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Ruling
Subject: GST and annual administration fee
Question
Is the annual administration fee subject to GST during the transitional period from 1 July 2011 to 30 June 2012?
Answer
No, the annual administration fee will not be subject to GST. As the fee is listed in the A New Tax System (Goods and Services Tax)(Exempt taxes, fees and charges) Determination 2011(No. 1) (the current determination), it will not be subject to GST during the transitional period from 1 July 2011 to 30 June 2012.
Relevant facts and circumstances
You are a local government authority and are registered for GST.
Before 1 July 2011, you charged an annual administration fee which was listed on the current determination.
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 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 Division 81
A New Tax System (Goods and Services Tax) (Exempt taxes, fees and charges) Determination 2011 (No. 1)
Reasons for decision
Summary
As the annual administration charge is listed in the current determination it will not be subject to GST for the transitional period 1 July 2011 to 30 June 2012.
Detailed reasoning
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.
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.
Under former Division 81 of the GST Act, GST applied to payments of taxes, fees and charges except for those that were listed in a written determination of the Treasurer.
Schedule 4 of Tax Laws Amendment (2011 Measures No. 2) Act 2011 repeals and replaces Division 81 of the GST Act to allow entities to self assess the GST treatment of a payment of an Australian tax or Australian fee or charge in accordance with certain principles. Under these amendments, government agencies will no longer need to have an Australian tax or certain categories of Australian fees or charges listed on a determination in order for those taxes, fees or charges to not be subject to GST.
The amendments to Division 81 of the GST Act apply in relation to Australian taxes or Australian fees or charges that are imposed under an Australian law on or after 1 July 2011.
However, under the amendments, the Australian taxes, fees and charges that are currently not subject to GST under the current determination will remain not subject to GST until 1 July 2012.
The Explanatory Memorandum (EM) to the Tax Laws Amendment (2011 Measures No. 2) Act 2011 states at paragraphs 4.37 and 4.38 in relation to the application of the new law and transitional provisions:
4.37 These amendments will apply in relation to Australian taxes or Australian fees or charges that are imposed under an Australian law on or after 1 July 2011.
4.38 However, under these amendments, the A New Tax System (Goods and Services Tax )( Exempt taxes, fees and charges) Determination 2011 (No. 1 ) which lists all Australian taxes, fees and charges that are not treated as consideration, and thus supplies to which they relate are not subject to GST, is to be grandfathered for one year. Thus, taxes, fees and charges that are imposed prior to 1 July 2012 and are currently listed in the Determination will not 'be subject to GST' for the transitional period (until 1 July 2012), after which any supplies to which they relate will be assessed against the provisions set out in these amendments. [Schedule 4, item 16]
As the annual administration fee you charge is listed in the current determination, it is not subject to GST under the transitional provisions that apply from 1 July 2011 to 30 June 2012.
However, from 1 July 2012 the GST treatment of that annual administration fee will need to be self assessed under the new Division 81 of the GST Act.
The publication Payments to government agencies under Division 81 which is available from our website www.ato.gov.au contains a flow charge to help government agencies work out if a government charge is subject to GST.