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60.
GST And Thoroughbred Exports
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20/07/2002 |
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It is a sad fact that despite thoroughbred breeding being one of the great traditional Australian industries and despite a recent Taxation Commissioner and a Reserve Bank Chairman and numerous senior ministers all being devoted thoroughbred lovers the Australian GST Act was drafted with the thoroughbred industry hardly at the forefront of our legislators' attention.
The greatest difficulty with the Act has been in the area of thoroughbred exports where the act appears to have been written without any consideration to our industry or the requirements of our non resident clients. Strange when the Act was touted as being beneficial to Australian exports.
In an endeavour to maintain Australia's thoroughbred export industry whilst at the same time meeting the requirements of the GST Act, representatives of the thoroughbred breeding industry have been meeting with ATO officers at various times over the past two years. It has been a difficult time for both sides but on the 25th March 2002 an agreement was reached between the ATO and the breeding industry as to how exports should be treated. However, a red ATO pamphlet that was widely distributed in June 2002 appeared to differ with previous understandings and after much alarm in the industry, officers of the ATO met with breeders representatives and other interested parties in Sydney on Monday ,15th July 2002.
Here are some important decisions that were agreed to at that meeting.
1. In relation to yearlings sold pre 25th March 2002 , the ATO has agreed to make some concessions that can not be relied on in any way for sales that are post 25th March 2002. They only relate to yearlings sold before the Inglis Easter Sale 2002. Providing that horses sold prior to 31st December 2001 have been exported within the time frames that are in red ATO pamphlet and the export can be proved by means such as the Australian Stud Book Web site , the Hong Kong Jockey Club Web site or export documentation then the sale can be treated as GST free. The horse can have been broken in but again this rule is without prejudice to the rules on sales after 25th March 2002. It must be noted that the horse must not have raced in Australia.
In relation to horses sold between 1st January 2002 and 24th March 2002 where the horse has not yet left Australia it will be still necessary to obtain extensions of time but these will be dealt with sympathetically.
2. In relation to sales made after 25th March 2002 there remain a few areas that are still of great concern to the industry. However all difficulties are overcome when the non resident purchaser makes one important step that is in the interest of himself and the vendor. Non residents should apply for a GST number and become registered and then the advantages are without any time limit. This is how it
works...the non resident must provide some evidence that he has a business of some sort or another ( it does not have to be anything to do with racing or breeding) and he provides this evidence to his Australian agent or the ATO together with a request to be provided with a GST number. He or his agent then buys a good Australian bred yearling and he pays the purchase price of say $100,000 plus the GST of $10,000. On his BAS return which he or his agent makes (on a monthly or quarterly basis) he claims back the GST of $10,000 plus any GST he may have paid for floating, agistment, handling breaking in . He can keep the horse in Australia for as long as he likes and never has to apply for any extensions in time. The key factor is that the non resident must register.
3. For horses that are purchased and are exported in the next week and this often happens when horses are going to New Zealand then the process is as follows. In the first instance, a sales invoice will be raised which includes GST. If the horse is exported prior to the amount being due to the sales company and if the sales company has proper proof of the export, then the first invoice can be credited and a GST free invoice can be raised.
4. There is a large market for tried horses that are exported mainly to Asian countries and this market is often without the horse being sold at auction. Normally these horses which, of course, are already broken in leave within the two month period and are not liable for GST. If it appears that the export may be delayed then the payment can be by
instalment with the 2 month period commencing on the date the final instalment
is paid or the invoice for it is raised.
In summary, for horses sold prior to 25th March 2002 the ATO has made some concessions to vendors that can not be relied post 25th March 2002. For post 25th March 2002 it is best for both the vendor and the non resident purchaser if the non resident has a GST number but in any case all horses sold at auction will have GST added to the purchase price. For horses that leave Australia within 60 days there is a mechanism available to free the sale from GST.
The remaining problem relates to those non resident individuals that come to Australia to buy yearlings but can not gain a GST number because they can not pass the enterprise test. They may be billionaires, they may be government ministers or doctors or lawyers employed in high powered and highly paid positions but yet they can not pass the enterprise test if they do not have their own business. It can well be asked how we can have such an extraordinary test that is so anti exports when a key function of the GST is to assist our exports. The effect of not being able to register is that unless the yearling that has been purchased leaves the country within 60 days or unless the ATO grants an extension GST becomes payable by the purchaser. Also if the horse is broken in, the ATO believes that alters the horse and GST is payable. In a country with such a rotten balance of trade it could be expected that we would be export friendly but this rule that discourages individuals from buying Australian products is clearly silly and against the spirit of the act. The situation can be so easily resolved by merely permitting horses to be broken in prior to export. This does not require any changes to the law but a simple change in policy by the Australian Treasury. If the policy is not altered the loss in income tax from breeders will be far, far greater than any gain in GST. This situation has to be fixed up for the sake of Australia's export future.
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