Active surveillance by the Australian Competition and Consumer Commission will ensure that consumers and businesses obtain benefits of around $2 billion annually as a result of New Tax System changes to be implemented on 1 July 2001, ACCC Commissioner responsible for the Goods and Services Tax, Dr David Cousins, said today.
Under the Intergovernmental Agreement on the Reform of Commonwealth-State Financial Arrangements, negotiated as part of the introduction of the New Tax System, the current Financial Institutions Duty and stamp duty on quoted marketable securities are to be abolished from 1 July 2001.
"The ACCC is monitoring the upcoming abolition of FID and SDQMS as part of its ongoing price exploitation role in the transition to the New Tax System.
"The direct benefit for consumers and businesses is they will no longer pay FID on deposits to their financial institutions, nor stamp duty on quoted marketable security transactions. Around $1.2 billion was collected in FID and around $800 million in SDQMS in the 1999/2000 financial year.
"Both FID and SDQMS are generally a very small proportion of total business costs, however businesses will need to adjust their prices where failure to do so would increase their net dollar margin. Increasing their net dollar margin as a result of the New Tax System changes would contravene the ACCC's price exploitation guidelines.
"Of the $1.2 billion collected in FID across the country, around 40 per cent, or $480 million is paid by households on their deposits. This means that the total FID paid by business across the whole of the economy amounts to approximately $720 million. These FID payments spread over two million businesses (a figure which excludes businesses with accounts in Queensland) represent a very small amount in each individual business' costs.
"Consumers should be aware that in some instances they may be charged FID or SDQMS after 30 June 2001, but this should only occur on the first statement relating to deposits or security transactions which were actually made prior to the abolition date. Under current FID reporting arrangements for most financial institutions, FID is deducted from account balances and reported to account holders at the end of each interest payment cycle. These cycles vary depending on the financial institution and the type of account (for example, monthly for most standard savings and credit card accounts, quarterly for most passbook accounts and on maturity for some term-deposit accounts).
"Similarly, consumers should note that Debits Tax (a separate tax applied to bank accounts with cheque drawing or payment order facilities) will continue to be charged. Likewise, stamp duty will still be charged on non-listed transfers of securities at the current rates.
"ACCC monitoring activity will continue to examine the general impact on prices and ensure the relevant savings are being passed on to consumers. This will primarily focus on certain industry sectors which on-charge the duties to consumers, such as banks, credit unions, building societies, finance companies, stockbrokers and real-estate agents. "The involvement of the four major banks in the ACCC's Public Compliance Commitment process will mean the ACCC will be able to keep a close watch on the way they implement the abolition of FID, to ensure they pass on the benefits and do not take any opportunity to unjustifiably increase fees as a result of these New Tax System changes.
"The ACCC has been liaising with relevant industry bodies, including major institutions, to ensure they are aware of the implications of the changes and the associated compliance issues. Consultation is also continuing with consumer advocates, to identify and deal with consumer issues".
Business inquiries related to legislative or technical issues regarding the abolition of FID and SDQMS should be directed to the relevant State or Territory revenue agency. Consumer inquiries related to the payment of FID or SDQMS should be first directed to the relevant financial institution or stockbroker.
If consumers believe they have been incorrectly charged FID on deposits or SDQMS on transfers made from 1 July 2001, and after having raised the matter with their financial institution or stockbroker they are still concerned, they can call the ACCC infocentre on 1300 302 502.