ATO Interpretative Decision

ATO ID 2012/22 (Withdrawn)

Goods and Services Tax

• This ATO ID was withdrawn as it is no longer correct. Amendments to Division 81 of the A New Tax System (Goods and Services Tax) Act 1999 and the A New Tax System (Goods and Services Tax) Amendment Regulation 2012 (No.2) specifically state that hearing fees are not consideration for a supply.
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Issue

Is payment to the Australian government agency of the daily hearing fee, imposed after 30 June 2012, excluded from being the provision of consideration, on the basis of being a kind of fee that satisfies subsection 81-10(4) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Decision

No, payment of the daily hearing fee, imposed after 30 June 2012, does not meet the requirements of a fee that satisfies subsection 81-10(4) of the GST Act. The payment is consideration for a taxable supply.

Facts

The entity is a Tribunal established under a State Act of Parliament, and is registered for GST. It carries on its activities in the 'form of a business', within the meaning of paragraph 9-20(1)(a) of the GST Act. It is an 'Australian government agency' for the purposes of section 195-1 of the GST Act. A number of different 'fees' are payable to the Tribunal Registrar in accordance with the State Act, and as prescribed in regulations made under the State Act.

One of these fees is described as a 'daily hearing fee'. It is a 'user pays' fee intended to recoup the costs of providing the services of the Tribunal. The owner of a recently constructed domestic residence (a 'householder') may apply for a dispute the householder has with the builder of the house to be heard and resolved by the Tribunal. If the matter proceeds, a prescribed fee is imposed on the householder, based on the number of days over which the Tribunal hears the matter. For GST purposes, the amount imposed as a daily hearing fee is not an 'Australian tax', and is of the nature of a fee or charge.

The daily hearing fee is not an 'Australian fee or charge' (or a kind of fee or charge) prescribed for the purpose of any regulations made under subsection 81-10(2) of the GST Act, which is about requiring a payment of an Australian fee or charge to be treated as consideration for a supply. Nor is the fee prescribed in any regulation made under section 81-15 of the GST Act, which is about treating certain Australian fees or charges as not being the provision of consideration.

In this instance, the subject matter of the decision the Tribunal is hearing does not fall within the scope of subsection 81-10(4) of the GST Act, about permissions, or subsection 81-10(5) of the GST Act, about information.

Reasons for Decision

Tax Laws Amendment (2011 Measures No. 2) Act 2011 (the amending Act), replaces former Division 81 of the GST Act with a new Division 81. In accordance with an application provision in the amending Act (item 16 of Schedule 4):

•

the new Division 81 applies in relation to the payment (or the discharging of the liability to make a payment) relating to any Australian tax, or any Australian fee or charge, imposed on or after 1 July 2011.

•

however, if the Australian tax, or the Australian fee or charge, is imposed before 1 July 2012, former Division 81 continues to apply (is 'grandfathered'), provided the payment is of a kind specified by a legislative instrument (a Division 81 Determination) made for the purposes of former subsection 81-5(2) of the GST Act, and in force immediately prior to 27 June 2011.

In this case, as the amount is imposed on or after 1 July 2012, former Division 81 can have no application, and the fee or charge must be considered under new Division 81 (in this ATO ID now referred to simply as 'Division 81').

In considering whether Division 81 of the GST Act has the effect of excluding the payment (or the discharging of a liability to make payment) of a fee or charge from being the provision of consideration, the following matters need to be considered:

•

does the fee or charge meet the definition of an 'Australian fee or charge'?

•

if so, is the payment covered either by subsection 81-10(4) of the GST Act, which is about permissions, exemptions, authorities or licences; or by subsection 81-10(5) of the GST Act which is about the provision of information?

•

alternatively, is payment of the fee or charge covered by a regulation made under section 81-15 of the GST Act?

•

conversely, is the fee or charge prescribed in a regulation made under subsection 81-10(2) of the GST Act which is about treating a payment as the provision of consideration?

The definition in section 195-1 of the GST Act of an 'Australian fee or charge' can be considered under the following three limbs:

(i)

a fee or charge (however described), other than an Australian tax;

(ii)

imposed under an 'Australian law'; and

(iii)

payable to an 'Australian government agency'.

The amount described as a 'daily hearing fee' is payable by a person who has applied for a Tribunal hearing. It is based on the number of days over which the Tribunal hears the matter. The facts state that for GST purposes the amount imposed is not an 'Australian tax', and is of the nature of a 'fee or charge'. The first limb of the definition of 'Australian fee or charge' is met.

An 'Australian law' has the meaning given by section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997). It is a 'Commonwealth law', a 'State law', or a 'Territory law'. A 'State law' is defined as a law of a State. This fee is imposed under a law of a State. Accordingly the second limb of the definition of 'Australian fee or charge' is met.

The facts state the entity is a Tribunal, and an Australian government agency and that the fee is payable to the Tribunal Registrar. The third limb of the definition of an Australian fee or charge is met.

The daily hearing fee is therefore considered to be an 'Australian fee or charge' as defined.

Under subsection 81-10(1) of the GST Act, a payment is not consideration to the extent the payment is an Australian fee or charge that is of a kind covered by subsection 81-10(4) or subsection 81-10(5).

Subsection 81-10(4) of the GST Act covers a fee or charge if the fee or charge:

(a)

relates to; or

(b)

relates to an application for;

the provision, retention, or amendment, under an Australian law, of a permission, exemption, authority or licence (however described).

The individual terms 'permission', 'exemption', 'authority' and 'licence' are not defined in the GST Act, and take their ordinary meanings in the context in which they are used. In explaining 'a fee or charge in relation to the provision, amendment or retention of a permission, exemption, authority or licence (however described)', the explanatory memorandum (EM) to the Tax laws Amendment (2011 Measures No.2) Bill states at paragraph 4.27:

A fee or charge in relation to the provision, amendment or retention of a permission, exemption, authority or licence (however described) includes but is not limited to:

•

application fees, licences, permits and certifications that are required by government prior to undertaking an occupation (for example, medical and legal professionals' right of practice licences, pilots' licences, heavy vehicle drivers' licences and adjustments to such licences); and

•

regulatory charges imposed to undertake an activity (for example, compulsory testing fees for regulatory purposes, compulsory inspection fees for regulatory purposes, a permit for restaurants to occupy the footpath, and a licence for an event to close roads).

The examples from the EM are of fees or charges paid in order for the payer to be authorised to undertake an occupation, or an activity.

The facts state that the subject matter of the issue to be heard and resolved by the Tribunal is a contractual dispute between the householder and the builder.

Having regard to the explanation provided by the EM, it is considered that the daily hearing fee is not a fee paid that relates to, or relates to an application for, the provision of a 'permission, exemption, authority or licence' for the purposes of subsection 81-10(4) of the GST Act. Rather, it is a fee paid for the services of the Tribunal for it to hear and resolve the dispute.

A related provision to consider is subsection 81-10(5) of the GST Act, which covers a fee or charge paid to an Australian government agency if the fee or charge relates to the agency doing any of the following:

(a)

recording information;

(b)

copying information;

(c)

modifying information;

(d)

allowing access to information;

(e)

processing information;

(f)

receiving information;

(g)

searching for information.

The daily hearing fee relates to the services to the householder of the Tribunal considering and dealing with the matter before it, a dispute between the householder and a builder. It is considered that these services do not fall within the list of information related activities that appear in subsection 81-10(5) of the GST Act. Also, as stated in the facts, the subject matter of the decision the Tribunal is hearing does not fall within the scope of subsection 81-10(5) of the GST Act.

As stated in the facts, the fee is not prescribed in any regulations made for the purpose of subsection 81-10(2) of the GST Act or section 81-15 of the GST Act.

It is concluded that Division 81 of the GST Act has no impact on the GST treatment of payment of the fee, if the fee is imposed on or after 1 July 2012.

To determine whether the fee is subject to GST, the general provisions of the GST Act must be considered.

Under section 9-5 of the GST Act, you make a taxable supply if:

(a)

you make the supply for consideration;

(b)

the supply is made in the course or furtherance of an enterprise that you carry on;

(c)

the supply is connected with Australia, and

(d)

you are registered, or required to be registered.

However the supply is not a taxable supply to the extent that it is GST-free or input taxed.

In this case:

•

the Tribunal carries out its proceedings in response to the application from a person, the householder. There is a supply of services (paragraph 9-10(2)(b) of the GST Act) to that person (of hearing and resolving the dispute).

•

the fee payable by the person who applied for the proceedings has a nexus with the supply of services, and is 'consideration' (paragraph 9-15(1)(a) of the GST).

•

as stated in the facts, the Tribunal carries out its activities 'in the form of a business' for the purposes of paragraph 9-20(1)(a) of the GST Act.

•

the supply of services is a thing done in Australia, and is connected with Australia under paragraph 9-25(5)(a) of the GST Act.

•

the Tribunal is registered for GST.

All of the positive requirements of section 9-5 of the GST Act are satisfied. The supply is not GST-free or input taxed. Accordingly the fee is consideration for a taxable supply, if the fee is imposed on or after 1 July 2012. Payment of the fee is subject to GST.

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 9-5
   paragraph 9-5(b)
   paragraph 9-10(2)(b)
   paragraph 9-15(1)(a)
   paragraph 9-20(1)(a)
   paragraph 9-20(1)(g)
   paragraph 9-25(5)(a)
   Division 81
   former Division 81
   former subsection 81-5(2)
   subsection 81-10(1)
   subsection 81-10(2)
   subsection 81-10(4)
   subsection 81-10(5)
   section 81-15
   section 195-1

Related Public Rulings (including Determinations)
Miscellaneous Tax Ruling MT 2006/1

Related ATO Interpretative Decisions
ATO ID 2012/21

Other References:
Explanatory Memorandum to Tax laws Amendment (2011 Measures No.2) Bill of 2011

Keywords
Australian fee or charge
Australian tax
Consideration
Division 81
Goods and services tax
Payment of an Australian fee or charge

Business Line:  Indirect Tax Centre of Expertise

Date of publication:  30 March 2012

ISSN: 1445-2782