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Ruling

Subject: GST and waste management services

Question

Will charges for the supply of an optional green waste recycling service, be exempt from goods and services tax (GST) from 1 July 2012?

Answer

No, charges for the supply of the service will not be exempt from GST from 1 July 2012 as they will be an Australian fee or charge which is consideration for a supply and therefore taxable.

Relevant facts and circumstances

The local government authority is registered for GST and provides a waste management service as required under legislation, which requires local governments to administer and enforce local government public health risks.

The local government authority levies a utility charge on waste management services. This charge is compulsory and applies irrespective of whether the service (mobile garbage bin waste collection) is actually used.

All improved premises (i.e. premises comprising buildings or other improvements) incur the mandatory waste management service utility charge.

The green waste is optional and charged as a utility charge on the rates notice the general rate charges to the ratepayer. This is for the kerbside collection of the bins containing the green waste.

The local government authority has the power to make and levy charges.

All improved premises (i.e. premises comprising buildings or other improvements) incur the mandatory waste management service utility charge.

Separate utility charges are made for optional green waste recycling services.

Both the mandatory waste management service utility charge and the optional green waste recycling service charge are shown on the one rate notice.

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 81-1

A New Tax System (Goods and Services Tax) Act 1999 Section 81-5

A New Tax System (Goods and Services Tax) Act 1999 Subsection 81-5(1)

A New Tax System (Goods and Services Tax) Act 1999 Subsection 81-5(2)

A New Tax System (Goods and Services Tax) Act 1999 Subsection 81-10(4)

A New Tax System (Goods and Services Tax) Act 1999 Subsection 81-10(5)

A New Tax System (Goods and Services Tax) Act 1999 Subsection 81-10(3)

A New Tax System (Goods and Services Tax) Amendment Regulations 2011 (No. 2)

Schedule 1 Amendment Regulation 81-10.01

A New Tax System (Goods and Services Tax) (Exempt taxes, fees and charges) Determination 2011 (No.1)

Reasons for decision

Detailed reasoning

Whether or not a supply is a taxable supply depends on the supplier's circumstances and the arrangement. A supplier will make a taxable supply if all of the requirements of section 9-5 of the GST Act are met.  

Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides:

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.

Prior to 1 July 2011, Division 81 of the GST Act provided that GST applied to payments of taxes, fees and charges, except those excluded from GST by a written determination of the Treasurer.

From 1 July 2011, a limited self-assessment 'principles-based' approach has been introduced. The GST law has been amended to replace the Division 81 and determination mechanism with specific legislative provisions to ensure that Australian taxes and certain government fees and charges are not subject to GST. The legislation also allows for the making of regulations to treat an Australian tax, or an Australian fee or charge, in a particular way.

From 1 July 2012, the self-assessment approach will have full effect in allowing entities to self assess the GST treatment of such payments.

Relevantly, new sections 81-5 and 81-10 of the GST Act state:

Section 81-5  Effect of payment of tax

Australian tax not consideration

(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.

Regulations may provide for exceptions

(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.

81-10  Effect of payment of certain fees and charges

Certain fees and charges not consideration

(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).

Prescribed fees and charges treated as consideration

(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 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.

Fees or charges paid for permissions etc.

(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).

Fees or charges relating to information and record-keeping etc.

(5) This subsection covers a fee or charge paid to an *Australian government agency if the fee or charge relates to the agency doing any of the following:

(a)  recording information;

(b)  copying information;

(c)  modifying information;

(d)  allowing access to information;

(e)  receiving information;

(f)  processing information;

(g)  searching for information.

The following definition of the term 'Australian fee or charge' has also been inserted in section

195-1 of the GST Act:

a fee or charge (however described), other than an * Australian tax, imposed under an * Australian law and payable to an * Australian government agency

The local government authority is required by legislation to manage the local government public health risk relating to waste. To discharge this function, the local government authority provides, amongst other things, a MGB green waste recycling service

A 'waste management service' is 'the provision of a comprehensive range of compulsory and optional collection and disposal services offered for the removal of waste from properties, roadways and parks of approved general refuse, recyclable material or green waste.

MGB green waste recycling service

A green waste recycling service provided at occupied premises is a waste management service which is the provision of an optional collection and disposal service offered for the removal from the property of waste which is approved green waste.

For an optional green waste recycling service, the local government authority provides a fortnightly collection of an approved green waste and levies an annual charge (per service). The annual charge is included in the rates account for the premises. It is exacted by the local government authority for public purposes.

Courts have generally accepted the following features will indicate whether a charge or fee is in fact a tax, being whether it is:

§ Compulsory exaction by a public authority

§ Enforceable by law

§ For public purposes; and

§ Not for services rendered.

The annual charge is not compulsory and is levied by the local government authority for the MGB green waste recycling service rendered, therefore it is not a tax.

The local government authority receives it as consideration for making a supply of a green waste recycling service. For GST purposes, the annual charge is an Australian fee or charge.

For a green waste recycling service, the local government authority provides in a year 26 collections of green waste.

Therefore, neither subsection 81-5(1) nor subsection 81-10(4) of the GST Act applies to the annual charge for an MGB green waste recycling service. The charges for the supply of the service will not be exempt from GST from 1 July 2012 as they will be an Australian fee for consideration of a supply and as all the requirements of section 9-5 of the GST Act are met it is a taxable supply.