Edited version of your private ruling

Authorisation Number: 1012444001390

Disclaimer

You cannot rely on the rulings in the Register of private binding rulings in your tax affairs. You can only rely on a private ruling that we have given to you or to someone acting on your behalf.

The Register of private binding rulings is a public record of private rulings issued by the ATO. The register is an historical record of rulings, and we do not update it to reflect changes in the law or our policies.

The rulings in the register have been edited and may not contain all the factual details relevant to each decision. Do not use the register to predict ATO policy or decisions.

Ruling

Subject: Division 81 and the GST treatment of particular taxes, fees or charges

Question

Is the payment of the Fee by the entities to you excluded from goods and services tax (GST) under Division 81 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it is imposed on or after 1 July 2013??

Answer

The payment of the Fee by the entities to you does not constitute consideration under either paragraphs 81-15.01(1)(d) or (f) of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations).

Relevant facts and circumstances

· You are a Government organisation registered for GST.

· You have received a previous Private Binding Ruling (PBR) from the Australian Taxation Office (ATO) in which we ruled that you were an Australian Government Agency for GST purposes.

· You are a statutory authority of a Government.

· You administer and operate a Board (GBB) and a Statement of Opportunities (GSOO) for a particular market.

· The GBB will consist of a website to publish information about short and near term supply, transmission, storage and demand in the State. The GBB will also provide an emergency management page to assist in the management of supply disruptions. It may also include information about other supplies, and later may be developed into a platform to facilitate the introduction of buyers and sellers of the supplies.

· The GSOO will be an annual planning document providing a comprehensive medium to long term outlook of the supplies and demand in the State, highlighting potential shortfalls or constraints.

· The GBB and GSOO will be established under certain regulatory instruments.

· The Rules have been drafted and currently with your Board for approval. It is not expected that any material or substantial changes will be made to these Rules prior to their finalisation.

· Under the Rules, it is proposed that you will provide the Services. These services are listed as follows:

· To establish, operate and maintain the GBB;

· To register or deregister Registered Participants and Registered Facilities and to grant exemptions;

· To prepare and publish the GSOO;

· To make Amending Rules and Procedures, including the initial Rules;

· To facilitate the processes of the Advisory Board;

· To monitor compliance and investigate breaches or possible breaches of the Rules or the Procedures;

· To take enforcement action under the Regulations;

· To manage information gathering and disclosure functions under the Regulations and the Rules; and

· Services deriving from the exercise of any other functions conferred on you under certain regulatory instruments.

· Under a particular Rule, you are able to recover the costs that you incur in providing the Services from the entities, a subset of the Registered Participants. The amounts paid by the entities to you are known as Fees.

· Under a particular Rule, you perform all of your functions under the Rules as a principal and do not act as an agent for any other party.

Relevant legislative provisions

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

Summary

For the reasons discussed below, payment of the fees or charges in question is not the provision of consideration for a supply. Therefore taxable supplies are not made, and the transactions are not subject to GST.

Detailed reasoning

Background

GST is payable on taxable supplies. Section 9-5 of the GST Act provides that you make a taxable supply if:

(a) you make the supply for consideration; and

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

(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.

Also, relevant to your circumstances, chapter 4 of the GST Act contains special GST rules that apply in particular circumstances. The special rules modify the application of the basic GST rules. Rules in Division 81 of the GST Act provide that certain payments to Australian government agencies are not the provision of consideration. The application of this Division must be considered in your circumstances.

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. Division 81 of the GST Act gives effect to this agreement.

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. The fees considered in this ruling are not covered by the Determination.

Division 81 of the GST Act was amended as of 1 July 2011. The amended legislation continues the intention that regulatory charges that do not relate to particular goods or services will be exempt from GST. In this context, Division 81 of the GST Act allows entities to self assess the GST treatment of a payment of an Australian tax or an Australian fee or charge in accordance with certain principles.

In particular section 81-5 of the GST Act provides that the payment of an Australian tax is not consideration, and section 81-10 of the GST Act considers that the payment of certain Australian fees and charges are not consideration. Regulations pursuant to Division 81 have also been made that specifically include or exempt certain payments from being the provision of consideration (see regulations 81-10.01 and 81-15.01 of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations).

Australian tax, fee or charge

As a starting point, it is necessary to determine whether the taxes, fees or charges described meet the specific requirements of an Australian tax, fee or charge before the further substantive requirements of Division 81 and the regulations made under Division 81 can be considered.

An Australian tax is a tax (however described) imposed under an Australian law. An Australian fee or charge is a fee or charge (however described), 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. 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 (ITAA 1997)).

Australian government agency has the meaning given by section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997). This in turn provides that Australian government agency means the Commonwealth, a State or a Territory, or an authority of the Commonwealth or of a State or a Territory.

There also needs to be a clear authority to impose a particular tax, fee or charge before it can be considered to be imposed under a state law.

Each of the taxes, fees or charges imposed are considered below to determine whether their payment is the provision of consideration in light of Division 81.

Your fee

Where the fee is paid to an Australian government agency and is imposed under an Australian law (which includes a law of a State) it will be an Australian fee or charge.

The fee is imposed under section 9(1) of the relevant Act which states:

9 . Regulations as to fees and charges for performance of functions

(1) The regulations may make provision for and in relation to the imposition and payment of fees and charges in connection with the recovery of costs incurred in the performance of functions under this Act, including by authorising the rules to provide for fees and charges in relation to functions specified in the regulations.

A particular section of the Rules provides that you may recover Service costs.

We consider that regulatory instruments are a state law, and therefore satisfy the definition of an Australian law. Therefore the fee is imposed under an Australian law.

We also consider that the fee is payable to an Australian government agency. You are a body corporate established by Regulation and are registered for GST.

You come within the definition of an Australian government agency in section 995-1 of the Income Tax Assessment Act 1997 (ITAA).

A particular Regulation provides that you are not an agent of the Crown and does not have the status, immunities and privileges of the Crown. However, we consider that this does not of itself preclude you from being the State, or an authority of the State, under the terms of the GST Act.

We consider that you are carrying out the relevant business or functions that would be carried out by the State. Your main functions are conferred on you by the relevant Regulations and Rules. You, in performing your functions, must endeavour to ensure that your revenue is sufficient to meet its costs as determined under the Rules. Under a particular Regulation, you may do all things necessary in performing your functions including entering into any contract or arrangement.

A Part of the relevant Regulations concerns Accountability. In particular, a Regulation provides that the Minister may give directions to you. You are also required to give the Minister access to information, keep the Minister informed and provide an Annual Report including financial reporting to the Minister.

We therefore accept that in your circumstances, based on these relevant factors, you therefore meet the definition of an Australian government agency for the purposes of Division 81 of the GST Act.

Having established that the fee is an Australian fee or charge, it is necessary to consider whether it is a fee or charge that does not constitute consideration under Division 81 of the GST Act and is therefore not subject to GST.

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"

Generally where only Government organisations have the legislative authority to do certain things, it will be regulatory in nature.

Section 81-15 of the GST Act allows the making of regulations that 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. Such regulations have been made at Division 81 of the GST Regulations. In particular, regulation 81-15.01 of the GST Regulations prescribes fees and charges which do not constitute consideration. This regulation adds to the kinds of fees and charges that are already made exempt from GST under subsections 81-10(4) and (5) of 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.

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 [my emphasis]

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

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

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

· Impounding animals;

· Releasing seized abandoned shopping trolleys; and

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

We consider that your activities are of the type contemplated by sub-regulation 81-15.01(1)(f), they are of a regulatory nature. Therefore the fees or charges are for supplies of a regulatory nature. Specifically, you establish and administer industry information sources and rules. You monitor compliance with the rules and procedures and undertake enforcement, and may also be required to perform other services relating to your obligations under the relevant Act, the relevant Regulations or the Rules. We consider that these activities are in keeping with the types of activities contemplated in the Explanatory Statement.

Furthermore, paragraph 81-15.01(1)(d) of the GST Regulations provides that a fee or charge to compensate an Australian government agency for costs incurred by the agency in undertaking regulatory activities will not be consideration.

We consider the fee is a fee imposed as compensation for costs incurred for regulatory activities covered by paragraph 81-15.01(1)(d) of the GST Regulations and does not amount to consideration. Therefore no taxable supply is made and GST does not apply.

Conclusion

For the reasons provided, the fee is excluded from being subject to GST by Division 81 of the GST Act.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

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