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Ruling

Subject: GST and fees

Question 1

Does Division 81 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) apply to exclude from the GST a fee imposed under a section of the relevant Act where the fee applies to a government body established under an associated Act?

Answer

Yes

Question 2

Does Division 81 of the GST Act apply to exclude from the GST a fee imposed under a section of the relevant Act where the fee applies to a non-government body?

Answer

No

Relevant facts

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

· You are a State or Territory of Australia and you impose certain responsibilities under the relevant Act on the Responsible person including:

o The responsible person is required to do certain things in accordance within certain sections of the relevant Act within a specified timeframe and periodically thereafter.

o Certain sections of the relevant Act allow another entity to request the Responsible person to cause a certain action to be made.

o Certain sections of the relevant Act requires the Responsible person to cause such actions as required:

(a) by the Territory, an authority of the Territory, the Minister, an authority or any other public authority or local governing body; or

(b) by or under any law (other than this Act) in force in the Territory; …

· A certain section of the relevant Act provides for the recovery of all or part of the cost incurred by the Responsible person in undertaking his obligations under the sections of the relevant Act.

· The relevant Act does not restrict these actions to be done solely by the Responsible person. However, a section of an associated Act requires a government body established under that Act to use the information prepared by the Responsible person pursuant to the relevant Act for certain things that the government body may be required to do. A non-government body under the associated Act may elect to use the Responsible persons' information but is not compelled to do so.

· This fee or charge is not listed on the A New Tax System (Goods and Services Tax) (Exempt Taxes, Fees and Charges) Determination 2011 (No. 1) (the Determination) that commenced on 1 January 2011.

Your contentions

You contend that:

· The fee or charge is an Australian fee or charge as defined by the GST Act.

· Sub-regulation 81-15.01(1) of the Regulations contains a list of fees and charges that will not be subject to GST because they are taken not to constitute consideration. This list includes:

(f) a fee or charge for a supply of a regulatory nature made by an Australian government agency.

· Regulation 81-15.01 would apply if the activity relating to the fee or charge is of a regulatory nature.

· If regulation 81-1 5.01 does not apply, the activity would be non-regulatory and may fall under regulation 81-1 0.01 which contains a list of fees and charges which constitute consideration.

· Regulation 81-1 0.01 would apply if the activity relating to the fee or charge is of a non- regulatory nature or if a non-government body can make the supply.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999:

Section 9-5

Paragraph 9-5(a)

Section 9-10

Section 81-5

Section 81-10

Subsection 81-10(1)

Subsection 81-10(2)

Subsection 81-10(4)

Subsection 81-10(5)

Section 81-15

Section 195-1

A New Tax System (Goods and Services Tax) Regulations 1999

Regulation 81-10.01

Regulation 81-15.01

Regulation 81-15.02

Income Tax Assessment Act 1997

Section 995-1

Reasons for decision

Issue 1

Question 1

Summary

A fee charged to a government body established under the associated Act for the recovery of all or part of the cost incurred by the Responsible person in undertaking his obligations under certain sections of the relevant Act is an Australian fee or charge. However, it is not consideration for a taxable supply.

Detailed reasoning

When the GST was introduced the Commonwealth, states and territories agreed that the GST would apply to the commercial activities of government at all levels, but that the non-commercial activities of government would be outside the scope of the GST.

Until 1 July 2011, various exemptions were set out in detail in the A New Tax System (Goods and Services Tax) (Exempt Taxes, Fees and Charges) Determination 2011 (No. 1) (the Determination). As a transitional measure, fees and charges listed in the Treasurer's determination as at 30 June 2011 remain exempt until 1 July 2013. Your fees under the relevant Act are not listed in the Determination.

Division 81 of the GST Act was introduced on 1 July 2011. It is legislation to enact the intention that regulatory charges that do not relate to particular goods or services will be exempt from GST, including licences, permits and certifications that are required by government prior to undertaking a general activity.

In this context, Division 81 of the GST Act allows entities to self assess the GST treatment of a payment of an Australian fee or charge in accordance with certain principles. Specifically, section 81-10 of the GST Act considers the effect of payment of certain Australian fees and charges.

An Australian fee or charge is a fee or charge (however described), other than an Australian tax, imposed under an Australian law and payable to an Australian government agency (section 195-1 GST Act). An Australian law means a Commonwealth, state or territory law, and Australian government agency means the Commonwealth, a state or territory, or an authority of the Commonwealth or of a state or territory (section 195-1 GST Act, as defined by reference to section 995-1, Income Tax Assessment Act 1997).

Section 195-1 of the GST Act defines an Australian fee or charge as a fee or charge (however described), other than an Australian tax, imposed under an Australian law and payable to an Australian government agency.

We consider that under this definition you are an Australian state or territory. Therefore where you impose a fee under a state law and the fee is payable to you this would meet the requirements of an Australian fee or charge.

Section 81-10 of the GST Act considers the effect of payment of certain Australian fees and charges. Australian fees or charges are not treated as the provision of consideration for a supply at first instance where they are of the nature described in this section. Subsection 81-10(4) of the GST Act considers that a payment is not the provision of consideration to the extent that the fee or charge relates to an application for, the provision, retention, or amendment, under an Australian law, of a permission, exemption, authority or licence (however described).

We consider that your circumstances do not involve a fee or charge relating to an application for, the provision, retention, or amendment, under an Australian law, of a permission, exemption, authority or licence.

Subsection 81-10(5) of the GST Act considers that a payment is not the provision of consideration 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

We consider that your fee under section relevant Act relate to you doing some of the activities that are listed in paragraphs 81-10(5)(a) to 81-10(5)(g). Specifically, we consider that the fees or charges relate to providing or establishing, and allowing access to, valuation information. Therefore the fee or charge relates to the following:

(a) recording information and

(d) allowing access to information.

As the fees are of the kind covered by subsections 81-10(4) and 81-10(5), subsection 81-10(1) applies.

Regulations may be made (under subsection 81-10(2)) that prescribe fees and charges that are to be treated as consideration. Such regulations have been made in Division 81 of the A New Tax System (Goods and Services Tax) Regulations 1999 (Regulations), at regulation 81-10.01. They include 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 (regulation 81-10.01 (f)); a fee or charge for a supply of a non-regulatory nature (regulation 81-10.01(g)), and 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 (regulation 81-10.01(h)).

In your case we consider that the fee is of a regulatory nature and therefore regulation 81-10.01 does not apply

The word 'regulatory' is not defined in the GST Act or the Regulations. However, the Explanatory Statement (ES) to A New Tax System (Goods and Services Tax) Amendment Regulation 2012 (No. 2) states "The term 'regulatory' captures those supplies made by a government agency, where that agency is legislatively empowered to make the relevant supply and the supply is to satisfy a regulatory purpose."

Sub-regulation 81-15.01(1) of the Regulations contains a list of fees and charges that will not be subject to GST because they are taken not to constitute consideration. This list includes:

(f) a fee or charge for a supply of a regulatory nature made by an Australian government agency.

The ES provides a number of examples that would fall under paragraph 81-15.01(1)(f) and states the following:

The payment of fees and charges of a kind prescribed by regulation 81-15.01 are not the provision of consideration and therefore do not give rise to a taxable supply. The regulation adds to the kinds of fees and charges that are already made exempt from GST under the operation of subsections 81-10(4) and (5) of the Act.

The term 'regulatory' captures those supplies made by a government agency, where that agency is legislatively empowered to make the relevant supply and the supply is to satisfy a regulatory purpose.

In some instances, although the consumer acquires something that may be of intrinsic value to the consumer, the acquisition is made in the context of satisfying a regulatory requirement of an Australian law. The following are examples of fees and charges for supplies that have a regulatory character:

· ·A fee or charge for providing a copy of a birth, death or marriage certificate;

· A compulsory inspection fee for checking that the foundations of a building comply with a building code;

· A fee for reviewing a film to give it an appropriate audience rating before it can be exhibited at a public cinema;

· A fee for the supply and fitting by a government department of a compulsory device to limit the speed of a heavy road transport vehicle;

· A fee for land registry services such as titling, valuation or surveying, undertaken by a government agency in providing those services; and

· Fees and charges imposed by an Australian government agency associated with:

o Towing and impounding a vehicle where the driver has committed a traffic offence;

o Seizing and destroying goods that are not permitted to be imported into Australia;

o Impounding animals;

o Releasing seized abandoned shopping trolleys; and

o Erecting a stock crossing sign on the side of a road that a farmer has stock regularly crossing.

The relevant Act enables the Responsible person to primarily undertake his obligations under the relevant Act. A section of an associated Act requires a government body established under that Act to use the information prepared by the Responsible person pursuant to a section of the relevant Act. Therefore, regulation 81-15.01 would apply and the fees do not constitute consideration for a supply and are not subject to GST

Question 2

Summary

A fee charged to a non-government body for the recovery of all or part of the cost incurred by the Responsible person in undertaking his obligations under the relevant Act is consideration for a taxable supply.

Detailed reasoning

As described above, an Australian fee or charge is a fee or charge (however described), other than an Australian tax, imposed under an Australian law and payable to an Australian government agency. An Australian law means a Commonwealth, state or territory law, and Australian government agency means the Commonwealth, a state or territory, or an authority of the Commonwealth or of a state or territory (section 195-1 GST Act, as defined by reference to section 995-1, Income Tax Assessment Act 1997).

Section 195-1 of the GST Act defines an Australian fee or charge as a fee or charge (however described), other than an Australian tax, imposed under an Australian law and payable to an Australian government agency.

We consider that under this definition you are an Australian state or territory. Therefore where you impose a fee under a state law and the fee is payable to you this would meet the requirements of an Australian fee or charge.

Section 81-15 of the GST Act provides that 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.

Section 81-10 of the GST Act considers the effect of payment of certain Australian fees and charges. Australian fees or charges are not treated as the provision of consideration for a supply at first instance where they are of the nature described in this section. Subsection 81-10(4) of the GST Act considers that a payment is not the provision of consideration to the extent that the fee or charge relates to an application for, the provision, retention, or amendment, under an Australian law, of a permission, exemption, authority or licence (however described).

We consider that your circumstances do not involve a fee or charge relating to an application for, the provision, retention, or amendment, under an Australian law, of a permission, exemption, authority or licence.

Subsection 81-10(5) of the GST Act considers that a payment is not the provision of consideration 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

We consider that your fee relates to you doing some of the activities that are listed in paragraphs 81-10(5)(a) to 81-10(5)(g). Specifically, we consider that the fees or charges relate to you

(a) recording information and

(d) allowing access to information.

As the fees are of the kind covered by subsections 81-10(4) and 81-10(5), subsection 81-10(1) applies.

Regulations may be made (under subsection 81-10(2)) that prescribe fees and charges that are to be treated as consideration. Such regulations have been made in Division 81 of the A New Tax System (Goods and Services Tax) Regulations 1999 (Regulations), at regulation 81-10.01. They include 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 (regulation 81-10.01(h)).

The Explanatory Statement Explanatory Statement for the A New Tax System (Goods and Services Tax) Amendment Regulation 2012 (No. 2) under the subheading "Fees and charges 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" states the following:

Item [2] - paragraph 81-10.01(1)(h)

This paragraph ensures that the regulatory activities of government made in competition with the private sector are subject to GST where the other requirements of section 9-5 of the Act are satisfied.

Fees and charges in this category are not excluded from being consideration for a taxable supply. This is consistent with the National Competition and Consumer Policy guidelines and ensures that a government entity is not given a competitive advantage over a private sector supplier making the same type of supply.

In your case where you charge a fee to a non-government body for the recovery of all or part of the cost incurred by you in undertaking your obligations we consider that the fee is 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 (regulation 81-10.01(h)) and therefore constitutes consideration for a taxable supply.

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