Edited version of your private ruling

Authorisation Number: 1011961086769

This edited version of your ruling will be published in the public register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.

Ruling

Subject: GST and fees and charges

Question 1

Are the charges for facilities and services as outlined under the contract subject to Division 81 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No.

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.

Entity A is a Statutory Authority established under a particular Act (Act).

The Act provides for Under Entity As functions.

The Act provides for Entity A's general powers and this includes entering into contracts.

Entity A's pricing structure is set for most of its customers under a general contract.

The contract provides that Entity A agrees to make facilities and services available for use in return for your agreeing to pay the charges for them under these terms.

The contract provides that you become liable for a charge under clause … when the supply of the services is made.

The fees and charges provided for under the Contact have not been listed under the A New Tax System (Goods and Services Tax)(Exempt Taxes Fees and Charges) Determination 2011 (No 1).

Relevant legislative provisions

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

A New Tax System (Goods and Services Tax) Act 1999 Section 81-10.

Reasons for decision

Summary

Entity A's charges for facilities and services as outlined under the contract are not subject to Division 81 of the GST Act as the requirements of being an Australian tax or an Australian fee or charge is not satisfied.

Detailed reasoning

The requirements for a taxable supply are stated in section 9-5 of the GST Act.

This provision provides that a supply is taxable if:

· you make the supply for consideration,

· the supply is made in the course or furtherance of an enterprise that you carry on,

· the supply is connected with Australia, and

· you are 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 words 'A supply is any form of supply whatsoever' in subsection 9-10(1) of the GST Act cover all supplies regardless of whether they concern goods or services. Subsection 9-10(2) does not limit subsection 9-10(1) and includes such things as goods, services, provision of information, rights and obligations. Something that is not listed in subsection 9-10(2) but falls within subsection 9-10(1) will be a supply.

When considering supplies we look to the arrangement in which the supplies are made. An arrangement may be evidenced by written agreements, legal instruments, Ministerial directions, departmental guidelines and memoranda of understanding.

The first requirement under section 9-5 of the GST Act is that you make a supply for consideration. The definition for consideration in section 195-1 provides that that consideration for a supply means any consideration within the meaning given by section 9-15, in connection with the supply.

When a recipient receives a supply from Entity A under the contract they are liable to pay a fee or charge for the supply. Hence, Entity A has made a supply for consideration and as such paragraph 9-5(a) of the GST Act will be satisfied.

Where the other paragraphs under section 9-5 are met, in that, the supply is made in the course or furtherance of Entity As enterprise that Entity A carries on, the supply is connected to Australia as the supply is done in Australia, and Entity A is registered for GST, the supply will be taxable to the extent it is not GST-free or input taxed.

Consideration must also be given to the operation of Division 81 of the GST Act.

The GST treatment of all new Australian taxes or Australian fees and charges that are not currently entered on the Treasurer's Determination will be self assessed under the changes made with effect from 1 July 2011. Those Australian taxes or Australian fees and charges that are not covered by the changes made and meet the requirements of section 9-5 of the GST Act will be taxable supplies, unless excluded by regulation.

Section 81-5 of the GST Act provides that:

(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.

(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 the 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.

Section 81-10 of the GST Act provides that:

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

(2) However, a payment you make, or 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.

(3) For the purposes of subsection (2), the consideration is taken to be provided to the entity to which the fee or charge is payable, for a supply that the entity makes to you.


(4) 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).

A supply to which a payment, or the discharging of a liability to make such a payment will not be subject to GST to the extent the payment is for an Australian tax or an Australian fee or charge covered by sections 81-5 and 81-10 of the GST Act.

For a payment to be an 'Australian tax' it must be a tax imposed under an Australian law. For a payment to be an 'Australian fee or charge' it must be a fee or charge imposed under an Australian law and be payable to an Australian government agency.

The Act is an Australian law. The only provision in the Act relating to fees and charges is a particular section. This provision states that this section does not apply to services or facilities that Entity A provides under contact. Hence, the fees and charges for Entity A services or facilities provided for under contract are not imposed under the Act.

Hence, the payments provided for under the contract are not imposed under an Australian law and neither section 81-5 or 81-10 of the GST Act will apply.

Consequently, as previously mentioned, the supply of services from Entity A to a recipient under the contract will be taxable to the extent it is not GST-free or input taxed.