Edited version of your private ruling

Authorisation Number: 1012457055644

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Ruling

Subject: GST and fees and charges

Question

Is the payment of the Fee A by the property owners 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

Yes.

The payment of the FeeA to you does not constitute consideration under the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations).

Relevant facts and circumstances

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 were constituted by Proclamation and are the Local Control Authority responsible for administering a particular Act in your region.

· You are registered for GST.

· You work with a wide range of stakeholders to undertake your enterprise.

· Effective from a specific date you intend to charge entities who have been issued Notice under a particular Act a fee to re-inspect their property to ensure they have taken the action that was directed on the Notice.

· The re-inspection is a regulatory function which enables the Officer to confirm if the property owner has taken the required action.

· The inspection fee is being charged in accordance with a subsection of the particular Act which states:

Liability for expenses

Any reasonable expense incurred by or on behalf of the Minister or a local control authority in ascertaining whether a weed control notice has been complied with, and in taking action if it is not being complied with (including charges for any inspection of land), is payable by the person required to comply with the notice, on demand by the Minister or authority.

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

Summary

For the reasons discussed below, payment of the fee or charge in question is not the provision of consideration for a supply. Therefore a taxable supply is not made, and the transaction is 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.

Fee A

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 A is imposed under a section of a particular Act.

We consider that the particular Act and the particular Regulations are a state law, and therefore satisfy the definition of an Australian law. Therefore the Inspection fee is imposed under an Australian law.

We also consider that the Fee A is payable to an Australian government agency.

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

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 A 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.

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.

Regulations may be made (under subsection 81-10(2) of the GST Regulations) that prescribe fees and charges that are to be treated as consideration. Such regulations have been made in Division 81 of the GST Regulations, at regulation 81-10.01 of the GST Regulations. A fee or charge that will constitute consideration includes a fee or charge for a supply of a non-regulatory nature.

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. In your case we consider that the Inspection fee is of a regulatory nature and therefore regulation 81-10.01 of the GST Regulations does not apply to specifically treat the fee as consideration.

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.

Regulation 81-15.01 of the GST Regulations prescribes fees and charges for the purposes of section 81-15 of the GST Act. 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 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.

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 A is similar to a compulsory inspection fee, and that it can be classified as either a fee imposed as compensation for costs incurred for regulatory activities covered by paragraph 81-15.01(1)(d) of the GST Regulations or a fee or charge for a supply of a regulatory nature made by an Australian government agency covered by paragraph 81-15.01(1)(f) of the GST Regulations. Therefore the Fee A does not constitute consideration, and as a result no taxable supply is made and GST does not apply.

Conclusion

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

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