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Edited version of your written advice
Authorisation Number: 1012768888899
Ruling
Subject: GST and collection agency fees
Question
Is the yearly collection agency fee not the provision of consideration pursuant to subsection 9-17(3) of the A New Tax System (Goods and Services Tax) Act (GST Act)?
Answer
The yearly collection agency fee is not the provision of consideration pursuant to subsection 9-17(3) of the GST Act.
Relevant facts and circumstances
You are a government entity registered for goods and services tax with effect from 1 July 2000.
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 Subsection 9-17(3)
Reasons for decision
Subsection 9-17(3) of the GST Act provides that a payment is not the provision of consideration if:
• the payment is made by one government related entity to another government related entity for making a supply
• the payment is (amongst other things) covered by an appropriation under an Australian law,, and
• the payment is calculated on the basis that the non-commercial test is satisfied.
We accept that both entities are government related entities for the purposes of applying subsection 9-17(3) of the GST Act.
The second requirement is to consider whether the payments in question are covered by an appropriation under an Australian law.
The third requirement of subsection 9-17(3) of the GST Act to consider (referred to as the non-commercial test) is whether the collection agency fee is calculated on the basis that the sum of:
• the payment (including the amounts of any other such payments) relating to the supply, and
• anything (including any payments for any act or forbearance) that the other government related entity receives from another entity in connection with, or in response to, or for the inducement of, the supply, or for any other related supply
does not exceed the supplier's (local councils) anticipated or actual costs of making those supplies.
It is considered that you satisfy this requirement. As all the requirements of subsection 9-17(3) of the GST Act are satisfied in relation to the collection agency fees those fees are not the provision of consideration.
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