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Ruling

Subject: Division 81 of the GST Act

Question 1

Is the Waste Service Charge an Australian tax under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes

This ruling applies for the following periods:

N/A

The scheme commences on:

N/A

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.

You are a local government entity and are registered for GST.

You issue a rates notice annually to each rateable property. Included in this notice are the relevant State Government Fire Levy, a General Rate (both not mentioned further in this request) and a Waste Service Charge (Charge).

You impose a household Charge for the collection of kerbside household waste (including recyclable materials).

The Charge is compulsory for assessed land within the defined locality collection district, regardless of whether the resident of the land has their bin collected or not.

The Charge is determined by you taking the total cost of the collection contract for the municipality (completed by external contractors) and equally distributing this over the number of non-vacant assessments in the collection district.

In using this method it is deemed that the Charge imposed does not reflect the cost of providing the collection to a particular property, however is regarded as an allocation of the total waste collection provision to the municipality.

The provision of the bins are independent & the collection and disposal charges from the external contractor.

You contract for the purchases of the bins & the collection and disposal charges from an external supplier and provide the bin collection service to ratepayers.

The Charge is a charge over the land and enforceable by law.

Domestic Waste Collection:

The collection is completed by an external contractor. You are charged in two ways.

Part A: Domestic garbage collection and transportation of waste, Number of Bins (regardless of locality) x Number of collections per annum x Rate per bin per collection.

Part B: Disposal fees paid for dumping of waste at licensed disposal site, Number of tonnes x Rate per tonne.

Kerbside Recycling:

The collection is completed by an external contractor. You are charged in two ways.

Part A: Annual fixed cost regardless of the mass of recyclables collected, Number of Bins (regardless of locality) x Number of collections per annum x Rate per bin per collection.

Part B: Acceptance of comingled recyclables at materials recovery centre, Number of tonnes x Rate per tonne.

The Charges is determined and charged by Council under the relevant Local Government Act.

Both the General Rates and the Charge were previously listed in the Determination 2011 (No.1) as Australian taxes, fees and charges which are exempt from the Goods and Services Tax.

Relevant legislative provisions

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

Section 81-1 of the A New Tax System (Goods and Services Tax) Act, 1999

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

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

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

Section 195-1 of the A New Tax System (Goods and Services Tax) Act, 1999

A New Tax System (Goods and Services Tax) Amendment Regulations 2011 (No. 2) (127 of 2011) 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

Prior to 1 July 2011, Division 81 of the A New Tax System (Goods and Services Tax) Act 1999 (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.

Note that the asterisks denote a defined term in the GST Act.

For the purposes of sections 81-5 and 81-10 of the GST Act, section 195-1 of the GST Act provides that an Australian tax is a tax imposed under an Australian law, being a law of the Commonwealth, a State or a Territory.

Under the Local Government Act, you levy a charge on the supply of mandatory waste management services. This charge is compulsory and applies irrespective of whether the waste service is actually used.

As the charge for the mandatory waste management service is imposed under the relevant Local Government Act, the charge for the service is considered to satisfy the requirements of an Australian tax for the purposes of section 81-5 of the GST Act or an Australian fee or charge under section 81-10 of the GST Act.

Further, payment of the Charges is not an Australian tax or an Australian fee or charge that is, or is of a kind, prescribed by the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations), for the purposes of subsections 81-5(2) and 81-10(2) of the GST Act above, as being treated as the provision of consideration.

Therefore, as the Charge is considered to satisfy the requirements of an Australian tax or an Australian fee or charge for the purposes of sections 81-5 and 81-10 of the GST Act and payment of the Charge has not been prescribed by the GST Regulations for the purposes of subsections 81-5(2) and 81-10(2) of the GST Act, the Charge will remain exempt from GST from 1 July 2012.

It should be noted that this exemption only extends to garbage collection, such as collection on a regular basis, and similar services which are levied on ratepayers and included as part of their rates.