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Edited version of your private ruling

Authorisation Number: 1012466113064

Ruling

Subject: Application of GST to fees paid for a permission

Question

Is the provision of a permission by the entity exempt from goods and services tax (GST) under Division 81 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) from 1 July 2013?

Answer

Yes, the provision of a permission by the entity is exempt from GST under Division 81 of the GST Act from 1 July 2013.

Relevant facts and circumstances

The entity is a government agency.

It was established to administer a State Act to regulate a particular industry and to provide permission to members of that industry to undertake certain activities.

Members of that particular industry pay the entity fees for the permission they require before undertaking those activities.

The amount payable is imposed under the State Act.

The entity is registered for GST.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 subsection 7-1(1),

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

A New Tax System (Goods and Services Tax) Act 1999 section 9-10,

A New Tax System (Goods and Services Tax) Act 1999 subsection 9-10(2),

A New Tax System (Goods and Services Tax) Act 1999 subsection 9-15(1),

A New Tax System (Goods and Services Tax) Act 1999 section 9-40,

A New Tax System (Goods and Services Tax) Act 1999 Division 81,

A New Tax System (Goods and Services Tax) Act 1999 section 81-10,

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

A New Tax System (Goods and Services Tax) Act 1999 section 195-1,

A New Tax System (Goods and Services Tax) Regulations 1999 regulation 81-15.01,

A New Tax System (Goods and Services Tax) Regulations 1999 paragraph 81-15.01(1)(f) and

Income Tax Assessment Act 1997 section 995-1.

Reasons for decision

Subsection 7-1(1) of the GST Act provides that GST is payable on taxable supplies.

Under section 9-40 of the GST Act, you must pay the GST payable on any taxable supply that you make.

You make a taxable supply under section 9-5 of the GST Act if:

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

The meaning of 'supply' is given in section 9-10 of the GST Act and in addition to the general words 'any form of supply whatsoever' includes, under subsection 9-10(2) of the GST Act, a supply of goods, services and an entry into an obligation to do anything, etc. The provision of permission would come within the definition of a supply under section 9-10 of the GST Act.

The term ' consideration' is defined in subsection 9-15(1) of the GST Act as including any payment, or any act or forbearance in connection with, or in response to or for the inducement of a supply of anything.

On the facts provided, the entity is registered for GST and the provision of permission is made in Australia in the course or furtherance of carrying on its enterprise. There are no provisions under Division 38 or Division 40 of the GST Act which would make the provision of permission GST-free or input taxed.

The issue that arises under section 9-5 of the GST Act is whether the provision of the permission is for consideration, that is, is the fee paid for the permission consideration for that permission. Item 8 in the table to section 9-39 of the GST Act provides that there are special rules relating to taxable supplies under Division 81 of the GST Act in relation to the payments of fees and charges.

Division 81 of the GST Act

Payments of fees and charges generally constitute consideration and if the requirements of section 9-5 of the GST Act are satisfied, the payment will be for a taxable supply on which GST is payable.

Under subsection 81-10(1) of the GST Act, Australian fees and charges of a kind covered by subsections 81-10(4) and (5) of the GST Act are not the provision of consideration.

Australian fee or charge

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.

(*asterisked terms are defined in section 195-1 of the GST Act)

Subsection 81-10(4) of the GST Act covers those fees and charges that relate to, or relate to an application for the provision, retention or amendment, under an Australian law, of a permission, exemption, authority or licence (however described).

In addition, subsection 81-10(5) of the GST Act covers those fees and charges paid to an Australian government agency if the fee or charge relates to the agency doing any of the following:

As a payment which is covered by subsections 81-10(4) or (5) of the GST Act is not consideration, the supply to which it relates is not a taxable supply on which GST is payable.

This is the case unless the payment is of a kind covered by subsections 81-10(2) or (3) of the GST Act which provide that certain Australian fees or charges that are of a kind prescribed by regulation are treated as the provision of consideration for a supply. These supplies will be taxable where the requirements of a taxable supply under section 9-5 of the GST Act are satisfied.

Conversely, section 81-15 of the GST Act provides that where an Australian fee or charge is prescribed by regulation, the payment of the fee or charge is not the provision of consideration.

Australian law

The term 'Australian law' is defined in section 195-1 of the GST Act as having the meaning given by section 995-1 of the Income tax Assessment Act 1997 (ITAA 1997) which states:

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

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

The State Act in this case is a State law.

Australian government agency

Section 195-1 of the GST Act defines the term "Australian government agency' as having the meaning given by section 995-1 of the ITAA 1997 which states:

Australian government agency means:

the Commonwealth, a State or a Territory; or

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

The entity in this case is a government agency.

It is accepted, on the facts provided, that the fees paid to the entity for permission to undertake certain activities is an Australian fee or charge and it is therefore, necessary to consider whether the payment of the fees is consideration for a supply made by the entity.

GST Regulations

Regulation 81-10.01of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations) sets out those Australian fees and charges that are prescribed for subsection 81-10(2) of the GST Act and which are treated as consideration. In particular, paragraph 81-10.01(g) of the GST Regulations refers to a fee or charge for a supply of a non-regulatory nature.

In contrast, subregulation 81-15.01(1) of the GST Regulations sets out those Australian fees and charges that are prescribed for section 81-15 of the GST Act and which do not constitute consideration. Of relevance to the present case is paragraph 81-15.01(1)(f) of the GST Regulations which refers to a fee or charge for a supply of a regulatory nature made by an Australian government agency.

The term 'regulatory nature' is not defined in the GST Regulations or the GST Act. The Explanatory Statement (ES) to the 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.

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 members of the particular industry in this case need to obtain permission from the entity under the State Act before they can undertake certain activities and they pay a fee to the entity for that permission.

Based on the facts provided, it is considered that the fees paid to the entity for permission to undertake those activities is for a supply of a regulatory nature by the entity and is covered by paragraph 81-15.01(1)(f) of the GST Regulations. As such, the supply is exempt from GST by virtue of section 81-15 of the GST Act.

Therefore, the provision of permission by the entity to undertake those activities is exempt from GST under Division 81 of the GST Act from 1 July 2013.

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