ATO Interpretative Decision

ATO ID 2013/38

Goods and Services Tax

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Issue

Is the entity, a waste disposal facility operator, liable for GST on the total amount charged to customers for allowing them to dispose of waste at a waste disposal facility, which includes amounts for the recovery of a waste levy under relevant state or territory environment protection legislation and regulations and carbon pricing mechanism costs under Commonwealth legislation?

Decision

Yes, the entity is liable for GST on the total amount charged to customers for allowing them to dispose of waste at a waste disposal facility, including amounts for the recovery of a waste levy and carbon pricing mechanism costs even if the amounts are identified separately in tax invoices issued to customers.

Facts

The GST registered entity operates a waste disposal facility and charges customers for allowing them to dispose of waste at the facility.

The entity incurs costs in relation to operating the waste disposal facility including:

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levies for which the entity is liable under relevant state or territory environment protection legislation and regulations (waste levy) to pay to a state or territory environment protection authority (EPA); and

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under the carbon pricing mechanism (CPM) of the Clean Energy Act 2011 (CE Act), as a 'liable entity' under Subdivision B of Division 2 of Part 3 of the CE Act.

The entity recovers the waste levy and CPM costs by including amounts in relation to these costs in the total amount charged to customers when they dispose of waste at the facility.

In some cases, the amounts recovered in relation to the waste levy and CPM costs are identified separately in the tax invoices issued to customers.

Reasons for Decision

Division 81 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) applies to the payment (or the discharging of the liability to make a payment) of Australian taxes or Australian fees or charges, to an Australian government agency by an entity which is liable for the tax, fee or charge under the provisions of the applicable Australian law. The payment of fees or charges to which Division 81 applies is not subject to GST.

In the present case, the entity is required to pay the waste levy to the EPA (an Australian government agency) under relevant state or territory environment protection legislation. The term 'waste levy' has been variously described, including as 'waste disposal contribution', 'landfill levy' or 'waste depot levy'.

The CPM applies in relation to the entity's waste disposal facility and the entity is a 'liable entity' under Subdivision B of Division 2 of Part 3 of the CE Act. The entity's liabilities to pay these amounts arise in relation to the application of these Australian laws to the operation of the waste disposal facility by the entity.

When the entity pays the waste levy and the CPM amounts to the relevant Australian government agency, Division 81 of the GST Act applies to the payments and these payments are not subject to GST. This is because these amounts are Australian fees or charges imposed on the entity under an Australian law that are payable to an Australian government agency, and the entity is the entity that is liable to pay for these amounts under the relevant law. Therefore, the entity will not need to account for any input tax credits on these payments as no GST is included in the amounts paid by the entity.

When the entity allows customers to dispose of waste at its waste disposal facility and charges customers a fee, the entity is making a taxable supply of waste management services under section 9-5 of the GST Act and the fee charged is consideration for that supply. The entity calculates the fee charged on a commercial basis. Generally, the calculation of such fees can be affected by many factors and typically reflect the costs of providing the services including, for example, costs of Australian taxes and Australian fees and charges for which the entity is liable and which the entity may seek to recover. In the present case, the entity may identify separate amounts in relation to the waste levy and CPM costs in the tax invoices issued to customers to indicate some or all of these costs are being recovered in the total amount charged for the services.

Accordingly, consistent with the view expressed at paragraphs 8 and 9 of Goods and Services Tax Determination GSTD 2000/10 Goods and services tax: are outgoings payable by a tenant under a commercial property lease part of the consideration for the supply of the premises?, Division 81 of the GST Act does not apply to amounts for the recovery of waste levy and CPM costs included in the total amount charged to customers.

Therefore, the total amount charged to customers, including amounts for the recovery of waste levy and CPM cost, is the consideration for the taxable supply of waste management services made by the entity and the entity is liable to pay GST to the ATO on the taxable supply. That is, the entity does not exclude the amounts included for recovery of these costs when calculating the GST payable by customers even if the amounts are identified separately in tax invoices issued to customers.

Note: Subsection 81-10(2) of the GST Act provides that an Australian fee or charge may be prescribed by the regulations as being a fee or charge that constitutes consideration. Fees for the use of a waste disposal facility are covered by paragraph 81-10.01(1)(d) of the A New Tax System (Goods and Services Tax) Regulations. This means that payment of the total amount charged to customers, including amounts for the recovery of waste levy and CPM costs, is specifically treated as consideration for a supply.

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 9-5
   Division 81
   subsection 81-10(2)

Related Public Rulings (including Determinations)
GSTR 2000/10

Keywords
Australian tax
Australian fee or charge
Australian government agency
Australian law
consideration
goods and services tax
supply

Siebel/TDMS Reference Number:  1-4SOPWEG

Business Line:  Interpretative Assistance, ITX

Date of publication:  5 July 2013

ISSN: 1445-2782