Edited version of private advice

Authorisation Number: 1052400921951

Date of advice: 12 June 2025

Ruling

Subject: GST - payments to a government entity

Question 1

Is the reimbursement of a government entity not the provision of consideration because of section 81-15 of the A New Tax System (Goods and Services Tax) Act 1999?

Answer 1

Yes, the payments are treated as not being consideration for a supply.

This ruling applies for the following periods:

Tax periods ending on or after 30 June 20XX and before 1 July 20XX

Relevant facts and circumstances

The entity is a government entity and receives payments under legislation from a non-government entity.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 9-15

A New Tax System (Goods and Services Tax) Act 1999 section 81-15

Reasons for decision

Generally, a supply is subject to GST if it satisfies the requirements of a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). One of those requirements is that the supply must be made 'for consideration' which is defined by section 9-15 of the GST Act to include 'any payment ... in connection with a supply of anything'.

However, Division 81 of the GST Act operates so that GST does not apply to certain payments of Australian taxes, fees and charges. Section 81-15 of the GST Act states that the A New Tax System (Goods and Services Tax) Regulations 2019 (GST Regulations) 'may provide that the payment of a prescribed Australian fee or charge, or of an Australian fee or charge of a prescribed kind, or the discharging of a liability to make such a payment, is not the provision of consideration'.

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

An Australian government agency is defined with reference to section 995-1 of the Income Tax Assessment Act 1997 to include an authority of the Commonwealth. The entity is an Australian Government entity and, as such, is an Australian government agency for the purposes of the GST Act.

The payments made to the entity are Australian fees or charges under section 81-15 of the GST Act.

Paragraph 81-15.01(d) of theGST Regulations provides that the payment of 'a fee or charge to compensate an Australian government agency for costs incurred by the agency in undertaking regulatory activities' is not the provision of consideration. Therefore, if the entity is undertaking 'regulatory activities' when it incurs expenses for which it is entitled to be paid by the non-government entity under the relevant legislation, the payment will not be consideration for the purposes of section 9-15 of the GST Act.

The Explanatory Statement to the A New Tax System (Goods and Services Tax) Amendment Regulation 2012 (No. 2) states that 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'. In regard to paragraph 81-15.01(d) of the GST Regulations, the Explanatory Statement gives several examples including 'fees charged by the Public Trustee in carrying out statutory duties' and states:

'This paragraph [81-15.01(d)] ensures that fees and charges which are for services provided on a cost recovery basis by government agencies, and relate to activities that are regulatory in nature, are not treated as the provision of consideration and therefore do not give rise to a taxable supply.'

The entity is responsible for undertaking various activities under specific legislation. The non-government entity is required to reimburse the entity, under legislation for the costs that the entity has incurred, or expects to incur. The services provided by the entity are regulatory in nature because the entity is required by legislation to provide those services.

Consequently, as the non-government entity is paying the entity for costs it incurred in undertaking various regulatory functions, the payments are covered by paragraph 81-15.01(d) of the GST Regulations and are treated as not being consideration for a supply for the purposes of section 9-5 of the GST Act.

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