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Ruling

Subject: Application of GST to commencement of proceedings fees and hearing fees

Question 1

Is goods and services tax (GST) payable on fees paid for the commencement of proceedings in a Tribunal from 1 July 2011 to 30 June 2012?

Answer

No. Fees paid for the commencement of proceedings in the Tribunal from 1 July 2011 to 30 June 2012 are exempt from GST.

Question 2

Is GST payable on hearing fees paid when a matter is heard by the Tribunal from 1 July 2011 to
30 June 2012?

Answer

No. Hearing fees paid when a matter is heard by the Tribunal from 1 July 2011 to 30 June 2012 are exempt from GST.

Relevant facts and circumstances

The Tribunal is part of the Department of Justice in a State. The Department of Justice is registered for GST.

State Regulations prescribe the payment of a commencement fee to commence a matter in the Tribunal and the payment of a hearing fee when a matter is heard by the Tribunal.

Both the commencement and hearing fees are paid into the consolidated revenue in the State. A corresponding amount is then included in the Tribunal's budget and used to finance its operations.

The commencement fees and hearing fees are specified in the A New Tax System (Goods and Services Tax)(Exempt Taxes, Fees and Charges) Determination 2011 (No 1) (the Determination).

Neither of the fees are listed in Regulation 81-10.01 of the A New Tax System (Goods and Services Tax) Regulations 1999 (the GST Regulations) which requires certain fees and charges to be treated as consideration.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 subsection 7-1(1)

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

A New Tax System (Goods and Services Tax) Act 1999 section 9-39

A New Tax System (Goods and Services Tax) Act 1999 section 9-40

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

Reasons for decisions

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 and that the non-commercial activities of government would be outside the scope of the GST.

Under subsection 7-1(1) of the GST Act, GST is payable on taxable supplies and taxable importations.

Section 9-40 of the GST Act provides that you must pay the GST payable on any taxable supply that you make.

Under section 9-5 of the GST Act, you make a taxable supply 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 word 'you' used in the GST Act applies to entities (individuals, companies, partnerships, etc) generally.

However, in some cases, a government entity will not meet the definition of 'entity' in section 184-1 of the GST Act but special rules apply to enable government entities, that are technically not entities, to register for GST.

Once registered for GST, a government entity, like all other GST registered entities, will be liable for GST on taxable supplies that it makes and entitled to input tax credits for its creditable acquisitions.

In this case, the Department of Justice is registered for GST and the Tribunal is part of this Department. Fees are paid to commence and hear a matter in the Tribunal.

Section 9-39 of the GST Act identifies special rules in relation to making taxable supplies. Item 8 in the table in section 9-39 of the GST Act provides that where there is a payment of taxes, fees and charges, the special rules in Division 81 of the GST Act may apply.

Previously, under Division 81 of the GST Act, GST applied to payments of taxes, fees and charges except for those that were excluded from GST by the Determination.

Schedule 4 of the Tax Laws Amendment (2011 Measures No. 2) Act 2011 amended Division 81 of the GST Act to allow entities to self assess the GST treatment of the payment of a tax, fee or charge in accordance with certain principles. Specifically, section 81-10 of the GST Act considers the effect of payment of certain Australian fees and charges.

Under the amended Division 81 which applies to Australian taxes or Australian fees and charges from 1 July 2011, government agencies will no longer need to have a tax, fee or charge listed in the Determination in order for that tax, fee or charge to be excluded from GST.

Under the amendments, the Australian taxes, fees and charges that are currently not subject to GST under the Determination will remain not subject to GST until 1 July 2012.

Both the commencement fees and the hearing fees are covered by the current Determination. Therefore, the payment of these fees is not the provision of consideration and is not subject to GST.

The ATO publication entitled Payments to government agencies under Division 81 contains a flow chart to assist government agencies to determine the GST status of a tax, fee or charge. This publication is available on the ATO website at www.ato.gov.au