Class Ruling

CR 2014/6

Goods and services tax: the GST treatment of fees and charges imposed by NSW Councils in relation to matters involving administration, animals, approvals / permits, health, impounding and pest control

• Please note that the PDF version is the authorised version of this ruling.
  This Ruling contains references to provisions of the A New Tax System (Goods and Services Tax) Regulations 1999, which have been replaced by the A New Tax System (Goods and Services Tax) Regulations 2019. This Ruling continues to have effect in relation to the remade Regulations.

  Paragraph 32 of TR 2006/10 provides further guidance on the status and binding effect of public rulings where the law has been repealed and rewritten.

  A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this Ruling is available.

What this Ruling is about

1. This Ruling sets out the Commissioner's opinion on the way in which the relevant provision(s) identified below apply to the defined class of entities, who take part in the scheme to which this Ruling relates.

Relevant provision(s)

2. The relevant provisions dealt with in this Ruling are:

•

Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act);

•

Division 81 of the GST Act;

•

Regulation 81-10.01 of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations);

•

Regulation 81-15.01 of the GST Regulations; and

•

Regulation 81-15.02 of the GST Regulations.

Unless otherwise stated, all legislative references in this Ruling are to the GST Act.

Class of entities

3. The class of entities to which this Ruling applies consists of all Councils that are members of the Local Government and Shires Association of New South Wales.

4. Within this Ruling the class of entities is collectively referred to as Council.

Qualifications

5. The Commissioner makes this Ruling based on the precise scheme identified in this Ruling.

6. The class of entities defined in this Ruling may rely on its contents provided the scheme actually carried out is carried out in accordance with the scheme described in paragraphs 9 to 13 of this Ruling.

7. If the scheme actually carried out is materially different from the scheme that is described in this Ruling, then this Ruling:

•

has no binding effect on the Commissioner because the scheme entered into is not the scheme on which the Commissioner has ruled; and

•

may be withdrawn or modified.

Date of effect

8. This Ruling applies from 1 July 2013 to all entities within the specified class who entered into the specified scheme during the term of the Ruling. However, this Ruling will not apply to taxpayers to the extent that it conflicts with the terms of a settlement of a dispute agreed to before the date of issue of this Ruling (see paragraphs 75 and 76 of Taxation Ruling TR 2006/10).

Scheme

9. The following description of the scheme is based on information provided by the applicant.

10. The scheme incorporates the supplies made by Council in relation to matters involving administration, animals, approvals / permits, health, impounding and pest control.

11. Council is registered for goods and services tax (GST).

12. By force of section 220 of the Local Government Act 1993 (LG Act), Council is a body politic of the State of New South Wales (NSW) with perpetual succession and the legal capacity and powers of an individual, both in and outside the State.

13. Council is an Australian government agency that is empowered under the LG Act to:

•

provide goods, services and facilities and to carry out activities, appropriate to the current and future needs of local communities and of the wider public

•

maintain responsibility for administering the regulatory systems under the LG Act

•

manage, improve and develop the resources of their local government areas, and

•

Council levies charges for goods and services under various sections of the LG Act and the other NSW statutes.^[1] In particular, under section 608 of the LG Act a Council may charge and recover an approved fee for any service it provides.

Ruling

14. This Ruling addresses the GST treatment of supplies made by Council in relation to matters involving administration, animals, approvals / permits, health, impounding and pest control for which particular fees and charges are imposed.

15. When we indicate a fee or charge relates to a taxable supply under section 9-5, we assume all the requirements of section 9-5 have been met and that the supply is not otherwise GST-free or input taxed under other provisions of the GST Act.

16. In this Ruling, if a fee or charge is not consideration for a supply and is not subject to GST by virtue of Division 81, it is referred to as being 'exempt'.

17. The following tables set out the GST treatment:

Commissioner of Taxation
22 January 2014

Appendix 1 - Explanation

Taxable supply

18. Subsection 7-1(1) provides that GST is payable on taxable supplies. As such, Council is liable to pay the GST payable on any taxable supply it makes. Section 9-5 states:

9-5 Taxable supplies

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.

(* Asterisked terms are defined in the Dictionary in section 195-1)

19. As Council is registered for GST and makes supplies in carrying on its enterprise in Australia, the issue that arises under section 9-5 is whether such supplies are supplies for consideration.

20. Section 9-39 provides special rules in relation to making taxable supplies. In particular, item 8 in the table in section 9-39 provides that where there is a payment of taxes, fees and charges the special rules in Division 81 may apply.

Division 81

Australian tax

21. Section 81-5 considers the effect of the payment of a tax. It states:

81-5 Effect of payment of tax

Australian tax not consideration

(1)

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 tax.

Regulations may provide for exceptions

(2)

However, a payment you make, or a discharging of your liability to make a payment, is treated as the provision of *consideration to the extent the payment is an *Australian tax that is, or is of a kind, prescribed by the regulations.

(3)

For the purposes of subsection (2), the *consideration is taken to be provided to the entity to which the tax is payable, for a supply that the entity makes to you.

22. The term 'Australian tax' is defined in section 195-1 as:

Australian tax means a tax (however described) imposed under an *Australian law.

23. 'Tax' is not defined in the GST Act. However, the following is the usual description of a tax, as cited in the High Court case of Roy Morgan Research Pty Ltd v. CMR of Taxation [2011] HCA 35 (Roy Morgan), as per Latham CJ in Matthews v. Chicory Marketing Board (Vict) (1938) 60 CLR 263.

.....a compulsory exaction of money by a public authority for public purposes, enforceable by law, and is not a payment for services rendered ...

24. The above description includes the words 'not a payment for services rendered'. It was discussed in Air Caledonie International v. Commonwealth (1988) 165 CLR 462 that in order to be classified as a fee for service rather than a tax, the fee or charge must be exacted for particular identified services provided or rendered individually to, or at the request or direction of, the particular person required to make the payment.

25. We consider that none of the payments or the discharging of a liability to make such payments as detailed in the table on pages 4 to 36 of this Ruling is a tax.

Australian fees and charges

26. Sections 81-10 and 81-15 consider the effect of the payment of certain fees and charges and state:

81-10 Effect of payment of certain fees and charges

Certain fees and charges not consideration

(1)

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 subsection (4) or (5).

Prescribed fees and charges treated as consideration

(2)

However, a payment you make, or a discharging of your liability to make a payment, is treated as the provision of consideration to the extent the payment is an *Australian fee or charge that is, or is of a kind, prescribed by the regulations.

(3)

For the purposes of subsection (2), the consideration is taken to be provided to the entity to which the fee or charge is payable, for a supply that the entity makes to you.

Fees or charges paid for permissions etcetera.

(4)

This subsection 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).

Fees or charges relating to information and record-keeping etcetera.

(5)

This subsection 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)

receiving information;

(f)

processing information;

(g)

searching for information.

81-15 Other fees and charges that do not constitute consideration

The regulations may provide that the payment of a prescribed *Australian fee or charge, or of an Australian fee or charge of a prescribed kind, or the discharging of a liability to make such a payment, is not the provision of *consideration.

27. The term 'Australian fee or charge' is defined in section 195-1 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.

Australian law

28. The term 'Australian law' is defined in section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) and relevantly includes a State law.

29. An Australian law includes Acts and law making powers which are delegated by parliaments, such as regulations, by-laws, proclamations and orders made under Acts.

Australian government agency

30. The term 'Australian government agency' is defined in section 995-1 of the ITAA 1997 and means:

•

the Commonwealth, a State or Territory; or

•

an authority of the Commonwealth or of a State or a Territory.

For the purposes of this Ruling it is accepted that Council comes within the definition of Australian government agency.

GST Regulations

31. Division 81 gives effect to the principles contained in the Intergovernmental Agreement on Federal Financial Relations (IGA). Payments of taxes are exempt from the GST. Payments of fees and charges generally constitute consideration and if the requirements of section 9-5 of are satisfied, the payment will be for a taxable supply. Some supplies are excluded and will be exempt.

32. The GST Act provides for regulations to prescribe payments that constitute consideration for a supply and, conversely, prescribe payments that are otherwise taxable as being a fee or charge that does not constitute consideration.

Australian fees and charges that do not constitute consideration

33. Regulation 81-15.01 of the GST Regulations sets out those fees and charges that are prescribed for section 81-15 and which do not constitute consideration.

Australian fees and charges that constitute consideration

34. Regulation 81-10.01 of the GST Regulations sets out Australian fees and charges that are prescribed fees and charges treated as consideration for subsection 81-10(2).

Australian fees and charges covered by both regulations 81-10.01 and 81-15.01 of the GST Regulations

35. Regulation 81-15.02 of the GST Regulations deals with how fees and charges are treated if they are covered by both regulations 81-10.01 and 81-15.01 and states:

(1)

The payment of a fee or charge covered by both paragraph 81-10.01(1)(g) and regulation 81-15.01, or the discharge of a liability to pay the fee or charge, is not to be treated as the provision of consideration.

(2)

The payment of a fee or charge covered by both paragraph 81-10.01(a), (b), (c), (d), (e), (f) or (h) and regulation 81-15.01, or the discharge of a liability to pay the fee or charge, is to be treated as the provision of consideration.

(3)

However, payment of a fee or charge covered by both regulations 81-10.01 and 81-15.01, or the discharge of a liability to pay the fee or charge, is not to be treated as the provision of consideration if the fee or charge:

(a)

is specified in the A New Tax System (Goods and Services Tax) (Exempt Taxes, Fees and Charges) Determination 2011 (No. 1), as in force immediately before the commencement of Schedule 4 to the Tax Laws Amendment (2011 Measures No. 2) Act 2011, and

(b)

was imposed before 1 July 2013.

Administration, animals, approvals / permits, health, impounding and pest control

36. The following comments and explanation refer to particular groups of fees and charges in the tables on pages 4 to 36 of this Ruling.

Administration

37. Other relevant ATO guidance in relation to the GST treatment of a credit card surcharge is provided at Issue 15.1 of the Financial services - questions and answers issues register and are available on the ATO website.

Animals, approvals / permits, health, impounding and pest control

38. Generally, payments of these fees and charges are exempt from GST as the GST Act provides for regulations to prescribe certain payments that are treated as not constituting consideration for a supply.

39. However, if a payment is not exempt, it will be consideration for a taxable supply and subject to GST if the requirements of section 9-5 are satisfied, unless the supply is GST-free or input taxed.

Appendix 2 - Legislative references

40. The following NSW Act and Regulation were considered in preparing this Ruling:

•

Local Government Act 1993; and

•

Local Government (General) Regulation 2005.

41. Sections 220 and 608 of the Local Government Act 1993 state:

220 Legal status of a Council

(1)

A Council is a body politic of the State with perpetual succession and the legal capacity and powers of an individual, both in and outside the State.

(2)

A Council is not a body corporate (including a corporation).

(3)

A Council does not have the status, privileges and immunities of the Crown (including the State and the Government of the State).

(4)

A law of the State applies to and in respect of a Council in the same way as it applies to and in respect of a body corporate (including a corporation).

608 Council fees for services

(1)

A Council may charge and recover an approved fee for any service it provides, other than a service provided, or proposed to be provided, on an annual basis for which it is authorised or required to make an annual charge under section 496 or 501.

(2)

The services for which an approved fee may be charged include the following services provided under this Act or any other Act or the regulations by the Council:

•

supplying a service, product or commodity

•

giving information

•

providing a service in connection with the exercise of the Council's regulatory functions-including receiving an application for approval, granting an approval, making an inspection and issuing a certificate

•

allowing admission to any building or enclosure.

(3)

In particular, a Council may charge an approved fee for inspecting premises that are reasonably required to be inspected in the exercise of the Council's functions, whether or not the inspection is requested or agreed to by the owner or occupier of the premises.

(4)

However, a Council may not charge an approved fee for the inspection of premises that are not used for a commercial activity, except where it is necessary to inspect the premises in connection with an application for an approval concerning the premises or in connection with any inspection that is reasonably necessary to determine if an approval has been complied with.

(5)

If inspections of premises are reasonably necessary to determine if an approval has been complied with:

(a)

an approved fee may be charged for such an inspection only if the charging of the fee has been included as a condition of the approval, and

(b)

an approved fee may not be charged for such an inspection before the approval is granted, and

(c)

an approved fee may not be charged for the inspection of any thing for which the Council relies on a certificate under section 93 that the thing has been done in compliance with the approval.

(6)

An approved fee charged for inspecting premises must be repaid to the person who paid it if the inspection is not carried out.

(7)

An approved fee charged in connection with a service provided at an airport established and maintained by the Council may be recovered from the holder of the certificate of registration issued under the Civil Aviation Regulations of the Commonwealth for the aircraft in respect of which the service was provided. This subsection applies whether or not the holder is the person to whom the service is actually provided.

Appendix 3 - Detailed contents list

42. The following is a detailed contents list for this Ruling:

© AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA

You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).

Not previously issued as a draft

References

ATO references:
NO 1-3VCVIA1

Related Rulings/Determinations:

TR 2006/10

Subject References:
goods and services tax
government entities
government related entities
GST consideration
GST regulations
local government

Legislative References:
ANTS(GST)A 1999 7-1(1)
ANTS(GST)A 1999 Div 9
ANTS(GST)A 1999 9-5
ANTS(GST)A 1999 9-15
ANTS(GST)A 1999 9-39
ANTS(GST)A 1999 Div 81
ANTS(GST)A 1999 81-5
ANTS(GST)A 1999 81-10
ANTS(GST)A 1999 81-10(2)
ANTS(GST)A 1999 81-10(4)
ANTS(GST)A 1999 81-15
ANTS(GST)A 1999 195-1
ANTS(GST)R 1999 81-10.01
ANTS(GST)R 1999 81-10.01(1)(a)
ANTS(GST)R 1999 81-10.01(1)(c)
ANTS(GST)R 1999 81-10.01(1)(h)
ANTS(GST)R 1999 81-15.01
ANTS(GST)R 1999 81-15.01(1)(d)
ANTS(GST)R 1999 81-15.01(1)(f)
ANTS(GST)R 1999 81-15.02
ITAA 1997 995-1
Tax Laws Amendment (2011 Measures No. 2) Act 2011 Sch 4
Local Government Act 1993 (NSW)
Local Government Act 1993 220
Local Government Act 1993 608
Local Government (General) Regulation (2005) (NSW)
Copyright Act 1968

Case References:
Air Caledonie International v. Commonwealth
(1988) 165 CLR 462
[1988] HCA 61

Matthews v. Chicory Marketing Board (Vict)
(1938) 60 CLR 263
Roy Morgan Research Pty Ltd v. Federal Commissioner of Taxation
(2011) 244 CLR 97
[2011] HCA 35
2011 ATC 20-282
(2011) 80 ATR 1

Other References:
ANTS (GST) (Exempt Taxes, Fees and Charges) Determination 2011 (No. 1)
Explanatory Statement to the ANTS (GST) Amendment Regulation 2012 (No. 1)
Explanatory Statement to the ANTS (GST) Amendment Regulation 2012 (No. 2)
Intergovernmental Agreement on Federal Financial Relations