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Legislative Assembly for the ACT: 1998 Week 6 Hansard (2 September) . . Page.. 1772 ..

Goods and Services Tax

MS TUCKER: My question is directed to the Chief Minister and Treasurer, Mrs Carnell. It relates to the impact of the proposed goods and services tax on the ACT. I understand that under the Federal Liberal Government's proposals non-profit community groups will be treated as businesses for the purposes of applying a GST. This means that all community groups will have to pay the GST on all the goods and services that they buy. Larger community groups with budgets over $100,000 must register as tax collectors under the scheme and will have to pay a GST on all income such as membership fees, fundraising events and merchandising. Even registered charities not covered by the exclusions for health, education and child care will be taxed on their income outside of donations. Minister, many of these community groups in the ACT rely on grants from the ACT Government for their viability and, as you are aware, their funding situations are very tight and the demands on their services are increasing. Given that you say you are broadly supportive of the GST and that it will impose an unexpected extra cost on these community groups, will you be increasing the grants paid to these groups as compensation for their loss of income if the GST is implemented?

MS CARNELL: I am not responsible for this policy, but I believe the effect on the ACT economy is an issue for everyone in the ACT. It is my understanding that charities will be exempt from GST. Charities will become liable for GST when they are in commercial businesses, in other words operating in a commercial context. From my understanding, appropriate safeguards have been put in place for charities operating as charities. When charities enter into potential business environments, such as telephone selling and those sorts of activities, then they will be subject to GST. When they are subject to GST they will be registered, which means they will be able to claim back the input tax. That means they will be able to claim back any GST component that is part of the product that they are selling on.

The effect on the CPI will be about 1.9 per cent. My understanding is that the Federal Government has put in place a safety net for pensioners and for fixed income superannuants which will give an up-front payment of $1,000 and $2,000. My understanding is also that the Federal Government have indicated that the increase in pensions will be about 1.5 per cent above the actual increase in costs of services, in the CPI generally. The pension increase will be about 1.5 per cent above the actual 1.9 per cent, so pensioners and people on fixed incomes will predominantly be at least as well off, if not better off. Meals on Wheels, for example, will be GST free. Meals on Wheels is a non-commercial activity for which only a nominal charge will be made. Even though Meals on Wheels are selling a service - they are selling meals on to the people involved - that sort of service will be GST free. Similar services provided by councils and people like the ACT Government that are non-commercial and attract only a nominal charge will also be GST free. Generally, I would have to say that it would appear that charities, when operating in those sorts of areas, will be GST free.

In answer to the last part of the question, whether the ACT Government would be in a position to increase funding to these entities, I have to say that, with access to a growth tax for the first time ever, the ACT Government would be in a position for the first time since self-government to look at some growth, which of course will enable us to start

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