Edited version of private advice

Authorisation Number: 1051737443654

Date of advice: 28 August 2020

Ruling

Subject: Goods and services tax and burial rights

Question

Is the supply by an Australian Government Agency of a grant of right of burial, or a renewal of a grant of right of burial, exempt from GST pursuant to Division 81 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes

Relevant facts and circumstances

You are registered for GST.

You are an Australian Government Agency (AGA).

In performing your functions, you may grant to a person for a term the right of burial (also commonly known as a right of interment) in a specified area of a cemetery and the right to place a memorial on that area. The right of burial is in respect of a plot, mausoleum, vault, ossuary or designated areas of the cemetery where cremated ashes are placed.

On the application by the holder of a grant of a right of burial you may, under a state law, renew the right of burial for a further term.

The supply of a right of burial or renewal of a right of burial in your particular State/Territory can only be made by an AGA.

You have the power to make By-laws that are necessary or convenient for the purposes of the state law including for regulating the grant of rights of burial and regulating the manner of payment and the receipt of fees and charges.

A grant confers on the holder during the term of the grant, an exclusive right:

·         to bury one or more dead bodies, or the ashes of one or more dead bodies in the grave specified in the grant; and

·         to carry out monumental works on the grave specified in the grant.

You may by resolution set fees and charges for, amongst other things, a grant or renewal of a grant of a right of burial.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 9-5

A New Tax System (Goods and Services Tax) Act 1999 Subsection 81-10(1)

A New Tax System (Goods and Services Tax) Act 1999 Subsection 81-10(2)

A New Tax System (Goods and Services Tax) Act 1999 Subsection 81-10(4)

A New Tax System (Goods and Services Tax) Act 1999 Subsection 81-10(5)

A New Tax System (Goods and Services Tax) Act 1999 section 81-15

A New Tax System (Goods and Services Tax) Act Regulations 2019

Reasons for decision

Summary

The supply by an AGA of a right of burial or renewal of a right of burial is not a taxable supply on which GST is payable. This is because the fee or charge for the grant of or renewal of a right of burial is not consideration for a supply and accordingly not a taxable supply pursuant to subsection 81-10(1) of the GST Act.

Legislation

Under section 9-40 of the GST Act you must pay the GST payable on any taxable supply that you make. Section 9-5 of the GST Act provides that you make a taxable supply if, amongst other things not presently relevant, you make the supply for consideration.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. The GST-free and input taxed provisions set out in Divisions 38 and 40 of the GST Act are not applicable to the supplies (grant of or renewal of a right of burial) the subject of this Ruling.

As you are registered for GST and make a grant of or renewal of a right of burial in the course of your enterprise as a cemetery operator for a fee, the issue that arises under section 9-5 of the GST Act is whether such supplies are made for 'consideration'.

The term 'supply' is defined in section 9-10 of the GST Act as 'any form of supply whatsoever' and includes amongst other things, a supply of services, a provision of information, a...grant ...of any right, an entry into, or release from, an obligation to do anything, to refrain from an act or to tolerate an act or situation and would include a grant of or renewal of a right of burial.

Subsection 9-15(1) of the GST Act provides that consideration includes any payment, or any act or forbearance, in connection with, in response to or for the inducement of a supply of anything.

The definition of consideration in section 9-15 of the GST Act is so broad that it would likely include the fees charged for the grant of or renewal of a right of burial.

On the facts provided all of the requirements for a taxable supply would be satisfied and as such the supplies of a grant of or renewal of a grant of a right of burial would be a taxable supply. This would be the case unless Division 81 of the GST Act comes into operation to preclude the fees in question from being the provision of consideration.

Division 81 of the GST Act

Subsection 81-10(1) of the GST Act relevantly provides that a payment, or the discharging of a liability to make a payment, is not the provision of consideration to the extent the payment is an Australian fee or charge that is of a kind covered by subsections 81-10(4) or (5) of the GST Act.

Subsection 81-10(4) of the GST Act covers a fee or charge if the fee or charge relates to or relates to an application for the provision, retention, or amendment, under an, Australian law of a permission, exemption, authority or licence (however described).

Subsection 81-10(5) of the GST Act 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:

·         recording information

·         copying information

·         modifying information

·         allowing access to information

·         receiving information

·         processing information, and

·         searching for information.

As the fees above are not consideration, a supply to which they relate will not be a taxable supply unless the fee or charge is also of a kind covered by subsections 81-10(2) and (3) of the GST Act.

Subsections 81-10(2) and (3) of the GST Act narrow the operation of subsection 81-10(1) by providing that the payment of certain fees and charges prescribed by regulation is treated as the provision of consideration for a supply. These supplies will be taxable supplies where the other requirements of a taxable supply, as provided under section 9-5 of the GST Act, are satisfied.

In this way, the regulations prescribed for subsection 81-10(2) of the GST Act were made to treat the payment of an Australian fee or charge that would otherwise be covered by subsections 81-10(4) and (5) of the GST Act, as consideration for a supply.

Subsection 81-10.01(1) of the A New Tax System (Goods and Services Tax) Regulations 2019 (GST Regulations) provides, amongst other things, that for subsection 81-10(2) of the GST Act, the following kinds of Australian fees or charges are prescribed:

(a)  ...

(f) a fee or charge for the provision of information by an Australian government agency if the provision of the information is of a non-regulatory nature;

(g) a fee or charge for a supply of a non-regulatory nature; ...

(h) a fee or charge for a supply by an Australian government agency, where the supply may also be made by a supplier that is not an Australian government agency.

Conversely, section 81-15 of the GST Act provides that where a fee or charge is prescribed by regulation, the payment of the fee or charge is not treated as the provision of consideration. Accordingly, a supply to which the fee or charge may relate will not be subject to GST.

Section 81-15.01 to the GST Regulations sets out those kinds of Australian fees and charges that are prescribed for section 81-15 of the GST Act and which do not constitute consideration. In particular paragraph 81-15.01(f) to the GST Regulations refers to a fee or charge for a supply of a regulatory nature made by an AGA and paragraph 81-15.01(d) to the GST Regulations which refers to a fee or charge to compensate an AGA for costs incurred by the agency in undertaking regulatory activities.

The term 'Australian fee or charge' is defined in section 195-1 of the GST Act as:

Australian fee or charge means a fee or charge (however described), other than an Australian tax, imposed under an *Australian law and payable to an *Australian government agency.

An AGA and an Australian law are terms defined in section 995-1 of the ITAA 1997 as:

Australian law means a *Commonwealth law, a *State law or a *Territory law.

Australian government agency means:

(a)  a Commonwealth, a State or a Territory or

(b)  an authority of the Commonwealth or of a State or a Territory.

(*Asterisked terms are defined in the Dictionary in section 995-1 of the ITAA 1997.)

Are the fees for the grant of or renewal of a right of burial an Australian fee or charge?

With regards to the elements of Division 81 of GST Act and on the facts provided you are an AGA for GST purposes. The fees in question are not an Australian tax as they don't have the character of a tax falling within the concept of a 'fee for service'. The fees are imposed under the state law and By-law which comes within the definition of an Australian Law. On that basis, the fees set by you under the state law come within the definition of an Australian fee or charge.

Are the fees for the grant of or renewal of a right of burial of a kind covered by subsection 81-10(4) of the GST Act?

Subsection 81-10(4) of the GST Act covers fees and charges that relate to the provision, retention or amendment of a permission, exemption, authority or licence (however described). The terms 'permission, exemption, authority or licence' are not defined in the GST Act and therefore take on their ordinary meaning, unless it has a special or technical meaning (Uber BV v Commissioner of Taxation [2017] FCA 110, per Griffiths J at paragraphs 133 to 142).

The ordinary meaning of the terms 'permission' and 'licence' as defined in The Macquarie Dictionary online https://www.macquariedictionary.com.au/ Australia (Macquarie) are:

permission noun

1. the act of permitting; formal or express allowance or consent.

2. liberty or licence granted to do something...

Licence noun

1.    formal permission or leave to do or not to do something.

2.    formal permission from a constituted authority to do something, as to carry on some business or profession, to be released from jail for part of one's sentence under specific restrictions, etc.

3.    a certificate of such permission; an official permit ...

Relevant to fees in relation to the grant (provision) of a right of burial or renewal of a right of burial is the word 'permission' which clearly connote allowing, permitting or consenting to something being done. The grant of a right of burial or renewal of a right of burial has the character of a formal permission from the grantor (you) under an Australian law (state law) to do something or allow something to be done (inter/bury human remains). It follows that the burial right or renewal of the burial right comes within the ordinary meaning of 'permission' in the context of the GST Act.

Licence

The definition of 'licence' was considered in Federal Commissioner of Taxation v. United Aircraft Corp (1943) 68 CLR 525 as providing an excuse for an act which would otherwise be unlawful, for example, an entry upon a person's land, or the infringement of a patent or copyright. It is an authority to do something which would otherwise be wrongful or illegal or inoperative.

A licence agreement in relation to land is the granting of a permission to use the land in consideration of a fee subject to the conditions set out in the licence. Windeyer J in Radaich v Smith (1959) 101 CLR 209 said in order to determine whether there is a licence to enter land and use it for some stipulated purpose or purposes, the appropriate approach is to see whether the grantee was given a legal right of exclusive possession of the land for a term or from year to year or for a life or lives.

In determining the exclusivity associated with burial rights, the scope of exclusive possession and the nature of burial rights are relevant. Lord Templeman in Street v Mountford [1985] AC 809 stated the scope of exclusive possession gives the holder the ability to exercise the rights of an owner of land with an authority to keep out strangers and the landlord from the land. Likewise, as Young J observed in Di Napoli v New Beach Apartments Pty Ltd (2004) 11 BPR 21, the modern common law doctrine in relation to property rights provide landowners with substantial control of the air space above the land at a necessary height required for ordinary enjoyment and land use as well as subterranean rights beneath the land surface for considerable depth. It follows that the right of exclusive possession includes an authority to keep out strangers and the landlord from the land, extending to a considerable depth of the soil beneath the surface and the air space above it at a reasonable height.

Despite the lack of legal authority on exclusive rights of burial in Australia, Young J in Smith v Tamworth City Council and Ors[1997] NSWSC 197 (Smith) observed the following features of burial rights after considering relevant American authorities, English law and local positions:

·         a right of burial is not an easement, but a licence: it is irrevocable once a body has been buried in the licensed plot;

·         the cemetery authority is able to make reasonable by-laws as to the maintenance of the appearance of the cemetery;

·         subject to such by-laws, the holder of the Right of Burial has the power to decide on the appearance of the grave and headstone;

·         the holder of the Right of Burial cannot use his or her right in such a way as to exclude friends and relatives of the deceased expressing their affection for the deceased in a reasonable and appropriate manner such as by placing flowers on the grave.

In Smith, the question was what are the rights and obligations of the holder of the Right of Burial. There, Young J concluded in NSW, the right obtained through purchasing a burial plot at a public cemetery was an irrevocable licence to have a body buried in that plot together with ancillary rights to have the body undisturbed and the right to care for the grave.

Young J made reference to Sankey LJ's observation in Hoskins-Abrihall v Paignton UDC [1929] 1 Ch 375, at 389 where he made clear that an exclusive right of burial does not prevent the public from placing flowers on a grave, a custom that is commonly observed in any cemetery. The decision confirms that an exclusive right of burial does not give a right to control the surface of the grave or affect the ultimate authority of the cemetery authority to make reasonable decisions on what is appropriate for the management and control of that cemetery.

The analysis of Smith suggests that the burial right included a licence to do all that was proper and reasonable to keep the grave in a decent state of repair. This right maybe limited by the terms of the statute under which the burial right was acquired. It does not allow the grantee to open a grave vault for purposes other than burial, or to exclude friends and relatives of the deceased expressing their affection for the deceased in a reasonable and appropriate manner, such as by placing flowers on the grave.

In terms of burial rights, it is a common misconception that a person owns a burial plot after purchasing a right of interment. What is actually purchased is the right to determine who can be buried in the plot, situated beneath the land surface. The holder of a burial right cannot prevent any members of the public from walking over the surface of a burial plot or from expressing affection for the deceased.

A right of burial does not prevent the cemetery authority as agent of the landowner from restricting the size and type of monuments that can be placed at the burial site. The only exclusivity provided by a burial right is the lack of access to the burial plot once a body is interred. The purpose of such an exclusion is to prevent buried remains from being disturbed for the duration of their interment in the interest of the public, as distinguished from protection of personal enjoyment and private use entitled as holder of a burial right.

It is therefore reasonable to conclude that the grant of a right of burial or renewal of a right of burial in your case is aligned with obtaining a permission, authority or a licence for interment at a public cemetery. The state law makes it clear that the right of burial at public cemeteries requires a permission or licence from you in the form of a grant of a right upon payment of an associated fee.

Both the grant of and renewal of a right of burial have the character of a formal permission or licence from you to do something which, in this case, is to bury a dead body or ashes of a dead body such that a grant of a right of burial or renewal of a right of burial could be construed to be the provision or retention of a 'permission, exemption, authority or licence' (however described) for the purposes of subsection 81-10(4) of the GST Act

Are fees for the grant of or renewal of rights of burial prescribed by the GST Regulations?

Section 81-15.01 of the GST Regulations sets out those fees and charges that are expressly excluded from being the provision of consideration for a supply. Relevantly fees for burial rights and renewal of burial rights, if charged to compensate you as an AGA for the costs incurred by you in undertaking a regulatory activity (paragraph 81-15.01(d) of the GST Regulations) or for a supply of a regulatory nature made by an AGA (paragraph 81-15.01(f) of the GST Regulations) will not constitute consideration for the supply.

Subsection 81-10 (2) of the GST Act may also, by regulation, expressly include certain Australian fees or charges as being consideration for a supply. Relevantly paragraph 81-10.01(1)(g) to the GST Regulation includes, for the purposes of subsection 81-10(2) of the GST Act, a fee or charge for a supply of a non-regulatory nature whilst paragraph 81-10.01(1)(h) to the GST Regulation includes, a fee or charge for a supply by an AGA where the supply may also be made by a supplier that is not an AGA.

Fees or charges for the supply of a grant of or renewal of a right of burial are not specifically listed in the GST Regulations. Paragraphs 81-10.01(1)(g) of the GST Regulations is mutually exclusive with paragraphs 81-15.01(d) and 81-15.01(f) of the GST Regulations. It follows that in deciding whether a fee for the supply of a grant of or renewal of a burial right is consideration for the supply it is necessary to determine whether or not the supply for which the fee is charged is regulatory or non-regulatory.

We note that in your circumstance only an AGA may be a supplier of a grant of burial right or renewal of right of burial under the state law and as such paragraph 81-10.01(h) of the GST Regulations does not apply.

Are the fees for the grant of or renewal of a right of burial regulatory or non-regulatory?

Paragraph 81-10.01(1)(g) of the GST Regulations ensures that the non-regulatory activities of government are subject to GST where the requirements of section 9-5 of the GST Act are satisfied.

The meaning of the term 'regulatory' is not defined in the GST Regulations or the GST Act. The explanatory statement to the A New Tax System (Goods and Services Tax) Amendment Regulation 2012 (No.2) (Explanatory Statement) explains that paragraph 81-10.01(1)(g) of the GST Regulations applies to goods and services for which fees are imposed where the consumer is provided with something that lacks a regulatory character. In other words, the fee or charge covered by paragraph 81-10.01(1)(g) of the GST Regulations does not include the kind arising under an Australian law intended to regulate behaviour, ensure consumer protection or ensure compliance with certain standards, as they are regulatory in nature.

In construing the definition of 'regulatory', the Explanatory Statement provides that it' captures those supplies made by a government agency, where the agency is legislatively empowered to make the relevant supply and the supply is to satisfy a regulatory purpose'. This can be contrasted with supplies (and payments) that would be made in the ordinary course of commerce even in the absence of regulation. Such supplies would be non-regulatory.

In the present case you are an AGA and are legislatively empowered under the state law and the By-law to make the supply of a grant of or renewal of a right of burial.

The grant of or renewal of a right of burial is to satisfy a regulatory purpose under the state law in that the grant of a burial right is integral to the management and control of public cemeteries and in the disposal of human remains in such cemeteries.

The state law provides that you may and in this case you have made the By-law for the purpose of, amongst other things, regulating the grant of rights of burial. The fee for burial rights arises under the state law and is intended to regulate behaviour and ensure compliance with certain standards in relation to the interment and placement of human remains. This is to ensure that such remains are properly disposed of and remain in their appropriate places of burial. In the absence of the state law, the disposal of human remains by anyone on public land in any manner would be lawful.

In most cases, human remains can only be interred (i.e. buried) or placed in designated cemeteries. The state law provides that a person shall not bury or assist at the burial of a dead body in any place other than a cemetery that is not closed unless the burial is in accordance with the Minister's authorisation given or is permitted under the state law.

Regulatory charges can be contrasted with resource and commercial charges. For these types of charges, the pricing is set by value-based, commercial or cost recovery. Legislation may not be required. Examples of resources charges are rights and privileges including licences to natural resources. This also includes lease and use of public property or infrastructure. Examples of commercial charges are sale of publications or data, provision of specialist expertise and advertising and sponsorship.

Having had regard to the ordinary meaning of the various terms and the state law and By-law, the grant of or renewal of a right of burial is a supply of a regulatory nature and as such paragraph 81-10.01(1)(g) of the GST Regulations will not apply.

Accordingly, the fee or charge for the supply of the grant of or renewal of a right of burial is not the provision of consideration either because:

·         it is a fee or charge that comes within subsection 81-10(1) of the GST Act being a fee or charge of a kind covered by subsection 81-10(4) of the GST Act and not of a kind covered by subsection 81-10.01(1) of the GST Regulations or

·         it is a fee or charge of a kind covered by paragraph 81-15.01(d) or (f) of the GST Regulations prescribed for section 81-15 of the GST Act.

As such the supply of the grant of or renewal of a right of burial is not a taxable supply under section 9-5 of the GST Act.