National TaxatIon Reform (Consequential Provisions) Bill

ARTHUR ROBtNSON & HEDDERWICKS UBRARY National TaxatIon Reform (Consequential Provisions) Bill Circulation Print EXPLANATORY MEMORANDUM General This Bill revises and introduces legislation as a result of the State's adherence to the Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations. The legislative measures include a record of the State's intention to give effect to the Agreement, the discontinuation of financial institutions duty and stamp duty on certain share transfers, certain changes to pay-roll tax arrangements and stamp duties to avoid instances of circular taxation, adjustments to gambling taxation arrangements in line with the Agreement, and the cessation of off-road diesel support as a result of Commonwealth support becoming comprehensive. Clause Notes PART I-PRELIMINARY Part 1 of the Bill contains the introductory provisions which include the purpose and commencement provisions, and the definition of words for the purposes of this Bill. Clause 1 sets out the purposes of the Bill. Clause 2 provides that the Bill, except Parts 8 and 9 and sections 17, 18, 19,24,33 and 34, is to come into operation on the day after the day on which the Bill receives the Royal Assent. Section 31 is deemed to have come into effect on 17 February 1999 because it relates to amendments to the Gaming Machine Control Act 1991 made by the Liquor Control Refonn Act 1998 which took effect on that date. Part 9 (except section 31) and sections 17, 18, 19,24,33 and 34 come into effect on 1 July 2000. Part 8 comes into operation on 3 July 2000. 541029 1 BILL LA CIRCULATION 3/312000

Clause 3 provides that certain words and expressions in this Bill are to be given the meaning contained in this provision. PART 2-INTERGOVERNMENTAL AGREEMENT Part 2 of the Bill records the State's intention to give effect to the Intergovernmental Agreement. Clause 4 Sub-clause (1) provides for the Intergovernmental Agreement to be set out in a Schedule. Sub-clause (2) records the State's intention to comply with and give effect to the Intergovernmental Agreement. PART 3-PAYMENT OF GST EQUIVALENTS BY STATE ENTITIES Part 3 of the Bill provides for State entities to pay GST equivalents to the Commonwealth. Clause 5 Clause 6 provides for State entities to pay amounts equivalent to the GST which they would pay if not prevented by section 114 of the Commonwealth Constitution. enables the Treasurer to direct State entities. Sub-clause (1) enables the Treasurer to direct a State entity to make payments or anything else it is authorised to do under section 5. Sub-clause (2) enables the Treasurer to make a direction to amend or revoke a previous direction. Sub-clause (3) provides for a direction to relate to events before the direction was given. Sub-clause (4) requires a State entity to comply with directions under this section despite any other written law. PART 4-GOVERNMENT FEES AND CHARGES Part 4 provides for regulations to be made to alter fees or charges set by statutory rules to take GST into account. Clause 7 provides for increases in fees or charges set by statutory rules. 2

Sub-clause (1) provides for the Governor in Council, on Ministerial recommendation, to regulate for an increase in a fee or charge set by a statutory rule. Sub-clause (2) prohibits the increase from exceeding the GST payable on the supply to which the fee or charge relates. Sub-clause (3) provides that the Minister can only recommend an increase if he or she considers it necessary as a result of the implementation of Commonwealth Acts relating to GST and the Intergovernmental Agreement. Sub-clause (4) excludes Part 2 of the Subordinate Legislation Act 1994 as applying to regulations made under the clause. This means that regulatory impact statements will not be required for changes to fees or charges. Sub-clause (5) provides for only one increase in each fee or charge under this clause. Sub-clause (6) provides for the increase to relate to supplies made wholly on or after 1 July 2000. Sub-clause (7) prohibits the increase from applying to that part of a supply made before 1 July 2000. Sub-clause (8) provides for GST to include notional GST as payable by a State entity under Part 3. PART 5-FINANCIAL INSTITUTIONS DUTY Part 5 of the Bill ensures that liability for financial institutions duty ceases from July 2001, so giving effect to the Intergovernmental Agreement. Clause 8 Clause 9 amends sections 8, 9 and 10 of the Financial Institutions Duty Act 1982 to provide that these sections will not after 30 June 2001 deem as an amount received by a financial institution a receipt of consideration, amount deposited or credited to an account, or transferred or transmitted to or for the credit of an account. inserts new section 17 into the Financial Institutions Duty Act 1982 discontinuing liability for financial institutions duty after 30 June 2001 under the Financial Institutions Duty Act 1982 in respect of a receipt of money (section 18(1)), broker receipts (section 18(2A)), the average daily liability during a month of a 3

registered short tenn money market operator (section 20) and a deposit of money (section 21(1)). Clause 10 Clause 11 inserts new sections 32(4) and (5) into the Financial Institutions Duty 1982 to provide that holders of exempt bank accounts continue to be liable for financial institutions duty and additional duty on amounts paid into an exempt account prior to 1 July 2001 in contravention of the Financial Institutions Duty Act 1982. This clause also clarifies the obligation under section 32 to furnish a certificate within two months of a financial year ending on or before 30 June 2001. inserts new section 32A into the Financial Institutions Duty Act 1982 to clarify that financial institutions, short tenn money market operators and depositors are not required to register or furnish returns under Part V of the Financial Institutions Duty Act 1982 in respect of the period after 30 June 2001. PART 6-PAY-ROLLTAX ACT 1971 Part 6 of the Bill ensures that GST will be excluded from amounts deemed to be wages liable to pay-roll tax under the Pay-roll Tax Act 1971, when payable for work under a relevant contract, or payable for services under an employment agency contract. Clause 12 inserts a definition of "GST" in section 3(1) of the Pay-roll Tax Act 1971. Clause 13 Sub-clause (1) inserts new section 3C(6)(h) into the Pay-roll Tax Act 1971, with the effect that an amount paid or payable by an employer relating to perfonnance of work under a relevant contract does not include GST when deemed under section 3C(2)(c) of the Pay-roll Tax Act 1971 as wages liable to payroll tax. Sub-clause (2) inserts new section 3D(2A) into the Pay-roll Tax Act 1971, with the effect that an amount paid or payable by a person deemed to be an employer in respect of the provision of services under an employment agency contract does not include GST when the amount is deemed under section 3D(2)( c) of the Pay-roll Tax Act 1971 as wages liable to pay-roll tax. 4

Sub-clause (3) clarifies in regard to section 3F(I) of the Pay-roll Tax Act 1971 that the Commissioner cannot include GST in any detennination relating to an employment agency contract reducing or avoiding liability to pay-roll tax. PART 7-STAMPS ACT 1958 Clause 14 inserts a definition of "GST" and substitutes the definition of "recognised stock exchange" in section 3 of the Stamps Act 1958. Clause 15 In order to give effect to the Intergovernmental Agreement, this clause combined with clause 20 ensures that liability for duty on transfers of marketable securities quoted on the market operated by the Australian Stock Exchange (ASX) or another recognised stock exchange will cease in respect of transactions entered into after 30 June 2001. Under the Intergovernmental Agreement, the intention is to exclude from cessation of liability for duty transfers of marketable securities in private companies and trusts and in public companies and trusts where the securities are not quoted on the ASX or another recognised stock exchange. Sub-clause (1) amends section 55A of the Stamps Act 1958 to provide that subdivision (4) of Division 3 of Part 11 does not apply to quoted marketable securities or rights in respect of shares transferred after 30 June 2001. Sub-clause (2) amends section 60A of the Stamps Act 1958 to provide that subdivisions (4A) and (4AA) of Division 3 of Part 11 only apply to a sale or purchase of a marketable security or right in respect of shares quoted on a market operated by the ASX before 1 July 200l. Sub-clause (3) amends section 60EA(a) of the Stamps Act 1958 to provide that subdivision (4AB) of Division 3 of Part 11 only applies to SCH-regulated marketable security transfers before 1 July 2001. Sub-clause (4) amends section 60EJ of the Stamps Act 1958 to provide that the Securities Clearing House (SCH) is not required to lodge a return or pay duty in respect of any month after June 2001. 5

Sub-clause (5) amends section 60H(1) of the Stamps Act 1958 to provide that companies are only required to lodge returns on transfers of marketable securities not duly stamped in cases where duty is payable under the Stamps Act 1958. Sub-clause (6) amends section 60J(a) of the Stamps Act 1958 to provide that subdivision (5) of Division 3 of Part 11 applies only to sales and transfers of marketable securities or rights in respect of shares made by or on behalf of futures brokers before 1July 200l. Sub-clause (7) amends section 62G of the Stamps Act 1958 to provide that in respect of capital reductions or rights alterations affecting the voting shares of a Victorian public company, a statement is not required to be lodged by that company in relation to an entitlement arising after 30 June 2001 in respect of shares quoted on a market operated by the ASX or a recognised stock exchange. Sub-clause (8) inserts a reference to a recognised stock exchange into section 621 (1)(a) and (b). Sub-clause (9) substitutes a reference to shares quoted on the market operated by the ASX for a reference to shares listed on the ASX. Clause 16 This clause ensures that GST will be excluded from amounts received on rental agreements and special rental agreements on which rental duty is payable. The clause amends section 131 AC( 4) of the Stamps Act 1958 to insert new paragraph (d), providing that a registered person lodging the required statement relating to dutiable rental agreements or special rental agreements need not include any amount of GST payable on the relevant supplies. Clause 17 A registered used car dealer (RUCD) is liable for stamp duty on a person's acquisition from the RUCD of a registered motor vehicle. The RUCD recovers that duty from the acquirer of the vehicle as part of the consideration for the vehicle's supply, with GST levied on that total amount. Accordingly, GST is imposed on the stamp duty-inclusive value of the vehicle, while stamp duty is imposed on its GST-inclusive value. This tax circularity problem is avoided by amendments to subdivision (16) of Division 3 of Part II of the Stamps Act 1958 and Heading XXI 6

in the Third Schedule to that Act, which have the effect of shifting the liability for the duty from the RUCD to the acquirer of the vehicle. GST is then imposed on that taxable supply, with the acquirer paying stamp duty on that total amount, as generally collected by the RUCD from the acquirer, on behalf of the State Revenue Office. Sub-clause (2) inserts a new sub-section 137AB(3) into the Stamps Act 1958, so that a person who acquires a motor car from a RUCD who elects personally to lodge the application for transfer of registration with VicRoads and pay the duty through VicRoads, must also lodge with VicRoads a copy of the agreement for sale of the motor car. Sub-clause (3) amends section 137 AH(l) of the Stamps Act 1958 to provide that a RUCD upon cessation of business or cancellation of registration must lodge a statement and pay the amount (if any) required on the return under section 137AK(1)(b). Clause 18 substitutes a new section 137AJ into the Stamps Act 1958 to remove the existing requirement for the RUCD to endorse all transfers of registered motor vehicles, replacing it with a provision requiring the RUCD to endorse only those transfers where the acquirer elects to pay the stamp duty to the RUCD. If the section applies, the RUCD must endorse the transfer with the RUCD number, confirming the acquirer has paid the amount payable and specifying the amount paid. Clause 19 amends section 137 AK of the Stamps Act 1958 to now require that all amounts received by a RUCD during the preceding month in respect of duty payable by acquirers on applications for transfers of registration be forwarded to the Commissioner. The clause also repeals section 137 AL, which is no longer necessary, and amends section 137 AM to provide a penalty where a person endorses on an application for transfer of registration a statement that duty has been paid by an acquirer to a RUCD when it has not been paid. It also provides that a person must not endorse on an application for transfer of registration an amount of duty different from that actually paid by an acquirer to the RUCD. 7

Clause 20 inserts new clause 3 into Heading IV(A) in the Third Schedule to the Stamps Act 1958, providing that duty is not payable under that Heading on a transfer after 30 June 2001 of a marketable security or right in respect of shares quoted on the market operated by the ASX or a recognised stock exchange. Clause 21 amends clause 3 of Heading XVII in the Third Schedule to the Stamps Act 1958, so providing a definition of "purchase money" that has the effect of excluding GST from the calculation of any duty payable on cattle sales. Clause 22 amends Heading XVIIA in the Third Schedule to the Stamps Act 1958 to clarify that 12 cents of stamp duty is the amount payable for each sheep, goat or carcase sold. Clause 23 amends Heading XVIII in the Third Schedule to the Stamps Act 1958 so providing a definition of "purchase money" that has the effect of excluding GST from the calculation of any duty payable on pig sales. Clause 24 repeals exemption (4) in Heading XXI in the Third Schedule to the Stamps Act 1958, having the effect that the acquirer of the motor vehicle and not the RUCD is now the person liable to pay the stamp duty. Clause 25 repeals unproclaimed subdivision (5A) of Division 3 of Part II of the Stamps Act 1958, dealing with duty on sales and purchases of marketable securities in non-corresponding States. PART 8-ABOLITION OF STAMP DUTY ON BOOKMAKERS' STATEMENTS Clause 26 Paragraph (a) provides for the abolition of duty payable on bookmakers' statements by repealing subdivision (12) of Division 3 of Part 11 of the Stamps Act 1958. Paragraph (b) repeals the charging provisions for duty on bookmakers' statements in Heading XV in the Third Schedule to the Stamps Act 1958. Clause 27 inserts a new section 168 into the Stamps Act 1958 that provides for a transitional provision to ensure that, notwithstanding the repeal of duty on bookmakers' statements, in respect of the weekly period ending before the repeal- 8

(a) (b) (c) a bookmaker will still have to comply with section 120 of the Stamps Act 1958 requiring a bookmakers' statement in the prescribed form; an assessment under section 120(6)(a) of the Stamps Act 1958 may be made where the bookmaker fails to furnish the required material specified; and section 118 of the Stamps Act 1958 relating to the production and inspection of betting tickets will continue to apply to relevant betting transactions. PART 9-GAMBLING TAXES AND PAYMENTS Part 9 of the Bill provides for adjustments to some of Victoria's State gambling tax arrangements to take account of the impact of the GST on gambling operators, as required by the Intergovernmental Agreement. Clause 28 amends the Club Keno Act 1993 to provide for a reduction in the rate of taxation on club keno games. It also amends the Club Keno Act 1993 to provide for an increase in the legislated share of club keno revenue that is paid to venue operators in circumstances where GST is payable. Sub-clause (1) defines the term "GST" to have the same meaning as in the Commonwealth's GST legislation (that is, the A New Tax System (Goods and Services) Tax Act 1999 of the Commonwealth). Sub-clause (2)(a) reduces the rate of taxation on Club Keno games from 33 1 / 3% to 24 24%; that is, by 9 09 percentage points, the amount of the GST on gambling (rounded to 2 decimal places). Sub-clause (2)(b) substitutes paragraph (b) of section 7(2) of the Club Keno Act 1993 to provide for an increase in the legislated share of club keno revenue that is paid to venue operators whenever GST is payable on the supply to which that payment is made. Club keno gaming revenue is the amount of revenue received by the gaming operators less prizes paid. Currently, 1/3 of all gaming revenue is returned to venue operators. However, GST may be payable on the supply to which the amount paid to venue operators relates. Wherever this is the case, section 7(2)(b)(i) 9

will apply. Section 7(2)(b)(i) provides that the venue operators' share of gaming revenue will be increased to 11/30thS of gaming revenue to cover a GST of 10% on the value of the taxable supply. In these cases, the value of the taxable supply for GST purposes is 10111thS of the amount of the consideration received for that supply, in this case, 11/30thS of total gaming revenue. Therefore, the value of the taxable supply is 10 / 11 x 11130 x gaming revenue = 1/3 x gaming revenue, the venue operators' current share of gaming revenue. Under the Commonwealth's GST legislation, the venue operator will be required to forward an amount of GST equal to llloth of the taxable supply to the Commonwealth. The gaming operators will be able to claim an input credit equal to this amount. In some cases, GST may not be payable in respect of the amount to which this section relates. For example, where the payment is made subject to a non-reviewable contract that was made before 3 December 1998, then the payment is GST-free. In such cases, section 7(2)(b)(ii) will apply. Section 7(2)(b)(ii) provides that the share of gaming revenue that is to be paid to venue operators is to remain at 1/3 Sub-clause (3) provides that the provisions of this clause take effect from the first "week" commencing after 1 July 2000. For the purposes of the Club Keno Act 1993, a "week" means a period of 7 days commencing on a Sunday and ending on the following Saturday. Therefore, the provisions of this clause take effect from the week beginning Sunday 2 July 2000. Clause 29 amends the Gaming and Betting Act 1994 to provide for a reduction in the rates of taxation with respect to on-course wagering permits, and wagering and approved betting competitions conducted by Tabcorp. Sub-clause (1) reduces the rate of taxation for on-course wagering permits from 28 2% to 19 11 %; that is, by 9 09 percentage points, the amount of the GST on gambling. Oncourse wagering permits may only be held by The Victoria Racing Club, the Harness Racing Board, the Greyhound Racing Control Board or a club licensed under section 24A of the Racing Act 1958. 10

Sub-clause (2) provides that the rate reduction for on-course wagering permits will take effect from 1 July 2000. Sub-clause (3) reduces the rate of taxation for wagering events conducted by Tabcorp (all such events are, by definition, conducted on totalisators) from 28 2% to 19 11 %; that is, by 9 09 percentage points, the amount of the GST on gambling. Sub-clause (4) provides that the rate reduction for wagering will take effect from 1 July 2000. Sub-clause (5) reduces the rate of taxation for approved betting competitions at fixed odds conducted by Tabcorp and for totalisators on approved betting competitions conducted by Tabcorp. For competitions at fixed odds, the rate will be reduced from 20% to 10 91 %; that is, by 9 09 percentage points, the amount of the GST on gambling. For totalisators on approved betting competitions, the rate will be reduced from 28 2% to 19 11 %; that is, by 9 09 percentage points, the amount of the GST on gambling. Sub-clause (6) provides that the rate reduction for approved betting competitions and totalisators on approved betting competitions will take effect from 1 July 2000. Clause 30 amends the Gaming Machine Control Act 1991 to provide for a reduction in the rate of taxation on electronic gaming machines (EGMs). It also amends the Gaming Machine Control Act 1991 to provide for an increase in the legislated share of daily net cash balances that is paid to venue operators in circumstances where GST is payable. The existing legislation has also been somewhat simplified. Sub-clause (1) amends section 136(3), and sub-clause (2)(a) repeals sections 136(3C) and 136(3D) of the Gaming Machine Control Act 1991. At present, sections 136(3C) and 136(3D) of the Gaming Machine Control Act 1991 provide that section 136(3), as it was in force immediately before 1 November 1996, applies to Tabcorp. The section, as then in force, specified the returns that Tabcorp must make to consolidated revenues, the Community Support Fund and the EGM venue operators. 11

Sections 136(3C) and 136(3D) also provide that section 136(3) of the Gaming Machine Control Act 1991, as currently in force, applies to Tattersall's. In its current form, this section provides that the share of daily net cash balances which must be returned by a gaming operator (Tattersall's) to the Government and to EGM venue operators is to be set out in regulations. In the original Gaming Machine Control Act 1991, the various returns were set out in legislation for both operators. However, the original legislation also contained a provision (in section 160) which amended the legislation on 1 November 1996 so that the returns would be set by regulation from that date. With the privatisation of the TAB in August 1994, the legislation was further amended so that the returns for Tabcorp would continue to be set by legislation after 1 November 1996. This was done to give the (then) new company of Tabcorp some certainty with respect to its future returns. Section 160 of the Gaming Machine Control Act 1991 has since been repealed but sections 136(3C) and 136(3D) remain. - In amending the Gaming Machine Control Act 1991, sub-clause (2) repeals sections 136(3C) and 136(3D) of that Act, thereby removing the reference to section 136(3) of that Act as it was in force immediately before 1 November 1996. However, Tabcorp's returns will continue to be set by legislation while returns of Tattersall's will continue to be set by regulation. This is being done to focus on the changes required to meet Victoria's obligations under the Intergovernmental Agreement. The returns that Tattersall's will be required to make under the relevant regulations will be the same as those required of Tabcorp in the legislation. Therefore, in addition to varying, as necessary, the operator's returns, sub-clause (1) amends section 136(3) so that it now pertains to Tattersall's as well as to Tabcorp. Section 136(3) of the Gaming Machine Control Act 1991, as currently enacted, contains four paragraphs- paragraph (a) determines the return to the venue operator when the venue operator is a club; paragraph (b) determines the returns to the venue operator where the venue operator is a hotel; 12

paragraph (c) effectively specifies that, where the EGM venue operator is a hotel, there also to be a return that is a payment of tax into the Community Support Fund; paragraph (d) determines the amount of tax that is to be paid into the Consolidated Fund. The returns covered in each paragraph relate to the shares of the total of daily net cash balances collected in respect of EGMs. This amount is the total of daily net cash balances in relation to each EGM, which in turn, is the amount wagered less prizes paid (including payments into the jackpot special prize pool). Among other things, the amendments contained in sub-clause (1) divide each of these four paragraphs into two subparagraphs. In each case, sub-paragraph (i) relates to the holder of an EGM licence under the Gaming Machine Control Act 1991 (that is, Tattersall's), while sub-paragraph (ii) relates to the holder of an EGM licence under the Gaming and Betting Act 1994 (that is, Tabcorp). This simplifies the present legislation because it removes the need for sections 136(3C) and (3D). Sub-paragraph (i) of each paragraph provides that the returns that Tattersall's is to make in each instance will be set out in regulations (in accordance with current practice as noted earlier). These returns will continue to be identical to Tabcorp's returns as set out in sub-paragraph (ii) of each paragraph, adjusted as necessary to take account of the impact of the GST. Section 136(3)(a) of the Gaming Machine Control Act 1991, as currently enacted, determines that Tabcorp must pay 33 1 / 3% of all daily net cash balances to venue operators that are clubs. However, GST may be payable on the supply to which these amounts relate. Wherever this is the case, the new section 136(3)(a)(ii)(A) will apply. This provides that the venue operators' share of gaming revenue will be increased to 36 2 / 3% of daily net cash balances to cover a GST of 10% on the value of the taxable supply. In these cases, the value of the taxable supply for GST purposes is 10/11 ths of the amount of the consideration received for that supply, in this case, 36 2 / 3% of daily net cash balances. Therefore, the value of the taxable supply is 10/11 x 36 2 / 3% of 13

daily net cash balances = 331/3% of daily net cash balances, the venue operators' current share of gaming revenue. Under the Commonwealth's GST legislation, the venue operator will be required to forward an amount of GST equal to IllOth of the taxable supply to the Commonwealth. The gaming operators will be able to claim an input credit equal to this amount. In some cases, GST may not be payable in respect of the amount to which this section relates. For example, where the payment is made subject to a non-reviewable contract that was made before 3 December 1998, then the payment is GST-free. In such cases, the new section 136(3)(a)(ii)(B) will apply. This provides that the share of gaming revenue that is to be paid to venue operators is to remain at 33 1 / 3%. Similarly, section 136(3)(b), as currently enacted, determines that Tabcorp must pay 25% of all daily net cash balances to venue operators that are hotels. Wherever a GST is payable, the new section 136(3)(b)(ii)(A) will apply. This provides that the venue operators' share of gaming revenue will be increased to 27 5% of daily net cash balances to cover a GST of 10% on the value of the taxable supply. In these cases, the value of the taxable supply for GST purposes is IOllIths of the amount of the consideration received for that supply, in this case, 27 5% of daily net cash balances. Therefore, the value of the taxable supply is 10 / 11 x 27 5% of daily net cash balances = 25% of daily net cash balances, the venue operators' current share of gaming revenue. Under the Commonwealth's GST legislation, the venue operator will be required to forward an amount of GST equal to I I 10th of the taxable supply to the Commonwealth. The gaming operators will be able to claim an input credit equal to this amount. Where GST is not payable, the new section 136(3)(b)(ii)(B) will apply. This provides that the share of gaming revenue that is to be paid to venue operators is to remain at 25%. Section 136(3)(c) of the Gaming Machine Control Act 1991, as currently enacted, effectively determines that Tabcorp must pay 81/3% of all daily net cash balances into the Community Support Fund where those balances are derived from EGMs located in hotels. These payments are also payments of tax that are included in the (Commonwealth) Treasurer's determination 14

under section 81 of the Commonwealth GST legislation and are, therefore, not consideration for the purposes of this Act. Together with the 25% of daily net cash balances that are paid to hotels, the 8 1 / 3% comes to 33 1 / 3%, the same as the proportion paid to clubs. While the 8 1 / 3% is deemed to be a tax on clubs, there is no need to adjust it for the GST because the 33 1 / 3% paid into consolidated revenue (for EGMs located at clubs and hotels alike) is adjusted by the full amount of the GST. Since these are shares of the same pool of daily net cash balances, adjusting the contribution to the Community Support Fund would constitute double counting. Therefore, the new section 136(3)(c)(ii), also provides that Tabcorp must continue to pay 8 1 / 3% of all daily net cash balances into the Community Support Fund, where those balances are derived from EGMs located in hotels. Section 136(3)(d) of the Gaming Machine Control Act 1991, as currently enacted, determines that Tabcorp must pay 33 1 / 3% of all daily net cash balances into consolidated revenue. These payments are payments of tax that are included in the (Commonwealth) Treasurer's determination under section 81 of the Commonwealth GST legislation and are, therefore, not consideration for the purposes of this Act. The new section 136(3)(d)(ii) will reduce this share from 33 1 / 3% to 24 24%; that is, by 9 09 percentage points, the amount of the GST on gambling. Sub-clause (2)(b) defines the term "GST" to have the same meaning as in the Commonwealth's GST legislation. Clause 30 will come into operation on 1 July 2000, by virtue of clause 2(3) of the Bill. Clause 31 is a statutory amendment that is necessary to re-establish the linkages between paragraphs (a), (b), (c) and (d) of section 12A(l) of the Gaming Machine Control Act 1991 and section 136(3) of that Act. These linkages were inadvertently broken as the result of amendments introduced by the Liquor Control Reform Act 1998 that were made as the result of an unrelated revision of the licensing arrangements. 15

The linkages are important because they determine which EGM venues will be treated as clubs and which will be treated as hotels for the purposes of allocating the shares of daily net cash balances (clubs receive 33 1 / 3% whereas hotels receive 25%). Section 12A(1) of the Gaming Machine Control Act 1991 sets out the kinds of premises which may be approved as EGM venues. Prior to the amendments to that Act introduced by the Gaming Acts (Miscellaneous Amendment) Act 1997, these requirements were set out in section 19(1). In particular, paragraphs (a), (b) and (d) of section 12A(1) of the Gaming Machine Control Act 1991 distinguish between premises on the basis of the type of licence that they operate under in accordance with the Liquor Control Reform Act 1998, or whether they are licensed under the Racing Act 1958. Paragraphs (a), (b) and (c) of section 136(3) cross-refer to these paragraphs in determining the different shares of daily net cash balances that go to operators and to the Community Support Fund depending on whether these daily net cash balances are. collected from EGMs located in hotels or EGMs located in clubs. Presently, section 136(3) of the Gaming Machine Control Act 1991 cross-refer to these paragraphs as follows: Section 136(3) Section 12A( 1) Venue type for tax purposes Paragraph (a) Paragraph (c) or Cd) club Paragraphs (b) Paragraphs (a) or (b) hotel & (c) Prior to the amendments to the Gaming Machine Control Act 1991 made by the Liquor Control Reform Act 1998, these cross-references were accurate. However, the amendments to section 12A(1) mean that section 136(3) of the Gaming Machine Control Act 1991 should cross-refer to these paragraphs as follows, noting that paragraph (c) has been revoked- 16

Section 136(3) Section 12A( 1) Venue type for tax purposes Paragraph (a) Paragraph (b) or (d) club Paragraphs (b) Paragraph (a) hotel & (c) Clause 31 effects the necessary substitutions. At first glance, the amendments to section 136(3) that are provided for in clause 30 appear to make the provisions of clause 31 redundant. However, the amendments in clause 30 only take effect from 1 July 2000. The amendments to section 12A( 1) of the Gaming Machine Control Act 1991 made by the Liquor Control Reform Act 1998 took effect from 17 February 1999. Therefore, clause 31 is required to amend section 136(3) as from that date. Consequently, clause 2(2) of the Bill provides for clause 31 to take effect from 17 February 1999. It is important to note, however, that the actual payments have corresponded to the provisions of section 136(3) as if it had already been amended. Clause 32 amends the Tattersall Consultations Act 1958 to provide for a reduction in the rates of taxation with respect to consultations (lotteries) and soccer football pools conducted by Tattersall's. Sub-clause (2)(a) reduces the rate of taxation for consultations from 36% to 32 36%. Note that lotteries are taxed on a turnover basis. Therefore, the tax rate must be converted to an expenditure basis before reducing it by 9 09 percentage points, the amount of the GST on gambling. The adjusted rate is then converted back to a turnover tax basis. The turnover tax rate can be converted to an expenditure basis by applying the following formulae =tj(1-p), where e is the equivalent expenditure based tax rate; is the turnover based State gambling tax rate; and p is the payout rate. 17

In this case, t = 0 36 and p = 0 6, the minimum payout rate prescribed in section 4(2) of the Tattersall Consultations Act 1958. Therefore, e = 0 9. Reducing this by 0 0909, gives an adjusted e of 0 8091 recurring, and converting this back to a turnover basis provides us with an adjusted t of 0 32364 or 32 36%, rounded to 2 decimal places. Sub-clause (2)(b) reduces the rate of taxation for soccer football pools from 34% to 29-46%, using the same methodology that was employed for converting the turnover taxes on consultations, except that t = 0 34 and p = 0 5, the minimum payout rate prescribed in section 4(2A) of the TattersaIl Consultations Act 1958. Sub-clause (3) provides that the rate reduction for consultations and soccer football pools will take effect from 1 July 2000. The TattersaIl Consultations Act 1958 gives the Treasurer the power to enter into duty sharing arrangements with other jurisdictions. The Treasurer will negotiate revised arrangements as necessary. PART to-other AMENDMENTS Part 10 of the Bill contains amendments to other Acts arising from certain changes to Commonwealth industry support and taxation arrangements. Clause 33 provides for the cessation of State off-road diesel subsidies, because the Commonwealth is introducing comprehensive support and because the Intergovernmental Agreement anticipates that the States will cease their support (as it would be superfluous ). Clause 34 Sub-clause (1) substitutes the words "sales taxes" with "taxes" in section 177(1) of the Liquor Control Reform Act 1998, reflecting the cessation of Commonwealth wholesale sales tax from 1 July 2000. Sub-clause (2) provides for the Commissioner of State Revenue to require certain persons who have held licences to make and keep records of sales and purchases of liquor for a period of five years. 18

Clause 35 inserts a definition of "GST" in the Livestock Disease Control Act 1994 and provides for GST to be excluded from stamp duty payable under section 92 of that Act. Schedule The Schedule sets out the Intergovernmental Agreement. 19