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Edited version of your private ruling
Authorisation Number: 1012508744667
Ruling
Subject: GST and Tip Availability Fee
Question 1
Are payments for the levy consideration for a taxable supply?
Answer
No, the payments for the levy are not consideration for a taxable supply.
Relevant facts and circumstances
· You are registered for goods and services tax (GST).
· You charge a levy.
· There is no direct service provided for the levy. The levy covers certain costs for the community as a whole.
· An entity is liable to pay the levy.
· The levy is imposed under a Government Act.
· You can enforce payment of the levy.
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 9-39
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 your residents 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.
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 the levy under a Government Act. Therefore, rates and charges are imposed under an Australian law for the purposes of Division 81 of the GST Act.
The term 'Australian government agency' is defined by section 995-1 of the ITAA 1997. 'Australian government agency' means:
· the Commonwealth, a State or Territory; or
· an authority of the Commonwealth or of a State or a Territory.
For the purposes of Division 81 of the GST Act, it is accepted that you come within the definition of an Australian government agency.
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 (Vic) (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 levy is imposed on entities. You raise amounts under the Government Act. Entities are liable to pay the levy under the Government Act which provides recovery options where the levy is not paid. Therefore, the levy is a compulsory exaction of money that is enforceable by law.
The levy is levied by a public authority. Legislation empowers you to enforce their payment and, as opposed to being payment for services rendered, the levy is on all entities in the area. The levy is used to cover costs and is for public purposes.
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, the payment of the levy is exempt from GST under Division 81 of the GST Act.
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