Edited version of your private ruling

Authorisation Number: 1012557144537

Ruling

Subject: GST and Government charges

Question 1

Are the following payments exempt from goods and services tax (GST) under Division 81 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when they are imposed on or after 1 July 2013?

· A levy payable to a fund administered by the Department

· Fees payable to the Department for a certificate and to conduct a survey

· Fee payable to the Department for a permit

· Fees payable to the Department for the regulation of specific vehicles

Answer

The following payments are exempt from GST under Division 81 of the GST Act (please see the Reasons for decision)

· A levy payable to the fund administered by the Department

· Fees payable to the Department for a certificate and to conduct a survey

· Fee payable to the Department for a permit

· Fees payable to the Department for the regulation of specific vehicles

Relevant facts and circumstances

· The relevant entities are all registered for GST.

· The fees or charges considered in this ruling are currently listed as exempt under the A New Tax System (Goods and Services Tax)(Exempt Taxes, Fees and Charges) Determination 2011 (No 1) (the Determination).

· The fees or charges are described in further detail below:

Levy

· The Levy is imposed via a State Act and Regulations which are laws of a State of Australia.

· The Levy is payable to the Fund which is administered by the Department on behalf of the State Government.

· The Levy is paid by owners to register, inspect or survey. A Section of the Act and a regulation prohibit a certificate of registration, inspection or survey being issued until the levy payable on the registration, inspection or survey is paid.

· The Fund must be kept as directed by the Treasurer and consists of levies payable under the regulation on the registration, inspection or survey, and income from investment of money belonging to the Fund.

· Under section of the State Act the Fund may be applied by the Minister towards establishing, maintaining and improving facilities for the public, and the payment of expenses of administering the Fund.

· The Fund is used to establish, improve and maintain facilities in the State. These facilities are available for public use for the benefit of all users.

· The Department and the Fund are audited by the Auditor-General and are consolidated into whole-of-government financial statements.

· The Department is an administrative unit established via a State Act.

Certificate fees

· The State Law commenced on 1 July 2013 to give effect to the Commonwealth Law.

· The Commonwealth Law provides the Governor-General may make regulations (Commonwealth Regulations) prescribing matters relating to accreditation of persons to perform the role of a surveyor.

· At present, the Governor-General has not made any regulation providing the accreditation of persons to perform the role of a surveyor.

· The State Governor has made regulations for the State Law (State Regulations) setting out the fees payable to the State in relation to things done under the Commonwealth Law by a delegate of the national Regulator, or an accredited person.

· The State Regulations provides that:

'an accredited person …is an officer or employee of this State or an agency of this State'.

The State Regulations set out the fees relating to certificate

· There is no Australian classification society.

· Under the Law, the Australian Authority (AA) is the national regulator in Australia. The AA has delegated authority to issue Certificate to the State and Territory agencies.

· The Certificate fee is payable to the State to survey and issue a Certificate that provides evidence the required has been met.

· The certificate fee under both the old law and the State Law and State Regulations is one combined fee that covers the issue of a certificate and the survey itself.

· Currently only surveyors employed by the State are surveying for a Certificate in the State, however under the Commonwealth Law it is possible that other private surveyors may be accredited to survey in the Australian state if provisions are to be made in the Commonwealth Regulations.

· At present, there are no private surveyors accredited to survey for AA other than those employed by the State.

Permit

· The fee payable for permit (annual and temporary) is imposed via Regulation and specified in Schedule of the Regulations (to which all legislative references under this heading are made).

· Fees charged vary depending on the length and the site.

· Fees for a permit is payable to the State.

· The permit provides permission for a person to use a specified site in a particular area.

· Regulation defines an area

· Permits can be annual or temporary.

· Regulation prohibits a person from using a site except in accordance with a permit issued under this regulation and specifies the maximum penalty for a person who uses a site without a permit.

· Regulation requires a permit to specify the use of a site to which it relates; and remain in force for the period specified in the permit; and is not transferable.

· Funds from the permit go into general revenue and are not allocated to a particular fund or facility.

Fees for the regulation of TAXIS

· Specific vehicle licence application and renewal fees, tender fees, initial payment for a specific licence are payable to the Department for the regulation of these vehicles under the State Act and State Regulations.

· The State Act prohibits a person from operating a vehicle that displays the specific word without a specific vehicle licence.

· The fee to apply and renew a licence is imposed under section of the State Act and the amounts are specified in the State Regulations Fees Schedule.

· Schedule to the State Regulations requires taxi licences to be allocated according to the prescribed tender process when they are first issued by the State Government. A specific vehicle licence tender fee is imposed in a Schedule and an amount is prescribed for it in a Schedule to the State Regulations. The licence tender fee is charged to cover the internal costs associated with the Department receiving and considering the tender submitted.

· A Section of the State Act provides for the Minister to determine a fee in respect of these licences allocated under the tender process. The fee payable, being the highest amount tendered, for the licence, is imposed under a Schedule of the State Regulations.

· A Section of the State Act states that the Minister must not issue more than a certain number of general licences in a particular year.

Relevant legislative provisions

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

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

Income Tax Assessment Act 1997 995-1 and

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

Reasons for decision

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 Determination as at 30 June 2011 remain exempt until 1 July 2013. All the fees considered in this ruling are covered by the Determination and therefore remain exempt until that time.

We have also advised that PSLA 2013/2 (GA) enables you to self-assess these fees, and where you consider that they are exempt this treatment will not be disturbed retrospectively if found to be incorrect. However, you have advised that you require our ruling on the fees and charges described.

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, or Australian fee or charge

As a starting point, it is necessary to determine whether each of the payments described in the facts is an Australian tax, or an Australian fee or charge before the further substantive requirements of Division 81 of the GST Act and the regulations made under that Division can be considered.

An Australian tax is a tax (however described) imposed under an Australian law and an Australian fee or charge is a fee or charge (however described), other than an Australian tax, imposed under an Australian law and payable to an Australian government agency (section 195-1 of the GST Act).

Paragraph 36 in Roy Morgan Researh Pty Ltd v Commissioner of Taxation [2011] HCA 35 (Roy Morgan) gives the usual description of a tax as cited by Latham CJ in Matthews v Chicory Marketing Board [Vict.] [1928] HCA 38 as

"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."

Paragraph 6 in Air Caledonie International v Commonwealth [1988] HCA 61 explains:

the negative attribute - "not a payment for services rendered" [in the usual description of a tax] - should be seen as intended to be but an example of various special types of exaction which may not be taxes even though the positive attributes mentioned by Latham C.J. [in Matthews] are all present. Thus, a charge for the acquisition or use of property, a fee for a privilege and a fine or penalty imposed for criminal conduct or breach of statutory obligations are other examples of special types of exactions of money which are unlikely to be properly characterised as a tax notwithstanding that they exhibit those positive attributes.

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 of the GST Act, as defined by reference to section 995-1 of the Income Tax Assessment Act 1997).

A payment is imposed under an Australian law if there is a provision in the law requiring a payee to make the payment.

Each of the payments described in the facts is considered below to determine whether the payment is the provision of consideration under Division 81 of the GST Act.

Levy

The Levy is imposed under a section of the State Act and a regulation which are laws of a State of Australia. The Levy is paid into the Fund which is administered by the Department on behalf of the State Government.

The Levies are paid by owners for the purposes of establishing, improving, and maintaining facilities in the State by the Department for the benefit of all users.

As a Levy is used to establish, improve and maintain facilities in the State for the benefit of all users, we consider that it is 'not a payment for services rendered' to the owner who pays the Levy.

Therefore, in the circumstances of the Levy, we consider that it is a tax like the superannuation guarantee charge in Roy Morgan and the training guarantee charge in Northern Suburbs General Cemetery Reserve Trust v The Commonwealth [1993] HCA 12.

As an Australian tax, the Facilities Levy is exempt from GST under section 81-15 of the GST Act.

Certificate fees

A Schedule to the State Regulations imposes the fees relating to certificates payable to the Department.

Certificate fees are paid by owners to ensure they meets the required standard for the issue of a certificate. The certificate provides evidence that they meet the required standards. An owner is not permitted to operate commercially if it does not hold a valid current certificate.

The Commonwealth Law provides the Governor-General may make regulations prescribing matters relating to accreditation of persons to perform the role of an inspector. At present, the Governor-General has not made any regulation providing the accreditation of persons to perform the role of inspectors.

The State Regulations in setting out the fees payable to the Department relating to certificates provides that the accredited person in undertaking the inspection is an officer or employee of the Department or an agency of the Department.

At present, there is no privately accredited person who is not an officer or employee of the Department or an agency of the Department can undertake activities relating to the certificates.

In these circumstances, we consider that the certificate fee is a payment for services rendered by the Department to the owner-payee. That is, the certificate fee is not a tax. It is an Australian fee or charge which relates to a permission, authority or licence (however described) to operate in the State for the purposes of subsections 81-10(1) and (4) of the GST Act. Therefore, the certificate fee is exempt from GST.

Permit

The permit fee is payable to the Department for the issue of a permit and is imposed under a State regulation and specified in a Schedule of the State Regulations.

A permit allows a person to use a specific site for a particular period of time. A person is prohibited from using a specific site without a permit.

By issuing permits, the Department regulates activities in specific sites.

In these circumstances, the permit fee is a 'fee for a privilege' and is not a tax. It is an Australian fee or charge which relates to the provision under a State law of a permission for the purposes of subsection 81-10(4) of the GST Act. Therefore, the permit fee is exempt from GST.

Fees for the regulation of TAXIS

The State regulations prescribe the fees payable to the Department for:

· the application and renewal of a specific vehicles licence

· the tender for a licence, and

· the issue of a licence by the State Government allocated under the tender process.

A Section of the State Act prohibits a person operating a vehicle that displays the word 'X' without a specific vehicles licence.

The licence tender fee is paid to the Department to cover the internal costs associated with the Department receiving and considering the tender submitted. It is a 'payment for services rendered' and is not a tax. It is an Australian fee or charge paid to the Department under a Schedule of the State regulations which regulates the receiving, recording and processing by the Department of the information provided in the tender process. Therefore, the licence tender fee is exempt from GST under subsection 81-10(5) of the GST Act.

A licence allows a person to operate a vehicle displaying the word 'X'. By renewing or issuing a specific vehicles licence, the Department regulates the activities of operators.

Therefore, the fee for application and renewal of a licence, or the highest amount tendered for a licence allocated under the tender process is a 'fee for a privilege' and is not a tax. Either of these fees is an Australian fee or charge which relates to the provision under a State law of a permission for the purposes of subsection 81-10(4) of the GST Act. Therefore, each is exempt from GST.

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