The Government will introduce measures to ensure that there is no disadvantage to

either party to a long-term non-reviewable contract under The New Tax System.

This will address the situation whereby certain pre-existing contracts that do not have

review clauses were to become subject to GST from 1 July 2005 without the ability of

the suppliers to recover the GST, while the recipients of the supplies receive an input

tax credit.

These long-term contracts will continue to remain GST-free until 30 June 2005. At that

time, if a review opportunity has not occurred, suppliers will be able to adjust their

prices to recover the net impact of the indirect tax reforms from the purchaser. That is,

the supplier can pass on GST less the cost reductions associated with the supply.

The purchaser will be entitled to input tax credits for the GST charged by the

supplier. The amendment will not apply to contracts where the recipient is not entitled to

an input tax credit or where the contract specifically precludes the inclusion of the GST

in the price of the supply.

Legislation to give effect to these measures will be introduced after details have been

settled in consultation with relevant industry groups.

Although this will not apply until after 30 June 2005 it is being announced now so that

parties affected have certainty and in particular are able to properly value long-term

contracts in property portfolios.

Canberra

3 May 2000

Contact: David Alexander (Tax Reform Legislative Unit) 02 6277 6390

Colin Brown (Treasury) 02 6263 4455