Edited version of your written advice

Authorisation Number: 1012819051919

Ruling

Subject: Nomination Fees in respect of applications for business or skilled migration visas

Question 1

Is payment of a Nomination Fee to T by an applicant for a business or skilled migration visa the provision of consideration for the purposes of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes, payment of a Nomination Fee to T by an applicant for a business or skilled migration visa is the provision of consideration for the purposes of section 9-5 of the GST Act.

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

T was established pursuant to State legislation which has as its object to achieve economic and social benefits for the State by facilitating, supporting and encouraging trade, investment and other commercial opportunities for the State.

The State legislation states that T is a body corporate and represents and has the status, privileges and immunities of the State and that T's functions include to facilitate, encourage, promote, identify, attract and develop trade and investment opportunities.

Subclasses of visa applications nominated or sponsored by T:

It was stated in the ruling request that Business and Skilled Migration (BSM), part of a division of T, nominates applicants on behalf of the State for the following subclasses of visas:

Subclass 190 - skilled nominated visa;

Subclass 489 - skilled regional (provisional) visa;

Subclass 188 - business innovation and investment (provisional) visa;

Subclass 888 - business innovation and investment (permanent) visa;

Subclass 132 - business talent (permanent) visa.

T charges the applicant a Nomination Fee in respect of these visas.

In addition, T sponsors applicants for the following visas:

Subclass 405 - investor retirement visa;

Subclass 892 - State or Territory sponsored business owner visa; and

Subclass 893 - State or Territory sponsored investor visa.

T charges the applicant a Sponsorship Fee in respect of these visas.

It was stated in the ruling request that a Sponsorship Fee is in the same nature as a Nomination Fee and is grouped with the Nomination Fee for the purposes of the ruling request.

The nomination or sponsorship process:

The ruling request described the process which an applicant must go through to apply for a business or skilled migration visa. A fact sheet issued by BSM includes a section entitled 'How to apply for nomination' which refers to the Commonwealth Department of Immigration and Border Protection as 'DIBP' and states:

Step 1: Ensure you meet the Australian eligibility criteria and have reviewed the visa conditions on the DIBP website

Step 2: Ensure you meet the State eligibility criteria

Step 3: Lodge an EOI through DIBP's SkillSelect database. Choose the State as the nominating State or Territory. Please include all information relating to your employment and education.

Step 4: If you meet the State's eligibility criteria, BSM will contact you with instructions on how to provide additional information to finalise your application. A non-refundable application fee must be paid prior to finalising your application.

Step 5: Once an applicant has been nominated by BSM they will receive an invitation from DIBP to lodge an application within 60 days of nomination.

BSM's fact sheet states:

BSM can nominate migrants for the following visas:

Skilled -nominated (subclass 190)

Skilled - nominated of sponsored (provisional) (subclass 489)

…

Benefits of seeking State nomination

Nomination by the State of will provide:

An additional 5 points in the DIBP points test for the 190 visa subclass or an additional 10 points for the 489 visa subclass;

Allocated higher priority processing by DIBP with your application.

BSM's fact sheet provides a link to the 'State eligibility criteria' for the 190 visa subclass as follows:

If you are seeking State nomination under the 190 visa subclass, you must:

Meet the Australian Government's eligibility criteria for the Skilled - Nominated (subclass 190) visa and the criteria to receive a positive skills assessment;

Have an occupation on the State's Skilled Occupation List (SOL) (subclass 190) visa;

Meet the minimum full time work experience as outlined on the SOL post qualification in your skilled occupation, and any additional requirements for licensing, registration or specialisations;

Demonstrate that you have sufficient funds to settle in the State and support you until you find a job;

Demonstrate your ability and commitment to establish yourself and any dependents in the State with a view to long-term settlement in the State;

Complete and submit an expression of interest through Skillselect.

If you are currently residing, working or studying in another State or territory of Australia, you need to provide evidence you have accepted a job in the State.

BSM's fact sheet also has a link to the 'Australian eligibility criteria' for a subclass 190 visa on DIBP's website which require an applicant to have:

Nominated an occupation that is on the relevant skilled occupation list;

Obtained a suitable skills assessment for that occupation;

Not yet reached 50 years of age;

Achieved the score specified in the invitation based on the points test;

At least competent English;

Been nominated by an Australian State or Territory government agency.

T's Fee Schedule (from 1 January 2014) states:

Please note:

All fees and charges are exclusive of GST

The fee is non-refundable

…

Fees will not be refunded under any circumstances. This includes changes to your personal circumstances or if you change your mind and do not apply for an Australian visa or if your application for a visa is not approved by the Australian Government.

The Fee Schedule sets out the Nomination Fees for the relevant visa subclasses:

T's adviser confirmed that T currently does not add GST to Nomination Fees.

T's adviser provided a copy of a State and Territory Skilled and Business Migration Agreement between DIBP and T (Agreement).

The Agreement is stated to provide a framework for the relationship between DIBP and BSM and to set out how BSM's mission aligns with DIBP's goals of maximising the economic benefits for Australia through skilled and business migration programs.

The Agreement states that DIBP's overall mission is to maximise the economic and social benefits for Australia from all forms of temporary and permanent migration. In relation to State and Territory skilled and business migration, DIBP aspires to a well-managed program which delivers the needed migrants within the overall settings of the Migration Program; DIBP recognises that each State and Territory is best place to determine State and Territory requirements; and DIBP also recognises that DIBP has an overarching role in co-ordinating State and Territory migration in the best interests of Australia as a whole.

The Agreement also refers to BSM's vision, i.e. to create a strong, competitive and sustainable State economy built on resilient communities. The Agreement states:

BSM's role in skilled and business migration includes:

Assessing and communicating the economic value of migration to the State;

Participating in migration programs, advocating improvements and providing policy advice on non-humanitarian migration to meet the State's skills and business needs; and

Work collaboratively with other units in T, and other State Government agencies, to attract foreign investment in the State.

Schedule 1 to the Agreement sets out the number of nomination places allocated by DIBP to the State for both the State/Territory Nominated (STN) and Business Innovation and Investment Program (BIIP) categories of the Migration Program

Relevant legislative provisions

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

Reasons for decision

Summary

Payment, or the discharging of a liability to make a payment, of a Nomination Fee:

is an Australian fee or charge that is covered by subsection 81-10(4) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) and is not deemed by subsection 81-10(1) of the GST Act to be the provision of consideration;

is covered by paragraph (g) in sub-regulation 81-10.01(1) of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regs) and therefore treated as the provision of consideration by subsection 81-10(2) of the GST Act; and

is not covered by sub-regulation 81-15.01(1) and therefore not deemed by section 81-15 of the GST Act not to be the provision of consideration.

Detailed reasoning

Section 9-5 of the GST Act states that an entity ('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.

Section 9-5 is part of the basic rules in Chapter 2 of the GST Act which also includes section 9-39 which states that Chapter 4 of the GST Act contains special rules relating to taxable supplies as set out in the checklist of special rules in section 9-39, item 8 of which refers to:

Payments of taxes, fees and charges - see Division 81

Section 45-5 in Chapter 4 states that the provisions of Chapter 4 override the provisions of Chapter 2, but only to the extent of inconsistency. In addition, Division 81 in Chapter 4 includes section 81-20 which states:

This Division has effect despite sections 9-15 and 9-17 (which are about consideration)

Division 81 of the GST Act:

T was established in 20XX. With application to the payment or the discharging of a liability to make a payment relating to an Australian tax or an Australian fee or charge imposed on or after 1 July 2011, section 3 and item 2 in Schedule 4 to the Tax Laws Amendment (2011 Measures No. 2) Act 2011 substituted a new Division 81 of the GST Act.

Paragraphs 4.14 to 4.18 in Chapter 4 of the Explanatory Memorandum to the Tax Laws Amendment (2011 Measures No. 2) Act 2011 (Explanatory Memorandum) explain the scheme of the new Division 81 of the GST Act and the intended effect of the A New Tax System (Goods and Services Tax) Amendment Regulations 2011 (No. 2) which substituted a new Division 81 into the GST Regs with effect from 1 July 2011:

4.14 Schedule 4 repeals and replaces Division 81 of the GST Act to allow government agencies to self-assess the GST treatment of any Australian tax or any Australian fee or charge imposed under an Australian law and payable to the agency, in accordance with certain principles.

4.15 Under these amendments, an 'Australian tax' or an 'Australian fee or charge' (as defined in the GST Act) will no longer be treated as the provision of consideration for a supply at first instance. Government agencies will no longer need to have an Australian tax, fee or charge listed on a Determination made by the Commonwealth Treasurer as a prerequisite for it not to be subject to GST.

4.16 Under these amendments, the payment of an Australian tax will not be treated as the provision of consideration and therefore any supply to which it relates will not attract GST. Furthermore, an Australian fee or charge of a kind to which subsections 81-10(4) and (5) apply will not be treated as the provision of consideration (for a supply) and also will not attract GST.

4.17 However, a regulation can be made with the effect of treating payments, or the discharging of a liability to make such payments, of an Australian tax or of an Australian fee or charge, as the provision of consideration for a supply. The GST treatment of the supply to which the tax, fee or charge relates may be a taxable supply.

4.18 The changes also provide for the making of regulations, where necessary, that will allow for the payment of an Australian fee or charge, or the discharging of a liability to make such a payment, to not be the provision of consideration and therefore any supply to which it relates will not be subject to GST.

Summary of submissions made in the ruling request:

It was submitted that the nomination or sponsorship by T of an applicant for a business or skilled migration visa is not a taxable supply because there is no supply for consideration as required by paragraph 9-5(a) of the GST Act because Division 81 of the GST Act deems payment of a Nomination Fee not to be the provision of consideration. The submissions were made in the alternative, i.e. that a Nomination Fee is either:

an Australian fee or charge which falls within subsections 81-10(4) or (5) of the GST Act and is therefore deemed by subsection 81-10(1) not to be the provision of consideration and not treated as the provision of consideration by subsection 81-10(2) and regulation 81-10.01 of the GST Regs; or

an Australian fee or charge that is deemed by section 81-15 of the GST Act and regulation 81-15.01 in the GST Regs not to constitute consideration.

'Australian fee or charge':

The alternative submissions made in the ruling request rely on either section 81-10 or section 81-15 of the GST Act, both of which apply to an 'Australian fee or charge' as defined in section 195-1 of the GST Act:

'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.

It was submitted in the ruling request that a Nomination Fee:

satisfies the 'fee or charge' component of the 'Australian fee or charge' definition because it is a fee payable by a visa applicant who requires T to either nominate or sponsor the applicant;

is not an 'Australian Tax' (defined in section 195-1 as a tax (however described) imposed under an Australian law) because it relates to services rendered by T in considering visa applications;

is 'imposed under an Australian law' because it is imposed by the Migration Act and the State legislation; and

is payable to an 'Australian government agency' (defined in section 195 of the GST Act by reference to section 995 -1 of the Income Tax Assessment Act 1997 (ITAA 1997)) as T is an authority of the State.

'Fee or charge' is not defined in the GST Act. Paragraph 24 of Class Ruling CR 2014/6 states (in part):

It was discussed in Air Caledonie International v Commonwealth (1988) 165 CLR 462 that in order to be classified as a fee for service rather than a tax, the fee or charge must be exacted for particular identified services provided or rendered individually to, or at the request or direction of, the particular person required to make the payment.

The 'how to apply for nomination' section of BSM's fact sheet indicates that, following Step 3 (i.e. an applicant lodges an EOI for a particular subclass of visa on DIBP's SkillSelect database and chooses the State as the nominating State), T does the following:

Step 4: If you meet the State's eligibility criteria, BSM will contact you with instructions on how to provide additional information to finalise your application. A non-refundable application fee must be paid prior to finalising your application.

Step 5: Once an applicant has been nominated by BSM, they will receive an invitation from DIBP to lodge an application within 60 days of nomination.

Step 1 and Step 2 in BSM's fact sheet respectively require an applicant to ensure that he or she meets both the Australian eligibility criteria (on DIBP's website) and the State's eligibility criteria (on T's website) before lodging the EOI with DIBP which nominates the State as the nominating State or Territory. Based on the material in BSM's fact sheet, we understand that T confirms that the applicant satisfies the State's eligibility criteria and the Australian eligibility criteria as it would make no sense for T to nominate an applicant who does not satisfy both. We discuss this in more detail below.

At the end of that process T either nominates or does not nominate the applicant. If T nominates the applicant, DIBP will then invite the applicant to lodge an application for the relevant subclass of visa.

In our view the things done by T are services provided to or at the request or direction of the applicant who pays the Nomination Fee and the Nomination Fee is therefore a fee or charge.

Not an Australian tax:

The definition of 'Australian fee or charge' excludes an Australian tax. 'Australian tax' is defined in section 195-1 of the GST Act:

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

The 'Australian tax' definition was inserted by the Tax Laws Amendment (2011 Measures No. 2) Act 2011. Paragraph 4.20 of the Explanatory Memorandum states that taxes are imposed as part of the general revenue raising activities of government and paragraph 4.22 states that examples of Australian taxes imposed under an Australian law include income tax, stamp duty, FBT, payroll tax, the Medicare Levy, local government 'ordinary rates' and various industry levies. Paragraph 23 of CR 2014/6 states:

'Tax' is not defined in the GST Act. However, the following is the usual description of a tax, as cited in the High Court case of Roy Morgan Research Pty Ltd v Commissioner of Taxation [2011] HCA 35, as per Latham CJ in Matthews v Chicory Marketing Board (Vic) (1938) 60 CLR 263:

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

For the reasons set out above in relation to whether a Nomination Fee is a fee or charge we consider that a Nomination Fee is a payment for services rendered by T to an applicant and therefore not an Australian tax.

Imposed under an Australian law:

We consider that a Nomination Fee is imposed under an Australian law. 'Australian law' is defined in section 995-1 of the ITAA 1997 as a Commonwealth law, a State law, or a Territory law and 'State law' is defined to mean a law of a State. Step 4 in the 'how to apply for nomination' section of BSM's fact sheet requires an applicant to pay a 'non-refundable application fee' and the ruling request referred to a provision in the State legislation which gives T all the powers of an individual and allows T to charge a fee for services supplied by T.

An Australian fee or charge must be payable to an Australian government agency. 'Australian government agency' is defined in section 195-1 of the GST Act as having the meaning given by section 995-1 of the ITAA 1997, i.e.

(a) the Commonwealth, a State or a Territory; or

(b) (b) an authority of the Commonwealth or of a State or a Territory.

The State legislation states that T is a body corporate, that T represents the State and that T has the status, privileges and immunities of the State. Paragraph 2 of Practice Statement Law Administration PSLA 2013/2 states that 'Australian government agency' encompasses local municipal and shire councils, State and Territory entities and Commonwealth entities. Based on the provisions of the State legislation referred to above, we consider that T is 'an authority…of a State' and therefore an Australian government agency.

For the reasons set out above, we consider that a Nomination Fee paid to T is an 'Australian fee or charge' for the purposes of Division 81 of the GST Act.

Subsections 81-10(1) and 81-10(4):

The first of the alternative submissions made in the ruling request was that a Nomination Fee falls within section 81-10 of the GST Act. Subsection 81-10(1) states:

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 fee or charge that is of a kind covered by subsection 81-10(4) or (5).

Subsection 81-10(4) states:

This subsection covers a fee or charge if the fee or charge

(a) relates to; or

(b) relates to an application for;

the provision, retention, or amendment, under an Australian law of a permission, exemption, authority or licence (however described).

'Australian law' is defined in section 195-1 of the GST Act by reference to the ITAA 1997, i.e.

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

…

'State law' means a law of a State.

In relation to the requirement in subsection 81-10(1) that the Australian fee or charge 'is of a kind covered by subsection 81-10(4)', i.e. relates to, or relates to an application for, the provision, retention, or amendment under an Australian law, of a permission, exemption, authority or licence (however described), it was submitted in the ruling request that a Nomination Fee relates to the provision of a permission. Reference was made to the Macquarie Dictionary meaning of 'permission'

1. The act of permitting; formal or express allowance or consent.

2. Liberty or licence granted to do something…

and to paragraph 4.27 of the Explanatory Memorandum to the Tax Laws Amendment (2011 Measures No. 2) Bill 2011 which states:

4.27 To the extent a payment, or the discharging of a liability to make such a payment, is a payment or discharge of an Australian fee or charge that relates to, or relates to the application for, the provision, amendment or retention under an Australian law, of a permission, exemption, authority or licence, it will not be treated as the provision of consideration. Therefore, any supply to which the fee or charge relates will not be subject to GST. A fee or charge in relation to the provision, amendment or retention of a permission, exemption, authority or licence (however described) includes but is not limited to:

application fees, licences, permits and certifications that are required by government prior to undertaking an occupation (for example, medical and legal professionals' right of practice licences, pilots' licences, heavy vehicle drivers' licences and adjustments to such licences); and

regulatory charges imposed to undertake an activity (for example, compulsory testing fees for regulatory purposes, compulsory inspection fees for regulatory purposes, a permit for restaurants to occupy the footpath, and a licence for an event to close roads).

In the ruling request it was submitted that the exclusion from section 81-10 in subsection 81-10(2) for an Australian fee or charge prescribed by regulation 81-10.01 of the GST Regs does not apply. It was further submitted:

Based on the above, we submit that the Nomination Fee is clearly an application fee that is imposed by a regulator (i.e. T) which in turn grants permission to the successful applicant to apply for a visa. As a result, the Nomination Fee satisfies the requirements of section 81-10 and will not be considered to be a provision of 'consideration', i.e. will not be a 'taxable supply' for GST purposes.

This submission treats T's nomination of an applicant as a 'permission' for the purposes of subsection 81-10(4), i.e. permission to apply for a visa of the subclass referred to in the EOI which the applicant lodged with DIBP. In our view the 'provision…under an Australian law, of a 'permission' to which a Nomination Fee either relates to or relates to an application for is the visa sought by the applicant.

Our view is supported by the scheme of the 'how to apply for nomination' section of BSM's fact sheet, Steps 1 and 2 of which advise an applicant to ensure that he or she meets the Australian eligibility criteria and the State's eligibility criteria before lodging an expression of interest (EOI) for a visa on DIBP's SkillSelect database and choosing the State as the nominating State or Territory (Step 3). Step 4 in BSM's fact sheet refers to T (through BSM) contacting the applicant with instructions on how to provide additional information to finalise the application for nomination. Step 5 indicates that is only after the applicant has been nominated by T that DIBP invites the applicant to lodge an application with DIBP for the relevant visa.

The Australian eligibility criteria reflect provisions of the Migration Act 1958 (Cth) (Migration Act) which make nomination by T only one of several primary or secondary criteria prescribed for a particular subclass of visa, each of which earns a specified number of points under a points system. Subdivision AA of Division 3 of the Migration Act deals with applications for visas for non-citizens. Subsection 45(1) states that, subject to the Migration Act and the Migration Regulations 1994 (Migration Regs), a non-citizen who wants a visa must apply for a visa of a particular class. Subsection 46(1) states that that an application for a visa is valid if, and only if, it is for a visa of a class specified in the application and satisfies the criteria and requirements prescribed under section 46. Subsection 46(2) states that an application for a visa is valid if it is an application for a visa of a class prescribed for the purposes of subsection 46(2) and, under the Migration Regs, the application is taken to have been validly made. Subsection 46(3) states:

(3)  The regulations may prescribe criteria that must be satisfied for an application for a visa of a specified class to be a valid application.

Part 2 of the Migration Regs deals with visas. Regulation 2.03 deals with criteria applicable to classes of visas and states that the prescribed criteria for the grant to a person of a visa of a particular class are either the primary criteria set out in a relevant Part of Schedule 2 or if a relevant Part of Schedule 2 sets out secondary criteria, those secondary criteria.

BSM's fact sheet refers to subclass 190 visas. In Schedule 2 to the Migration Regs the primary criteria for a subclass 190 (Skilled-Nominated) visa, which must be satisfied by at least one member of the family unit, include:

190.211- the applicant was invited, in writing, by the Minister to apply for the visa (BSM's fact sheet indicates (Step 5) that DIBP will issue an invitation within 60 days after T has nominated the applicant);

190.212 - at the time of invitation to apply for the visa the relevant assessing authority had assessed the applicant's skills as suitable for the applicant's nominated skilled occupation;

190.213 - at the time of invitation to apply for the visa, the applicant had competent English;

190.214 - the applicant's score, when assessed in relation to the visa under Subdivision B of Division 3 of Part 2 of the Migration Act, is not less than the score stated in the invitation to apply for the visa (Subdivision B of Division 3 of Part 2 of the Migration Act sets out a 'points system' - subsection 93(2) provides for regulations to prescribe a number of points for each prescribed quality (regulation 2.26AC(1) and Schedule 6D to the Migration Regs set out a general points test for skilled migration visas, including subclass 190, which allocates points for qualifications such as age, English language, overseas employment experience, Australian employment experience, educational qualifications, Australian study qualifications, being invited to apply for the visa and the nominating State has not withdrawn the nomination); subsection 93(1) states that the Minister shall make an assessment by giving the applicant the prescribed number of points for each prescribed quality satisfied by the applicant; subsection 96(2) allows the Minister to specify the pass mark for the purposes of the Migration Act in relation to applications for visas of a particular class; and subsection 94(1) states that an applicant whose assessed score is more than or equal to the applicable pass mark is taken to have recorded the qualifying score);

190.215 - the nominating State or Territory government agency has not withdrawn the nomination;

190.216 - the applicant satisfies specified public interest criteria; and

190-217 - the applicant satisfies specified special return criteria.

In relation to the criteria numbered 190.214, i.e. a score under Subdivision B of Division 3 of Part 2 of the Migration Act, section 92 of the Migration Act states that Subdivision B has effect where one of the prescribed criteria in relation to a visa of a particular class is the criterion that the applicant receives the qualifying score when assessed as provided by Subdivision B. Subsection 93(1) of the Migration Act states that the Minister shall make an assessment by giving an applicant the prescribed (under the Migration Regs) number of points for each prescribed qualification satisfied by the applicant. Subsection 96(2) states that the Minister may, from time to time, by notice in the Gazette, specify, in relation to applications for visas of a particular class, the pass mark for the purposes of this Act and the regulations. Regulation 2.26AC of the Migration Regs is stated to apply to a Skilled - Nominated (Permanent) visa and states that each qualification prescribed in an item in Schedule 6D to the Migration Regs is prescribed as a qualification in relation to the grant to an applicant for a subclass 190 visa and has the number of points prescribed in Schedule 6D. Schedule 6D to the Migration Regs sets out a general points test for general skilled migration visas mentioned in regulation 2.26AC).

We have referred to the provisions set out above in detail because we consider that it would make little sense for T to nominate an applicant who does not satisfy the Australian eligibility criteria. In the relevant facts we noted that the State's eligibility criteria for a subclass 190 visa include that the applicant satisfies the Australian eligibility criteria. Consequently, apart from T confirming that an applicant meets the other State's eligibility criteria and holds the documents listed in the 'documents required' section of BSM's fact sheet, T checks that the applicant satisfies the Australian eligibility criteria for the relevant visa subclass. We therefore consider that, for the purposes of subsection 81-10(4), a Nomination Fee is a 'fee or charge' that either 'relates to' a visa or 'relates to an application for' a visa.

In relation to the 'relates to' requirement in subsection 81-10(4), paragraph 52 of Goods and Services Tax Ruling GSTR 2003/9 states:

52. The words 'relates to'… are not defined in the GST Act. Such terms must be read in the context in which they appear and courts have ruled that the terms be interpreted in accordance with the intent of the relevant statute. In Hatfield v. Health Insurance Commission (1987) 15 FCR 487 at page 491 Davies J stated:

Expressions such as 'relating to', 'in relation to', 'in connection with' and 'in respect of' are commonly found in legislation but invariably raise problems of statutory interpretation. They are terms which fluctuate in operation from statute to statute... The terms may have a very wide operation but they do not usually carry the widest possible ambit, for they are subject to the context in which they are used, to the words with which they are associated and to the object or purpose of the statutory provision in which they appear.

In the present case subsection 81-10(4) requires that the fee or charge either 'relates to' or 'relates to an application for' the provision under an Australian law of a permission. The second alternative appears to be intended to apply to an unsuccessful application, i.e. where an application fee or charge is paid but the permission is not provided. In our view the use of these alternatives in subsection 81-10(4), plus the overall scheme of section 81-10 (i.e. where a fee or charge that satisfies either subsection 81-10(4) or (5) and is therefore not the provision of consideration under subsection 81-10(1) can nevertheless be treated as consideration pursuant to subsection 81-10(2) and the GST Regs) indicates that 'relates to' in subsection 81-10(4) is intended to have a wide operation. We therefore consider that a Nomination Fee paid by an applicant to T in the circumstances set out in BSM's fact sheet either 'relates to' or 'relates to an application for' a visa of the subclass referred to in an EOI lodged with DIBP by an applicant.

We also consider that a visa is a 'permission' for the purposes of subsection 81-10(4). Division 1 of Part 2 of the Migration Act includes subsection 13(1) which states:

(1)  A non-citizen in the migration zone who holds a visa that is in effect is a lawful non-citizen.

and subsection 14(1) which states:

(1) A non-citizen in the migration zone who is not a lawful non-citizen is an unlawful non-citizen.

Section 5 of the Migration Act defines 'migration zone' as the area consisting of the States, the Territories, Australian resource installations and Australian sea installations. Thus, in terms of the Macquarie Dictionary definition of 'permission' referred to above, a visa is a formal or express allowance or consent to a non-citizen entering and remaining in Australia. The grant of a visa pursuant to the Migration Act is the 'provision' of a permission and that provision is 'under an Australian law', as required by subsection 81-10(4).

For the reasons set out above we consider that a Nomination Fee is covered by subsection 81-10(4) and is deemed by subsection 81-10(1) not to be the provision of consideration.

Subsection 81-10(2):

Subsection 81-10(1) is qualified by subsection 81-10(2) which states:

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 the payment is an Australian fee or charge that is, or is of a kind, prescribed by the regulations.

Regulation 81-10.01 in the GST Regs states:

For subsection 81-10(2) of the Act, the following kinds of Australian fee or charge are prescribed:


(a) a fee for parking a motor vehicle in a ticketed or metered parking space;
(b) a toll for driving a motor vehicle on a road;
(c) a fee for hire, use of, or entry to a facility, except for an entry fee to a national park;
(d) a fee for the use of a waste disposal facility;
(e) a fee for pre-lodgement advice if:


(i) the advice relates to an application to which subsection 81-10(4) of the Act applies; and


(ii) it is not compulsory to seek the advice;

(f) a fee or charge for the provision of information by an Australian government agency if the provision of the information is of a non-regulatory nature;

(g) a fee or charge for a supply of a non-regulatory nature;

(h) a fee or charge for a supply by an Australian government agency, where the supply may also be made by a supplier that is not an Australian government agency.

Paragraphs 4.31 and 4.32 of the Explanatory Memorandum explain the reasons for subsection 81-10(2) of the GST Act and regulation 81-10.01:

4.31 These amendments allow for a payment, or discharging of a liability to make such a payment, of any Australian fee or charge, or a fee or charge of a specified kind (including fees and charges that have not been treated as the provision of consideration due to the application of subsection 81-10(1)) to be treated, by way of regulation, as the provision of consideration for a supply made by the entity to which the fee or charge is payable. This supply will be a taxable supply if the requirements of section 9-5 of the GST Act are met.

4.32 The abovementioned regulation-making power allows for circumstances where, for policy reasons, the Government considers that GST should apply to the payment, or discharging of a liability to make such a payment, of an Australian fee or charge.

It was submitted in the ruling request that T makes a supply of services to an applicant for a visa and that that supply is of a regulatory nature as the Explanatory Statement to A New Tax System (Goods and Services Tax) Amending 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.

It was submitted that T is legislatively empowered to nominate and sponsor business and skilled migration visa applications on behalf of the State and the nomination and sponsorship is a legislative requirement under the Migration Act for all visas nominated or sponsored by a State or Territory. It was submitted that the Nomination Fee or Sponsorship Fee is for a regulatory purpose as it is charged for regulating the nomination and sponsorship of migrants for certain visas.

We agree that the Nomination Fee does not fall within the categories of fees or charges in paragraphs (a), (b), (c), (d) (e), (f) or (h) of sub-regulation 81-10.01(1). However, we consider that the Nomination Fee falls within paragraph (g) in sub-regulation 81-10.01(1):

(g) a fee or charge for a supply of a non-regulatory nature;

Paragraph (g) refers to the 'supply' which a fee or charge is 'for'. 'Supply' is defined in subsection 9-10(1) of the GST Act as any form of supply whatsoever and subsection 9-10(2) states that 'supply' includes a supply of services, a provision of advice or information, or any combination of the matters referred to in subsection 9-10(2).

As noted above, BSM's fact sheet indicates that where an applicant lodges an EOI for a particular subclass of visa on the DIBP's SkillSelect database and chooses the State as the nominating State, T confirms that the applicant meets the State's eligibility criteria and the Australian eligibility criteria for that subclass of visa, contacts the applicant with instructions on how to provide additional information to finalise the application for nomination, asks the applicant to provide the 'documentation required' as set out in BSM's facts sheet and either does or does not nominate the applicant. We therefore consider that a Nomination Fee is 'for' a supply or supplies made by T.

The issue is whether the supplies made by T for a Nomination Fee are 'of a non-regulatory nature' as required by paragraph (g) of sub-regulation 81-10.01(1). Regulation 81-10.01 in its original form was inserted into the GST Regs by the A New Tax System (Goods and Services Tax) Amendment Regulations 2011 (No.2) with effect from 1 July 2011 but was amended with effect from 1 July 2012 by the A New Tax System (Goods and Services Tax) Amendment Regulation 2012 (No. 2) which renumbered regulation 81-10.01 as sub-regulation 81-10.01(1) and replaced paragraph (f) with paragraphs (f), (g) and (h). In relation to paragraph (g) in sub-regulation 81-10.01(1) the Explanatory Statement to the A New Tax System (Goods and Services Tax) Amendment Regulation 2012 (No. 2) (Explanatory Statement) states:

Supplies that are not regulatory in nature

Item [2] - paragraph 81-10.01(1)(g)

This paragraph ensures that the non-regulatory activities of government are subject to GST. This paragraph applies to supplies of goods and services for which fees are imposed where the consumer is provided with something that lacks regulatory character. That is, the fee or charge does not arise under an Australian law which is intended, for example, to regulate behaviour, ensure consumer protection and ensure compliance with certain standards. The paragraph applies even though it may be the sole responsibility of a government agency to supply the goods and services for which the fees are imposed, and such supplies are in the public interest. The following are examples of fees and charges that do not have a regulatory character:

A fare charged for travel on a transportation service;

A fee paid by the media to a council for immediate access to traffic information; and

A fee charged for exclusive rights to a mausoleum or burial plot.

The Explanatory Statement states that paragraph (g) applies to supplies of goods and services for which fees are imposed and where the consumer is provided with something that lacks regulatory character. Although described as a 'Nomination Fee' it is evident from the 'how to apply for nomination' section of BSM's fact sheet discussed above that the Nomination Fee has a nexus with supplies of services and the provision of advice by T to an applicant. This view is supported by BSM's fact sheet which states that the Nomination Fee is non-refundable and the notes to BSM's Fee Schedule which state that a Nomination Fee will not be refunded in any circumstances including where the applicant changes his or her mind and does not apply for a visa or the Australian Government does not grant the visa.

The Explanatory Statement also states that paragraph (g) in sub-regulation 81-10.01(1) applies to a fee or charge which does not arise under an Australian law which is intended to regulate behaviour. The Australian law under which a Nomination Fee arises is the State legislation, the object of which is to achieve economic and social benefits for the State. That object contrasts with the object of the Migration Act which expressly refers to regulation. Subsection 4(1) of the Migration Act states:

(1)  The object of this Act is to regulate, in the national interest, the coming into, and presence in, Australia of non-citizens.

Subsections 4(2) to 4(5) state how that object is to be advanced. Subsection 4(2) states:

(2)  To advance its object, this Act provides for visas permitting non-citizens to enter or remain in Australia and the Parliament intends that this Act be the only source of the right of non-citizens to so enter or remain.

We set out in more detail why a Nomination Fee is for a supply of a non-regulatory nature in our consideration of section 81-15 and regulation 81-15.01 below.

In comments on a draft of this ruling T's adviser stated that these reasons for decision are inconsistent with the principle stated in the Explanatory Statement in relation to paragraph 81-10(1)(g) of the GST Regs, i.e.

This paragraph applies to supplies to supplies of goods and services for which fees are imposed where the consumer is provided with something that lacks regulatory character.

T's adviser stated:

Specifically, the Commissioner considers that because the object of the State legislation (i.e. to achieve economic and social benefits for the State) contrasts with that of the Migration Act (i.e. to regulate, in the national interest, the coming into, and presence, in Australia of non-citizens), it is not possible for T's activities of nominating and sponsoring visa applications to be for a regulatory purpose (i.e. to regulate the coming into, and presence in Australia, of non-citizens). Instead T is restricted to performing those activities for the purpose of achieving the object of the State legislation, that is, to achieve economic and social benefits for the State.

…

We consider this reasoning is inconsistent with the principles outlined in the Explanatory Statement…In determining whether a supply is of a non-regulatory nature, the relevant test (a negative test) is to consider whether the consumer is provided something that lacks regulatory character…

We note the principles in the Explanatory Statement do not prescribe a test which limits the consideration of whether a supply is of a non-regulatory nature (or a regulatory nature) to the object of the particular Act that governs the functions of the government agency.

Therefore we submit the Commissioner has applied the incorrect test in the draft ruling in reaching the conclusion that T's supply is of a non-regulatory nature by limiting the consideration of T's activities to the object of the State legislation (i.e. because the object of the State legislation is to achieve economic and social benefits for the State, T's functions and activities must be limited to achieving that objective). We submit the correct approach in determining whether T's supply is of a non-regulatory nature (or a regulatory nature) is to examine the nature of the supply (beyond the scope of the State legislation) and consider whether it satisfies the relevant tests provided by the principles in the Explanatory Statement.

As indicated by the reasons for decision set out above, the draft of this ruling referred to the object of the State legislation (and, by way of contrast, the object of the Migration Act) in relation to sub-regulation 81-10.01(g) of the GST Regs because the Explanatory Statement states:

That is, the fee or charge does not arise under an Australian law which is intended, for example, to regulate behaviour, ensure consumer protection, and ensure compliance with certain standards.

We therefore consider it relevant to consider whether the Australian law (i.e. the State legislation) under which the Nomination Fee arises is intended to regulate behaviour and, for that purpose, referred to the object of the State legislation.

The reasons for decision in relation to sub-regulation 81-10.01(g) set out in the draft of this ruling were not limited to the object of the State legislation. Those reasons for decision also considered the nature of the supply made by T (as indicated by the terms of BSM's fact sheet) and referred to our reasons for decision in relation to regulation 81-15.01 which, in concluding that a Nomination Fee is not 'a fee or charge for a supply of a regulatory nature made by an Australian government agency' (sub-regulation 81-15.01(1)(f)) relied on the examples given in the Explanatory Statement of fees falling outside sub-regulation 81-15.01(1)(f) and the intention stated in the Explanatory Statement that the GST Regs (as amended) carry on the GST treatment of Australian taxes, fee and charges provided in the A New Tax System (Goods and Services Tax) (Exempt Taxes, Fees and Charges) Determination 2011 (No. 1).

The comments on the draft of this ruling also referred to referred to a section of the State legislation which states that T's functions include any other function given to it under and Act. It was submitted that T can perform functions given to T by the Migration Act such as nominating and sponsoring visa applications. The comments referred to the discussion in the draft of this ruling of the 'how to apply for nomination' section of BSM's fact sheet (above) which suggested that T would confirm that the applicant satisfies the State's eligibility criteria and the Australian eligibility criteria (i.e. the primary criteria and points test prescribed under the Migration Act for the relevant class of visa) as it would make no sense for T to nominate an applicant who did not satisfy those criteria. It was submitted:

Based on the above, we submit T performs an important regulatory function in the application process of various visa subclasses. Specifically, T is required to confirm whether the applicant meets the State's eligibility criteria and Australian eligibility criteria (prescribed by the Migration Act) before it decides whether or not to nominate the applicant for the visa subclass.

Importantly, Step 5 in the BSM's fact sheet provides that it is only after the applicant has been nominated by T that DIBP will invite the applicant to lodge an application with DIBP for the relevant visa. This means that if T does not nominate a particular applicant, that applicant is unable to proceed to the next step of the visa application process with DIBP. In light of the above, we submit T's supply of services to applicants for nominating and sponsoring visa applications is a supply of a regulatory nature as T regulates the coming into and presence in Australia of non-citizens by deciding whether the applicant can proceed to the next step of the visa application process with DIBP through its nomination function.

To the extent that T confirms that an applicant meets the State's eligibility criteria we do not agree that T performs a regulatory function. As noted above, BSM's fact sheet requires an applicant to ensure that he or she meets both the Australian eligibility criteria and the State's eligibility criteria and it makes sense for T to confirm that the applicant meets the Australian eligibility criteria before nominating the Applicant. However, T's nomination does not amount to T regulating the coming into and presence in Australia of non-citizens. It is clear from the provisions of the Migration Act and Migration Regs related to the subclass 190 visa referred to above that the supply of a regulatory nature commences after T nominates the applicant when DIBP then invites the applicant to apply for a visa. Subsection 46(1) requires an application for the relevant subclass of visa to be made and the Migration Regs (including Schedule 2) set out the primary criteria which must be satisfied in order for the visa to be granted. In the case of a subclass 190 visa the first of the seven primary criteria is that the applicant was invited to apply and one of the other primary criteria is confirmation that the nominating State has not withdrawn the nomination.

Thus, although nomination by T is necessary in order for DIBP to invite an applicant to apply for a skilled migration visa, that nomination is not sufficient for the grant of such a visa by DIBP. The view that T does not perform the regulatory function described in the further submissions is also supported by the

Section 81-15 and regulation 81-15.01:

Our view that a Nomination Fee falls within paragraph (g) of sub-regulation 81-10.01(1) and does not constitute consideration is not determinative because sub-regulation 81-15.02(1) states:

The payment of a fee or charge covered by both paragraph 81-10.01(1)(g) and regulation 81-15.01, or the discharge of a liability to pay the fee or charge, is not to be treated as the provision of consideration.

It was submitted in the ruling request that a Nomination Fee falls within paragraph (f) in sub-regulation 81-15.01(1), i.e.

(f) a fee or charge for a supply of a regulatory nature made by an Australian government agency.

It was also submitted that T makes a supply of services to an applicant for a visa and that T is an Australian government agency. We agree with these submissions for the reasons set out above in relation to paragraph (g) of sub-regulation 81-10.01(1).

It was further submitted that the supply made by T is 'of a regulatory nature'. Reference was made the section of the Explanatory Statement which discusses regulation 81-15.01 generally:

Regulation 81-15.01 prescribes fees and charges for the purposes of section 81-15 of the Act. The fees and charges prescribed in regulation 81-15.01 are regulatory in nature and are considered to fall within the principles contained in the Intergovernmental Agreement and are therefore intended to be exempt from GST.

The payment of fees and charges of a kind prescribed by regulation 81-15.01 are not the provision of consideration and therefore do not give rise to a taxable supply. The regulation adds to the kinds of fees and charges that are already made exempt from GST under the operation of subsection 81-10(4) and (5) of the Act.

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.

It was submitted:

In this regard, T is legislatively empowered to nominate and sponsor business and skilled migration visa applications on behalf of the State Government. As mentioned above, the nomination or sponsorship by T is a legislative requirement under the Migration Act for all State-nominated or sponsored business and skilled migration visa subclasses. Further, the Nomination fee is for a regulatory purpose as it is a fee charged by an Australian Government Agency for regulating the nomination or sponsorship of migrants for certain visas.

In our view the provisions of the State legislation do not support the submission that T charges a Nomination Fee for regulating the nomination or sponsorship of applicants for certain visas. As noted above, the object of the State legislation is to achieve economic and social benefits for the State.

T is empowered to do anything necessary or convenient to be done in performing T's functions and T's functions, as set out in the State legislation mainly relate to facilitating, assisting etc. 'trade and investment opportunities'. We therefore consider that when T undertakes the activities referred to in Step 4 of the 'how to apply for nomination' section of BSM's fact sheet in relation to a visa subclass based on skills, business innovation, or investment, T is not 'regulating the nomination of applicants for certain visas' but achieving the object of the State legislation.

As noted above, the object of the State legislation contrasts with subsection 4(1) of the Migration Act which indicates that the object of the Migration Act is to regulate the coming into and presence in Australia of non-citizens. Even where T nominates an applicant for a subclass 190 visa, that does not guarantee that DIBP will grant a visa to the applicant as nomination by a State or Territory is merely one of the seven primary criteria required to be satisfied and secures only five additional points under the points test.

We also note that the examples given in the Explanatory Statement of fees or charges which do fall within paragraph (f) of sub-regulation 81-15.01(1) generally arise under legislation has regulation or co-ordination as an object. One example given in the Explanatory Statement for paragraph (f) of sub-regulation 81-15.01(1) is:

A fee paid for a licence to operate a childcare facility

The relevant State legislation states:

(1) The object of this Act is to protect, and promote the best interests of, children receiving child care.

Another example given in the Explanatory Statement for paragraph (f) of sub-regulation 81-15.01(1) is:

Developer contribution fees, including contributions required to be paid under planning agreements and local infrastructure contributions;

The relevant legislation in the State establishes an Authority, states that the Authority's main function is to give effect to the legislation and that that main function is performed by the Authority:

(a) planning, developing and managing land in urban development areas, for urban purposes; and

(b) deciding urban development area development applications; and

(c) co-ordinating the provision of infrastructure for urban development areas.

We also note that child care licence application fees and development approval fees (including contributions towards infrastructure) were included in the Schedule to the A New Tax System (Goods and Services Tax) (Exempt Taxes, Fees and Charges) Determination 2011 (No. 1) and thereby specified as not being the provision of consideration for the purposes of the former subsection 81-5(2) of the GST Act. The Explanatory Statement to the A New Tax System (Goods and Services Tax) Amendment Regulations 2011 (No. 2) states:

The Regulations, in conjunction with the amendment to Division 81, are intended to carry on the GST treatment of particular classes of Australian taxes, fees and charges that are currently provided under the A New Tax System (Goods and Services Tax) (Exempt Taxes, Fees and Charges) Determination 2011 (No. 1).

In the comments on a draft of this ruling T's adviser pointed out that certain migration-related fees were also specified as not being for the provision of consideration pursuant to the former subsection 81-5(2) of the GST Act:

Specifically, items 10.3 and 10.10 of Part 1 of Schedule 1 to the A New Tax System (Goods and Services Tax) (Exempt Fees and Charges) Determination 2011 (No. 1) provides that a fee for nomination of business activities and an assessment fee for assessing a person's work qualifications and experience imposed under the Migration Regulations 1994 for visa application purposes are treated as not being the provision of consideration.

Based on the reasoning outlined above, we submit that the Nomination Fee is very similar in nature to the immigration related fees described above that were expressly specified as not being the provision of consideration under the former Division 81 provisions. Accordingly, we submit the same GST treatment should apply in respect of the Nomination Fee charged by T for nominating and sponsoring visa applications (i.e. the Nomination Fee does not constitute the provision of consideration for the purposes of section 9-5 of the GST Act).

The comments set out above refer to items 10.3 and 10.10 in Part 1 of the Schedule to the A New Tax System (Goods and Services Tax) (Exempt Taxes, Fees and Charges) Determination 2011 (No. 1) (Determination). Item 10.3 refers to a fee payable under regulation 1.20G or 1.20GA of the Migration Regulations 1994 (Migration Regs) for nomination of business activities. Regulations 1.20G and 1.20GA were in the former Division 1.4A (Temporary business entry: sponsorship and nomination) of the Migration Regs which provided for approval of a business sponsor and approval of the nomination of an activity to be undertaken in Australia by a prospective holder of a subclass 457 (Long Stay) visa. Division 1.4A of the Migration Regs has been repealed but item 10.8 in the Determination states that an employer nomination fee payable pursuant to regulation 5.37 of the Migration Regs is not the provision of consideration. Regulation 5.37 refers to an application under sub-regulation 5.19(1) for the Minister's approval of the nomination of a position. Subsection 140GB(1) of the Migration Act states that an approved sponsor may nominate a proposed occupation and subsection 140GB(2) states that the Minister must approve such a nomination if the prescribed criteria are satisfied. Sub-regulation 5.19(1) states that a person (nominator) may apply to the Minister for approval of the nomination of a position in Australia and sub-regulation 5.19(2)(b) states that such an application must be accompanied by the fee mentioned in regulation 5.37. Regulation 5.19 deals with a temporary residence transition nomination and a direct entry nomination. In the case of a direct entry nomination, sub-regulation 5.19(4) states that the Minister must approve a nomination of a position if eight criteria are satisfied. Those criteria include that the application is made in accordance with sub-regulation 5.19(2) (i.e. made in the approved form and accompanied by the fee mentioned in regulation 5.37). Thus, provided all the other criteria (e.g. the application identifies a need for the nominator to employ a paid employee to work in the position under the nominator's direct control (sub-regulation 5.19(4)(a)(ii)) set out in sub-regulation 5.19(4)(a) to (h) are satisfied, the Minister must approve nomination of the position if the nominator pays the fee specified in regulation 5.37.

We consider that there are fundamental differences between the employer nomination fee referred to in item 10.8 of the Schedule to the Determination and the Nomination Fee payable to T under the State legislation. The former is paid to DIBP pursuant to legislation (i.e. the Migration Act) which is intended to regulate behaviour, the Minister is legislatively empowered to make the relevant supply (i.e. approve the nomination of the position) and the supply satisfies a regulatory purpose (i.e. the primary criteria for the grant of a subclass 457 Temporary Work (Skilled) visa in Schedule 2 to the Migration Regs include (457.223(2)) that a nomination of an occupation in relation to the applicant has been approved under section 140GB of the Migration Act; the nomination was made by a person who was a standard business sponsor at the time the nomination was approved; and the approval of the nomination has not ceased). By comparison the Nomination Fee is paid to T pursuant to the State legislation which is not intended to regulate behaviour and the supply made by T does not satisfy a regulatory purpose as it is a necessary condition but not a sufficient condition for the grant of a visa.

Consequently we do not agree with the submission that the Nomination Fee paid to T is very similar in nature to the fees payable to DIBP referred to in items 10.3 and 10.10 in the Schedule to the Determination and should therefore be treated as not being the provision of consideration.

For the reasons set out above we consider that the Nomination Fee payable to T does not fall within paragraph (f) of sub-regulation 81-15.01(1) of the GST Regs. Nor does a Nomination Fee fall within any other paragraph of sub-regulation 81-15.01(1). Consequently a Nomination fee is not prescribed by sub-regulation 81-15.01(1) as not constituting consideration for the purposes of section 81-15 of the GST Act.

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