tax liability.
26.5 Sarah is the owner of a private residential dwelling located in Tasmania
(Property A). The taxable value of Property A is $300,000. Sarah resides
in Property A as her PPR for one year (in 2017) and then buys another
residential dwelling in Tasmania (Property B), which she subsequently
uses and occupies as her PPR (in 2018). The taxable value of Property
B is $700,000. Sarah decides to keep Property A as an investment
property and rents out the property after she moves into Property B.
Advise Sarah as to her 2019 land tax liability in respect of Property
A and B.
26.6 Glen is a citizen of Country M but has many Australian customers for
his company’s products. As most of these customers are located in

Melbourne, Glen buys an apartment for $600,000 there that he stays
in when on business. Assuming that Glen stays in the apartment for
190 days in the current land tax year, what would be his land tax
liability? What difference would it make if the apartment is in Sydney?
26.7 Retail Therapy Pty Limited is in the business of running discount gift
shops. Its business model is to hold each shop in a separate subsidiary
and the shop assistants are employed by the subsidiary rather than
Retail Therapy. The average total wages paid by one of these shops
over the course of a year is only about $150,000 but there are 10 shops
across the state. In your jurisdiction, would Retail Therapy or any of the
shops have a payroll tax liability?
26.8 Simon is a consultant with Amcare, a global organisation that sells
products through its online store. Simon is paid by Amcare on
a commission basis (so a percentage of the value of goods sold to
Amcare customers) and works the days and times that suit him. He
is responsible for all personal costs in attending product information
26: State taxes [26.400] 951
evenings and travelling to customers. Simon uses the Amcare website

to showcase the products to customers.
Using relevant case law to support your answer, advise Amcare as
to whether commissions paid to Simon constitute taxable wages for
payroll tax purposes in your jurisdiction.
26.9 Midcity Electrical Services Pty Ltd has the contract to deliver and
install NBN equipment to customers of ATG Telecom, an Australian
telecommunications company and internet service provider. Midcity
hires contractors to deliver the equipment and undertake any necessary
installation services. Once a job has been logged, the contractor collects
the equipment from Midcity’s warehouse, travels to the customer’s
location, evaluates the current set-up, obtains the customer’s approval
to proceed, unpacks the equipment, installs cables if necessary,
connects and activates the wi-fi router, and explains to the customer
how the system works. Consider whether the payments made to the
contractors by Midcity in these circumstances would be subject to
payroll tax under the contractor provisions.
26.10 The economic impacts of the COVID- 19 pandemic have been
widespread and are continuing. What are some of the measures
that have been adopted by state and territory governments to assist
businesses to weather this crisis?
APPENDIX
Tax rates and tables
1. 2020–2021 income tax rates for Australian resident individuals
Taxable income Tax on this income

0–$18,200 Nil
$18,201–$45,000 19c for each $1 over $18,200
$45,001–$120,000 $5,092 plus 32.5c for each $1 over $45,000
$120,001–$180,000 $29,467 plus 37c for each $1 over $120,000
$180,001 and over $51,667 plus 45c for each $1 over $180,000
The above rates do not include the Medicare levy or the Medicare levy
surcharge.
Part-year residents can access a tax-free threshold of at least $13,464. Their

access to the remaining $4,736 of the full tax-free threshold is pro-rated.
2. 2020–2021 income tax rates for foreign resident individuals

Taxable income Tax on this income

0–$120,000 32.5c for each $1
$120,001–$180,000 $39,000 plus 37c for each $1 over $120,000
$180,001 and over $61,200 plus 45c for each $1 over $180,000
3. 2019–2020 Medicare levy low-income earner thresholds

(note: 2020–2021 figures not released at time of publication)
Threshold amount Phase-in limit
Individual entitled to the seniors and $36,056 $45,069

pensioners tax offset
All other taxpayers $22,801 $28,501
954 PRINCIPLES OF TAXATION LAW 2021
4. 2020–2021 Medicare levy surcharge
Income ($) Surcharge rate (%)

Singles Families*
0–90,000 0–180,000 0
90,001–105,000 180,001–210,000 1
105,001–140,000 210,001–280,000 1.25
140,000+ 280,001+ 1.5
* For families with more than one dependent child, the relevant threshold is
increased by $1,500 for each child after the first.
5. 2020–2021 rates for minor taxpayers
Division 6AA income Tax payable

$ $
0–416 Nil
417–1,307 66% of excess over 416
1,308+ 45% of entire amount
6. Personal tax offsets

• Dependant offset: 2020–2021 income year –the highest rate of the
existing tax offset that would apply (2020–2021: $2,816).
• Low income rebate: 2020– 2021 income year: The rebate is a

maximum of $700 reduced by 5.0 cents for every dollar of income
exceeding $37,500 and up to $45,000 and then reducing by
1.5 cents for every dollar of income exceeding $45,000.
• Low-and middle-income tax offset: 2020–2021 year:
(i) $255 for taxpayers with income up to $37,000;
(ii) $255 plus 7.5% of income exceeding $37,000 for taxpayers with
income of more than $37,000 and up to $48,000;
(iii) $1,080 for taxpayers with income of more than $48,000 and up to
$90,000; and
(iv) $1,080 less 3% of income exceeding $90,000 for taxpayers with
incomes greater than $90,000 up to $126,000.
• Senior Australians and pensioners tax offset: 2020–2021 income year,
senior Australians tax offset amount a maximum of $2,230 for singles
and $1,602 for each partner of a couple.
APPENDIX 955
• Zone rebate: 2020–2021, ordinary Zone A rebate amount $338 plus

50% of any applicable notional rebate for dependants; ordinary Zone
B rebate amount $57 plus 20% of any applicable notional rebate for
dependants; “special areas” of Zone A or Zone B rebate amount $1,173
plus 50% of any applicable notional rebate for dependants.
7. Private health insurance offset for 2020–2021
Status Income thresholds

Base tier Tier 1 Tier 2 Tier 3
Singles $90,000 or less $90,001– $105,001– $140,001 or more
$105,000 $140,000
Family* $180,000 or less $180,001– $210,001– $280,001 or more
$210,000 $280,000
Age Rebate percentage from 1 April 2020 to 31 March 2021 (%)
Under 65 years 25.059 16.706 8.352 0
65–69 years 29.236 20.883 12.529 0
70 years and over 33.413 25.059 16.706 0
* The family income threshold is increased by $1,500 for each dependent child after
the first child. The income thresholds are indexed annually.
8. Prescribed rates per kilometres for motor vehicle expense claims

From 1 July 2015, all motor vehicles, irrespective of their size, use the same
rate.
Year Cents per kilometre
2020–2021 72
2019–2020 68
9. Car depreciation limit per year

2020–2021 income year: $59,136
2019–2020 income year: $57,581
2018–2019 income year: $57,581
10. Indexation numbers for CGT calculations

Index reference base from 2011–2012 tax year:
Year Quarter ending
31 March 30 June 30 September 31 December
1985 37.9 38.8 39.7 40.5
1986 41.4 42.1 43.2 44.4
1987 45.3 46.0 46.8 47.6
1988 48.4 49.3 50.2 51.2
1989 51.7 53.0 54.2 55.2
1990 56.2 57.1 57.5 59.0
1991 58.9 59.0 59.3 59.9
1992 59.9 59.7 59.8 60.1
1993 60.6 60.8 61.1 61.2
1994 61.5 61.9 62.3 62.8
1995 63.8 64.7 65.5 66.0
1996 66.2 66.7 66.9 67.0
1997 67.1 66.9 66.6 66.8
1998 67.0 67.4 67.5 67.8
1999 67.8 68.1 68.7 N/A*
* Indexation frozen at 30 September 1999.
11. Improvement thresholds for pre-CGT assets

The improvement threshold is $50,000 indexed from 1985
Year ended 30 June 2021: $155,849
Year ended 30 June 2020: $153,093
Year ended 30 June 2019: $150,386
12. Preservation age for superannuation benefits
Preservation age (years) Date of birth

55 Before 1 July 1960
56 1 July 1960–30 June 1961
57 1 July 1961–30 June 1962
58 1 July 1962–30 June 1963
59 1 July 1963–30 June 1964
60 30 June 1964+
A person’s preservation age is dependent on their date of birth.
APPENDIX 957
13. Taxation of benefits paid from an untaxed fund: 2020–2021
Taxpayer is at Taxpayer is at less than Taxpayer is less than

least 60 60 but greater than preservation age
preservation age
Taxable $0–$1,565,000 $0–$215,000 is taxed at 17% $0–$1,565,000 taxed
component taxed at up to (including Medicare levy), at 32% (including
17% (including anything over $215,000 up Medicare levy), every
Medicare levy), to $1,565,000 taxed at 32% dollar in excess of
anything over (including Medicare levy), this taxed at 47%
this taxed at every dollar over $1,565,000 (including Medicare
47% taxed at 47% levy)
Tax-free Tax free Tax free Tax free
component
14. Taxation of benefits paid from a taxed fund: 2020–2021
Taxpayer is Taxpayer is at less than 60 but Taxpayer is less than

at least 60 greater than preservation age preservation age
Taxable Tax free $0–$215,000 is tax free, Taxed at up to 22%
component anything in excess taxed at 17% (including Medicare
(including Medicare levy) levy)
Tax-free Tax free Tax free Tax free
component
15. Account-based pension: Minimum annual withdrawal
Age Annual payment as a % of Reduced annual payment as a % of

account balance account balance for the 2019–2020 and
2020–2021 years
55–64 4% 2%
65–74 5% 2.5%
75–79 6% 3%
80–84 7% 3.5%
85–89 9% 4.5%
90–94 11% 5.5%
95+ 14% 7%
16. Taxed fund: Taxation of income streams: 2020–2021
Taxpayer is at Taxpayer is less than Taxpayer is less

least 60 60 but greater than than preservation
preservation age age
Taxable Tax free (s 301-10 Taxed at marginal tax Taxed at marginal
component of the ITAA 1997) rate less a 15% rebate tax rate
(s 301-25 of the ITAA
1997)
Tax-free Tax free (ss 301-15 Tax free (ss 301-15 and Tax free (ss 301-15
component and 301-30 of the 301-30 of the ITAA 1997) and 301-30 of the
ITAA 1997) ITAA 1997)
17. Untaxed fund: Taxation of income streams: 2020–2021
Taxpayer is at Taxpayer is less than Taxpayer is less than

least 60 60 but greater than preservation age
preservation age
Taxable Taxed at marginal Taxed at marginal tax Taxed at marginal tax
component tax rates less a 10% rates (s 301-110 of the rates (s 301-120 of the
rebate (s 301-100 of ITAA 1997) ITAA 1997)
the ITAA 1997)
Tax-free Tax free (ss 301-15 Tax free (ss 301-15 Tax free (ss 301-15
component and 301-30 of the and 301-30 of the and 301-30 of the ITAA
ITAA 1997) ITAA 1997) 1997)
18. Taxation of death benefits paid from a Superannuation

Fund: 2020–2021
Taxpayer is a Taxpayer is not a death benefit dependant

death benefit
dependant
Taxable Tax free (s 302-60 Capped at 17% including Medicare levy if from a
component of the ITAA 1997) taxed fund and at 32% including Medicare levy if
from an untaxed fund
(s 302-145 of the ITAA 1997)
Tax-free Tax free (s 302-60 Tax free (s 302-145 of the ITAA 1997)
component of the ITAA 1997)
APPENDIX 959
19. Redundancy payments: Non-assessable, non-exempt amount

per year
Category 2020–2021a Rate of tax $

Genuine redundancy 10,989 + (5,496 × years of Tax-free employment
• tax-free amount serviceb) termination payment
Early retirement scheme 10,989 + (5,496 × years of Tax-free employment
• tax-free amount serviceb) termination payment
a
Each monetary amount in the formula is indexed annually in accordance with
movements in average weekly ordinary time earnings.
b
Number of whole years in the period or periods of employment to which the
payment relates.
20. Taxation of ETP: 2020–2021
Agea of recipient Life benefit employment termination payment

Tax-free component Taxable componentb includes
Medicare levy
Preservation age or older Tax freed 17% – $0–$215,000
45% –$215,001+
Below preservation age c
Tax free d
32% – $0–$215,000
45% –$215,001+
a
Age is determined on the last day of the income year in which the person receives
the payment.
b
The entire taxable component of the life benefit termination payment is included
in the taxpayer’s assessable income and a tax offset applies to effectively cap the
maximum tax rate. Medicare levy of 2% may also be payable where a tax rate
greater than 0% applies.
c
Preservation age of 55 phasing to age 60 for those born after 1 July 1960.
d
Non-assessable, non-exempt income (ie, not counted in working out tax payable
on taxpayer’s other assessable income).
21. The super guarantee charge percentage (%)
Year Rate (%)

Current rate 9.50
1/7/2021 10.00
1/7/2022 10.50
1/7/2023 11.00
1/7/2024 11.50
1/7/2025 12.00
22. FBT statutory interest rates

1 April 2020–31 March 2021: 4.80%
1 April 2019–31 March 2020: 5.37%
1 April 2018–31 March 2019: 5.20%
23. Examples of effective life

Examples of the Commissioner’s determination of effective life from TR 2020/
3 (Table B)
Asset Effective life (years)
Art works (restricted to works of art and 100
reproductions of artwork that are tangible in
nature, such as paintings, sculpture, drawings,
engravings and photographs, that are
displayed in open viewing areas in premises
used for taxable purposes including reception
areas, waiting rooms and foyers)
Computers 4 (desktops); 2 (laptops, tablets)
Escalators 20
Motor vehicles (Cars) 8 (generally); 4 (taxis); 5 (rental
cars); 8 (hire cars used to provide
basic service ride-sourcing, etc);
6 (general hire cars including cars
used to provide premium ride-
sourcing, etc)
Office furniture
– Bookcases 15 (timber); 20 (metal)
– Chairs 10
– Desks 20
Mobile phone 3
Telephone systems 7
Television set 10
Vending machine 5
APPENDIX 961
24. Stamp duty –transfer (conveyance) duty rates for eastern

border states
New South Wales –General land transfer duty rates
Dutiable value Rate

$0–$14,000 $1.25 for every $100 or part of the value
$14,001–$31,000
exceeds $14,000
$31,001–$83,000
exceeds $31,000
$83,001–$310,000
exceeds $83,000
$310,001–$1,033,000
exceeds $310,000
Over $1,033,000
exceeds $1,033,000
Premium Property $155,560 + $7.00 for every $100 or part, that the value
Duty: over $3,101,000 exceeds $3,101,000
Sections 32 and 32A of the Duties Act 1997 (NSW).
Victoria: General non-PPR property transfer duty rates
Dutiable value Rate

$0–$25,000 1.4% of the dutiable value of the property

$350 + 2.4% of that part of the dutiable value that exceeds
> $25,000–$130,000
$25,000
$2,870 + 6% of that part of the dutiable value that exceeds
> $130,000–$960,000
$130,000
More than $960,000 5.5% of the dutiable value
Section 28 of the Duties Act 2000 (Vic).
Queensland –General land transfer duty rates
Dutiable value Rate

Up to $5,000 Nil
$1.50 for each $100, or part of $100, by which the dutiable
$5,001–$75,000
value is more than $5,000
$1,050 + $3.50 for each $100, or part of $100, by which
$75,001–$540,000
the dutiable value is more than $75,000
$540,001–$1,000,000
the dutiable value is more than $540,000
More than $1,000,000
the dutiable value is more than $1,000,000
Schedule 3 of the Duties Act 2001 (Qld).
25. Land tax rates for eastern border states

Victoria: General land tax rates for 2009–present
Landholding taxable value Rate

< $250,000 Nil
$275 plus 0.2% of the taxable value that exceeds
$250,000 to < $600,000
$250,000
$975 plus 0.5% of the taxable value that exceeds
$600,000 to < $1,000,000
$600,000
$2,975 plus 0.8% of the taxable value that exceeds

$1,000,000 to < $1,800,000
$1,000,000
$9,375 plus 1.3% of the taxable value that exceeds
$1,800,000 to < $3,000,000
$1,800,000
$24,975 plus 2.25% of the taxable value that
$3,000,000 and over
exceeds $3,000,000
Schedule 1, Table 1.4, of the Land Tax Act 2005 (Vic).
APPENDIX 963
New South Wales: General land tax rates for 2021
$100 + 1.6% of the amount by which the taxable

> $755,000–$4,616,000 value exceeds the tax threshold of $755,000 up to
the premium threshold of $4,616,000
$60,164 for the first $4,616,000 then 2% of the
> $4,616,000 and over
amount by which the taxable value exceeds the
(premium threshold)
premium rate threshold of $4,616,000
Section 3AL and Sch 13 of the Land Tax Act 1956 (NSW) and ss 62TBA and
62TBC of the Land Tax Management Act 1956 (NSW).
Queensland: Land tax rates for an individual owner (other than companies,

absentees and trustees for which different rates will apply)

< $600,000 Nil
$600,000–$999,999 $500 + 1.0c for each $1 more than $600,000
$1,000,000–$2,999,999 $4,500 + 1.65c for each $1 more than $1,000,000
$150,000 + 2.25c for each $1 more than
$10,000,000 or more
$10,000,000
Section 32 and Sch 1 of the Land Tax Act 2010 (Qld).

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Part

Separate to Commonwealth taxes, each of the states and territories of

GST-​free supply........................................................................................ [25.140]

• Registration for GST purposes is central to the imposition of GST, and

As discussed in Chapter 3, under the Federal Constitution, taxation laws must

Further, the imposition of tax must be dealt with in separate legislation. In

[25.20] Example 25.1 provides an overview as to the application of GST in

This chapter also briefly discusses the provisions regarding importations,

[25.40] Figure 25.1 provides a guide to dealing with GST.

A wide range of entities, including individuals, companies, trusts and

Certain activities, such as the provision of labour as an employee, a private

(s 9-​20(2)), while the activities of certain entities, such as charitable and

Registration turnover threshold

on an enterprise and provide ride-​sourcing services must register for GST,

The meaning of “annual turnover” is outlined in Div 188. An entity’s annual

Case study 25.1: Meaning of supply

grant by the taxpayer to the purchaser of contractual rights exercisable

Case study 25.2: Existence of a supply

only exclusion to the definition of “supply” is the supply of money or digital

supply of accounting services. Further, the accounting services would

In the course or furtherance of an enterprise

Connection to the indirect tax zone

Consequences of making a taxable supply

Example 25.6: Consequences of making a taxable supply

The price of the supply is equal to the consideration received, which in

The following items are listed in Div 38 as GST-​free supplies:

Some of the more common categories of GST-​free supplies are discussed in

• food specified in Sch 1 of the GST Act as not being GST-​free.

In addition, subdiv 38-​B also lists other government-​funded health services

In addition, excursions or field trips (s 38-​90), course materials (s 38-​95) and

Other GST-​free supplies

Broadly, child care is GST-​ free when provided by a registered carer, an

and will depend on the particular circumstances of the supply: see Ruling

Consequences of making a GST-​free supply

• school tuckshops and canteens: subdiv 40-​E;

Regulation 40.5.11, by reference to Sch 7 of the GST Regulations, provides a

Regulation 40.5.12 of the GST Regulations specifies the broad categories

• residential premises that are not commercial residential premises; or

provided in an office building, private hospital, residential care facility or a shop

“Commercial residential premises” is defined in s 195-​1 as:

“Commercial accommodation” is defined in s 87-​15 as the right to occupy

commercial residential premises have the choice of treating the supply as a

The distinction between “residential” and “commercial residential premises”

predominantly for residential accommodation (regardless of the term of

“Long-​term lease” is defined in s 195-​1 as a lease, hire or licence for a period

“New residential premises” is defined in s 40-​75 as residential premises:

Consequences of making an input taxed supply

Example 25.8: Input taxed supplies

The rental of the houses would constitute input taxed supplies as it is

In the case of a mixed supply, the value of the supply is to be apportioned

Example 25.9: Consequences of making a mixed supply

Composite supplies are treated as a single supply, and it is necessary to

[25.180] Table 25.1 provides a summary of the GST consequences for an

Table 25.1  GST consequences of making a supply

GST payable on supply?

Where the supply comprises a combination of taxable and GST-​free or input

As mentioned earlier, the basic rules regarding taxable supplies, GST-​free

Under s 11-​5 of the GST Act, an entity makes a creditable acquisition if:

• the supply to the entity was a taxable supply: see [25.225];

• an acquisition of something the supply of which is a financial supply; and

purpose where it is made for a business purpose. Section 11-​15(2)(b) expressly

Example 25.11: Acquisition for a creditable purpose

to the carrying on of his enterprise. Further, they are specifically excluded

Acquisitions related to input taxed supplies

GST-free supply........................................................................................ [25.140]

[25.40] Figure 25.1 provides a guide to dealing with GST.

(s 9-20(2)), while the activities of certain entities, such as charitable and

on an enterprise and provide ride-sourcing services must register for GST,

Case study 25.1: Meaning of supply

Case study 25.2: Existence of a supply

Connection to the indirect tax zone

Consequences of making a taxable supply

Example 25.6: Consequences of making a taxable supply

The following items are listed in Div 38 as GST-free supplies:

Some of the more common categories of GST-free supplies are discussed in

• food specified in Sch 1 of the GST Act as not being GST-free.

In addition, subdiv 38-B also lists other government-funded health services

In addition, excursions or field trips (s 38-90), course materials (s 38-95) and

Other GST-free supplies

Broadly, child care is GST- free when provided by a registered carer, an

Consequences of making a GST-free supply

• school tuckshops and canteens: subdiv 40-E;

• residential premises that are not commercial residential premises; or

“Commercial residential premises” is defined in s 195-1 as:

“Commercial accommodation” is defined in s 87-15 as the right to occupy

“Long-term lease” is defined in s 195-1 as a lease, hire or licence for a period

“New residential premises” is defined in s 40-75 as residential premises:

Consequences of making an input taxed supply

Example 25.9: Consequences of making a mixed supply

Table 25.1 GST consequences of making a supply

Where the supply comprises a combination of taxable and GST-free or input

As mentioned earlier, the basic rules regarding taxable supplies, GST-free

Under s 11-5 of the GST Act, an entity makes a creditable acquisition if:

• an acquisition of something the supply of which is a financial supply;  and

purpose where it is made for a business purpose. Section 11-15(2)(b) expressly

Under s 11-15(4), any acquisitions related to the making of financial supplies

Supply to the entity was a taxable supply

Example 25.15: Acquisition was a taxable supply

all of the requirements in s 11-5 of the GST Act.

• expenses for a leisure facility or boat: s 26-50 of the ITAA 1997;

value of the taxable importation: s 13-20(1). The value of a taxable importation

In relation to acquisitions, s 29-10 provides that, for accruals basis entities,

aware of the adjustment: s 29- 20(1). However, adjustments for entities

Table 25.2 Standard GST-registration and Limited GST-registration

Standard GST-registration Limited GST-registration

Interaction with other taxes

Example 25.23: GST and income tax

Absentee/foreign owners...................................................................... [26.275]

Table 26.2 Dutiable transaction provisions

measures, the proposed phase-in to reach 50% for contracts entered