Edited version of your private ruling

Authorisation Number: 1012508630959

Subject : GST treatment of levy

Question

From 1 July 2013, are payments of a levy made to you, consideration for a taxable supply?

Answer

No, from 1 July 2013 payments of a levy made to you are not consideration for a taxable supply.

Relevant facts and circumstances

You are registered for goods and services tax (GST).

You levy a defined subset of ratepayers.

The levy is a contribution to your running expenses with no direct service provided.

The facilities being funded by the levy are utilised by ratepayers as well as visitors to the local government area.

No services are provided to the defined subset of ratepayers.

A separate fee per use is charged at each of your facilities.

The levy is imposed under a Government Act (GA).

You are able to enforce payment of the charge under the GA.

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 9-40

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

A New Tax System (Goods and Services Tax) Act 1999 section 81-5

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

Income Tax Assessment Act 1997 section 995-1

Reasons for decision

Subsection 7-1(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that GST is payable on taxable supplies.

Under section 9-40 of the GST Act, an entity must pay the GST payable on any taxable supply that it makes.

An entity makes a taxable supply under section 9-5 of the GST Act if:

· it makes the supply for consideration

· the supply is made in the course or furtherance of an enterprise that it carries on

· the supply is connected with Australia, and

· it is registered or required to be registered for GST.

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

The issue that arises under section 9-5 of the GST Act is whether the levy paid by the defined set of ratepayers to you is consideration for a taxable supply.

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 taxes, fees and charges.

Australian Tax

Section 81-5 of the GST Act 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 that 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.

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

Currently, there are no regulations that prescribe the payment of an Australian tax to be the provision of consideration.

The term 'Australian tax' is defined in section 195-1 of the GST Act as:

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

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

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.

You derive your authority to impose rates and annual charges under a GA. Therefore, the levy is imposed under an Australian law for the purposes of Division 81 of the GST Act.

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 26, is that it is:

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

The landowner is liable under the GA to pay the levy to you and the GA provides recovery options where charges are unpaid. Therefore, the levy is a compulsory exaction of money that is enforceable by law.

As a government body, empowered by the GA, you are a public authority, providing facilities for public purposes.

The levy is imposed on landowners by incidence of their ownership of land in a defined local government area for the purpose of contributing to the running expenses of publicly available facilities. The charge provides no direct service to landowners, who must pay separate charges to access the facilities. Therefore the levy is not a payment for services rendered.

As the levy satisfies the usual description of a tax as cited in the High Court case of Roy Morgan, the Commissioner considers the levy to be a payment of an Australian tax for the purposes of section 81-5 of the GST Act.

Therefore, from 1 July 2013, the payment of the levy is not consideration for a taxable supply and is thereby not subject to GST under Division 81 of the GST Act.

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