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Ruling

Subject: Payment of fees

GST and various fees and charges received by an Australian government agency

Question

Are the fees paid to an Australian government agency (you) in relation to particular services that include

· reviewing decisions

· granting approvals or permissions to provide the various services.

· providing copies or extracts from various registers, and

Answer

The fees payable in relation to a review of a decision is not a fee or charge covered by subsection 81-10(1) of the GST Act. The fee is consideration for a taxable supply as all the requirements under section 9-5 of the GST Act are satisfied.

However, the purpose of the fee can be different depending on the circumstances in which it is paid. Where the fee is paid for a review of a decision which would require suspension, withdrawal or other amendments of a licence, payment of the fee may be covered by subsection 81-10(1) of the GST Act because of the relationship with that licence. This would be an exception to the usual treatment and would need to be determined based on the particular factual circumstances in which the payment was made.

The fees payable in relation to obtaining approvals or permissions are of a kind cover by subsection 81-10(4) of the GST Act. Accordingly, the fee to obtain the relevant approval is not the provision of 'consideration'.

The fees payable in relation to obtaining a copy of, or extract from, various registers is an Australian fee or charge of a kind covered by subsection 81-10(5) of the GST Act. Accordingly, the fee is not the provision of consideration and no GST is payable on the supply of a copy of, or extract from, the register of approved suppliers.

Relevant facts and circumstances

You are an independent statutory authority established under a State Act (the Law and the Regulations). You come within the meaning given by section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) of an Australian government agency and are registered for goods and services tax (GST).

The Law contains provisions relating to the imposition of different fees applicable to certain services you provide. These services and their fees are detailed in the Regulations.

The services you are providing are not currently included in the A New Tax System (Goods and Service Tax) (Exempt taxes, fees and charges) Determination 2011 (No. 1) (the Treasurer's Determination).

Your functions are set out in the Law and include:

· guiding the implementation and administration of a quality framework (the framework) and monitoring and promoting consistency in its implementation and administration

· promoting continuous improvement by permitted services

· establishing, maintaining and publishing national registers

· publishing, monitoring and reviewing the compliance of permitted services with certain standards, and

· deciding the qualifications required to be held by operators, including the assessment of equivalent qualifications.

You have provided a summary of fees and the key provisions of the Law in relation to the supplies you make.

Each State and Territory is responsible for the legislation for which the Law is enacted, and this is done via a regulator (the Regulator). Each Regulator operates in conjunction with you to assist with carrying out the functions of the Law. The Regulator's functions include:

· assessing permitted services against certain standard and determining the grade of those services, and

· maintaining and publishing registers of permitted operators, permitted services and certified personnel.

As well as setting out an assessment and grading process, the Law sets out a national system to permit new services to replace State and Territory licensing systems. The process comprises three inter-related processes for entities and individuals:

· operator permits

· service permits, and

· personnel certification.

A permit is ongoing unless suspended, cancelled or surrendered. All decisions by the Regulator in relation to the permit process are reviewable. The applications for a permit must include payment of the prescribed fee.

Under the Law, an operator must pay the prescribed annual fee in respect of each service permit held by the operator.

Under the Law, the Regulator that granted the service permit for a service may at any time assess the service to determine whether and at what level the service meets the standards. This process is said is to be the key tool available to a Regulator to provide feedback and assist continuous improvements in the services provided.

A Regulator may reassess and re-grade a permitted service at any time. A permitted service operator may also apply in writing to the Regulator for a reassessment and a re-grading. The application must include payment of the prescribed fee.

Under the Law, it is an offence to fail to display prescribed information.

The grounds for suspension of a service permit include, amongst other things, the service being operated at a level that does not meet the lowest standard.

A Regulator may suspend a service permit without prior notification if it is satisfied that there is immediate risk to the safety, health or wellbeing of consumers. You have confirmed that a very poor assessment may lead to regulatory action and suspension of a service. Issues that lead to the suspension or cancellation of a permit may also impact on the assessment of a service's overall grade as the service will not be able to demonstrate that it is meeting a particular standard.

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 9-10.

A New Tax System (Goods and Services Tax) Act 1999 section 9-15.

A New Tax System (Goods and Services Tax) Act 1999 Division 38.

A New Tax System (Goods and Services Tax) Act 1999 Division 40.

A New Tax System (Goods and Services Tax) Act 1999 Division 81.

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

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

A New Tax System (Goods and Services Tax) Act 1999 subsection 81-10(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 81-15.

A New Tax System (Goods and Services Tax) Act 1999 section 195-1.

A New Tax System (Goods and Services Tax) Regulations 1999 paragraph
81-10.01(f).

A New Tax System (Goods and Services Tax) Regulations 1999 paragraph
81-15.01(1)(f).

Education and Care Services National Law Act 2010 (Vic)

Education and Care Services National Regulations 2011

Reasons for decision

Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that 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 term 'supply' is defined in section 9-10 of the GST Act as 'any form of supply whatsoever' and includes amongst other things, a supply of goods, a supply of services, a provision of advice or information, an entry into, or release from, an obligation to do anything, to refrain from an act or to tolerate an act or situation.

Subsection 9-15(1) of the GST Act provides that consideration includes:

· any payment, or any act or forbearance, in connection with a supply of anything

· any payment, or any act or forbearance, in response to or for the inducement of a supply of anything.

The circumstances in which a supply is GST-free or input taxed are found in Division 38 and Division 40 of the GST Act respectively.

Section 9-39 of the GST Act provides special rules in relation to making taxable supplies. In particular, 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.

Division 81 of the GST Act

Division 81 of the GST Act was amended with effect from 1 July 2011 to allow entities to self assess the GST treatment of a payment of an Australian tax or an Australian fee or charge in accordance with certain principles. The amendments to Division 81 of the GST Act allow for regulations to be made to treat an Australian tax, or an Australian fee or charge in a particular way that will determine if the amount paid, or the discharging of a liability to make such payment, is subject to GST.

Subsection 81-5(1) of the GST Act provides that 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.

Subsection 81-10(1) of the GST Act provides that 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 subsections 81-10(4) or (5) of the GST Act.

However, under subsection 81-10(2) of the GST Act a payment made by an entity, or the discharge of a 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 A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations). 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 the paying entity (subsection 81-10(3) of the GST Act).

Subregulation 81-10.01(1) of the GST Regulations provides, amongst other things, that for subsection 81-10(2) of the GST Act, the following kinds of Australian fee or charge are prescribed:

(a)…

(f) a fee or charge for the provision of information by an Australian government agency if the provision of the information is of a non-regulatory nature.

Paragraph 81-10.01(1)(f) of the GST Regulations was amended to take effect from 1 July 2012.

Subsection 81-10(4) of the GST Act covers a fee or charge if the fee or charge:

· relates to or

· relates to an application for

· the provision, retention, or amendment, under an Australian law, of a permission, exemption, authority or licence (however described).

Subsection 81-10(5) of the GST Act 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:

· recording information

· copying information

· modifying information

· allowing access to information

· receiving information

· processing information, and

· searching for information.

Section 81-15 of the GST allows for regulations to specify that the payment of a prescribed Australian fee or charge is not the provision of consideration; the relevant regulation being GST Regulation 81-15.01 which took effect from 1 July 2012.

Subregulation 81-15.01(1) of the GST Regulations provides, amongst other things, that for subsection 81-15 of the GST Act, the following kinds of Australian fees or charges do not constitute consideration:

(a)…

(f) a fee or charge for a supply of a regulatory nature made by an Australian government agency.

An Australian tax and an Australian fee or charge is defined in section 195-1 of the GST Act as:

Australian tax means a tax (however described) imposed under an *Australian law.

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

(* Asterisked terms are defined in the Dictionary in section 195-1 of the GST Act.)

An Australian government agency and an Australian law are terms defined in section 995-1 of the ITAA 1997 as:

Australian law means a *Commonwealth law, a *State law or a *Territory law.

Australian government agency means:

· a Commonwealth, a State or a Territory or

· an authority of the Commonwealth or of a State or a Territory.

Those Australian taxes, fees and charges that were not subject to GST under the former Division 81 of the GST Act as they were listed in the Treasurer's Determination remain not subject to GST where imposed prior to 1 July 2013. Thereafter, they will be assessed under Division 81 of the GST Act as amended.

Any taxes, fees or charges that are currently listed in the Treasurer's Determination that are not exempt from GST under the amended Division 81 of the GST Act will attract GST if they are imposed under an Australian law on or after 1 July 2013 (provided they satisfy the requirements of section 9-5 of the GST Act and are not otherwise treated, by way of regulation, as not being subject to GST).

The GST treatment of all new Australian taxes or Australian fees or charges that were not listed in the Treasurer's Determination will be self assessed under the changes made to Division 81 of the GST Act with effect from 1 July 2011.

None of the fees or charges in question is listed in the Treasurer's Determination.

Are the fees in question a tax?

On the facts provided, the fees in question do not have the character of a tax. Rather, the fees fall within the concept of a fee for service rather than a tax. Accordingly, consideration must be given as to whether the fees in question are of a kind covered by sections 81-10 or 81-15 of the GST Act.

Are the fees of a kind covered by section 81-10 of the GST Act?

On the facts provided, you are an Australian government agency for GST purposes (being an authority of the Commonwealth or of a State or a Territory). The fees in question are not an Australian tax and are imposed under the Law and Regulations which come within the definition of an Australian law. On that basis, the fees prescribed in the Regulations and other fees come within the definition of an Australian fee or charge.

With regards to the elements of section 9-5 of the GST Act, you are registered for GST. The services performed by you in dealing with various applications, reviewing decisions, assessing services, making determinations about qualifications, providing extracts from registers etc come within the definition of a supply pursuant to section 9-10 of the GST Act and will be made in the course of your enterprise. The supplies are connected with Australia as they are done in Australia through an enterprise you carry on in Australia. The supply, for which a prescribed or other fee specified in the Regulations is paid, is not GST-free or input taxed. The matter of contention in this context is whether the supplies are made 'for consideration'.

In Goods and Services Tax Ruling GSTR 2006/9 Goods and services tax: supplies and Goods and Services Tax Ruling GSTR 2001/4 Goods and services tax: GST consequences of court orders and out-of-court settlements, the Commissioner takes the view that to determine whether a payment is consideration under section 9-15 of the GST Act and whether there is a 'supply for consideration', the test is whether there is a sufficient connection between the supply and the payment made, the test being objective.

The definition of consideration in section 9-15 of the GST Act is so broad that it would likely include fees or charges. There is no issue in the present case that each of the fees you have listed has a sufficient nexus or connection with supplies to satisfy the definition of consideration under section 9-15 of the GST Act. However, where the fees are of a kind covered by subsections 81-10(4) or (5), or a regulation made pursuant to section 81-15 of the GST Act, they do not constitute consideration.

(1) Prescribed fee for an application for a review of decisions

You have argued that the prescribed fee paid in relation to an application for the further review of a decision made on a grade allocated to a permitted service, constitutes an application for the retention of a licence under paragraph 81-10(4)(b) of the GST Act.

There is no issue that the fee in question relates to an application for a review of the grade or that the application is under an Australian Law. The issue is whether the grade for which an application to review is made, comes within the definition of a 'permission, exemption, authority or licence'.

Under the Law, following the review, you may:

· confirm the grade determined by the Regulator or

· amend the grade.

Therefore, it can be argued that the fee relates to an application for a retention or amendment under an Australian law.

The terms 'permission, exemption, authority or licence' are not defined in the GST Act. Generally, where a term is not defined in the relevant Act or regulations, it is usually interpreted in accordance with its ordinary meaning, unless it has a special or technical meaning.

The ordinary meaning of the term 'licence' as defined in The Macquarie Dictionary, 2009, 5^th edn, The Macquarie Library Pty Ltd New South Wales (Macquarie) is:

Licence noun

1. formal permission or leave to do or not to do something.

2. formal permission from a constituted authority to do something, as to carry on some business or profession, to be released from jail for part of one's sentence under specific restrictions, etc.

3. a certificate of such permission; an official permit …

The word 'permission' is defined in the Macquarie as:

permission noun

1. the act of permitting; formal or express allowance or consent.

2. liberty or licence granted to do something.

3. Computers a level of access to computing resources.

The word 'exemption' is defined in the Macquarie as:

exemption noun

1. the act of exempting.

2. the state of being exempted; immunity.

The word 'authority' is defined in the Macquarie as

authority noun (plural authorities)

1. the right to determine, adjudicate, or otherwise settle issues or disputes; the right to control, command, or determine.

2. a person or body with such rights.

3. an accepted source of information, advice, etc.

4. an expert on a subject.

5. a statute, court rule, or judicial decision which establishes a rule or principle of law; a ruling.

6. title to respect or acceptance; commanding influence.

7. a warrant for action; justification.

8. testimony; witness.

The Concise Oxford English Dictionary (11^th edition revised) in English Dictionaries and Thesauruses defines the words 'licence' and 'permission' as:

1. licence n.

a permit from an authority to own or use something, do a particular thing, or carry on a trade (especially in alcohol). formal or official permission

1. permission n.

the action of officially allowing someone to do a particular thing; consent or authorization.

The Australian Oxford Dictionary, 2004, 2^nd edn, Oxford University Press defines the term 'permission' as:

consent; authorisation

Clearly, the words permission or licence, have the connotation of allowing or permitting something to be done.

Paragraph 15AB(1)(a) of the Acts Interpretation Act 1901 (AIA) provides that consideration may be given to material not forming part of an Act to confirm that the meaning of a provision is the ordinary meaning conveyed by the text of the provision taking into account its context in the Act and the purposes or object underlying the Act. Paragraph 15AB(2)(e) of the AIA provides that any explanatory memorandum relating to the Bill containing the provision is extrinsic material that may be considered for this purpose.

In explaining 'a fee or charge in relation to the provision, amendment or retention of a permission, exemption, authority or licence (however described)', the explanatory memorandum to the Tax Laws Amendment (2011 Measures No.2) Act 2011 (EM) states at paragraphs 4.27 and 4.28:

4.27 To the extent a payment, or the discharging of a liability to make such a payment, is a payment or discharge of an Australian fee or charge that relates to, or relates to the application for, the provision, amendment or retention under an Australian law, of a permission, exemption, authority or licence, it will not be treated as the provision of consideration. Therefore, any supply to which the fee or charge relates will not be subject to GST. A fee or charge in relation to the provision, amendment or retention of a permission, exemption, authority or licence (however described) includes but is not limited to:

application fees, licences, permits and certifications that are required by government prior to undertaking an occupation (for example, medical and legal professionals' right of practice licences, pilots' licences, heavy vehicle drivers' licences and adjustments to such licences); and

regulatory charges imposed to undertake an activity (for example, compulsory testing fees for regulatory purposes, compulsory inspection fees for regulatory purposes, a permit for restaurants to occupy the footpath, and a licence for an event to close roads).

4.28 As noted, this exemption applies to an Australian fee or charge imposed in relation to, or to the application for, the retention of a permission, exemption, authority or licence. An example of such a fee would be a periodic compulsory inspection fee, made under an Australian law and payable to an Australian government agency, for the retention of a permit. In such cases, the inspection fee is directly related to the retention of the permission (the permit) and would not be subject to GST. …

In the present case, the Law sets out a system to approve new services to replace the current licensing systems. The process comprises three inter related permits namely the operator permit, the service permit and the personnel certificate. Under the Law, becoming a permitted operator is a precondition to operating one or more service. A permitted operator can apply to the Regulator for a service permit for certain services. Applications for an operator permit or a service permit or personnel certificate must include a payment of a prescribed fee. All decisions made by the Regulator in relation to the permit process are reviewable.

In contrast, the assessment and grading process is said to be directed to promoting continuous improvements in the provision of services across the areas set out in the standards. The assessment and publication of grades for services promote greater transparency and accountability and provide customers with information about the services provided.

Both the operator permit and a service permit (permits) granted have the character of a formal permission from the Regulator to do something which in this case is to operate the regulated business providing the services. These permits have the character of a licence or permission (however described).

The grade, on the other hand, involves assessing a particular service against a benchmark and grading it, so as to promote improvements in the quality of the services provided. A grade in itself does not confer a permission to do something such that a grade could be construed to be a 'permission, exemption, authority or licence' (however described) for the purposes of subsection 81-10(4) of the GST Act.

Having had regard to the ordinary meaning of the various terms and the Law and Regulations, there is insufficient relationship between the application to review a decision made on a particular grade and the 'provision, retention or amendment' of a 'permission, exemption, authority or licence' (permits) for the purposes of subsection 81-10(4) of the GST Act.

GST treatment prior to 1 July 2012

As the fee payable in relation to the application for a review of a rating is not an Australian tax, or a fee or charge of a kind covered by either subsection 81-10(4) or subsection 81-10(5) of the GST Act, the fee payable is not precluded from constituting consideration for a supply (service) made under Division 81 of the GST Act.

Accordingly, as all the requirements of section 9-5 of the GST Act are satisfied, the supply for which the application fee (payable under subsection 145(2) of the National Law) is consideration, is a taxable supply on which GST is payable.

However, the purpose of the fee can be different depending on the circumstances in which it is paid. Where the fee is paid for a further review of a rating level that is so poor as to require suspension, withdrawal or other amendments to a service approval, payment of the fee may be covered by subsection 81-10(1) of the GST Act because of the relationship with that approval. This would be an exception to the usual treatment and would need to be determined based on the particular factual circumstances in which the payment was made.

GST treatment after 30 June 2012

Paragraph 81-15.01(1)(f) of the GST Regulations provides that for subsection 81-15 of the GST Act, a fee or charge for a supply of a regulatory nature made by an Australian government agency does not constitute consideration. GST Regulation 81-15.01 took effect from 1 July 2012.

The Explanatory Statement to Select Legislative Instrument 2012 No 148 states:

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 the Intergovernmental Agreement, the Commonwealth, States and Territories agreed that Division 81 of the Act would exempt Australian taxes, fees and charges from GST in accordance with the following principles:

taxes that are in the nature of a compulsory impost for general purposes and compulsory charges by way of fines or penalties should be exempt from GST;

regulatory charges that do not relate to particular goods or services should be exempt from GST, including:

· fees and charges levied on specific industries and used to finance particular regulatory or other activities in the government sector; and

· licences, permits and certifications that are required by government prior to undertaking a general activity.

The Explanatory Statement explains that where a government fee or charge is prescribed by a regulation made pursuant to section 81-15 of the GST Act, the payment of the fee or charge is not treated as the provision of consideration. Accordingly, a supply to which the fee or charge may relate will not be subject to GST. Thus, regulations made under section 81-15 add to the operation of subsections 81-10(4) and (5) of the Act to provide for the exempt status of Australian fees and charges that may not otherwise be covered under the Act.

The explanatory statement contains some principles for determining whether activities of government are of a regulatory nature. The explanatory statement provides that an activity has a regulatory character where it is for the purpose of regulating behaviour, ensuring consumer protection and compliance with certain standards.

You are charged with carrying out the functions of the Law. The functions include:

· assessing permitted services against certain standard and determining the grade of those services, and

· maintaining and publishing registers of permitted operators, permitted services and certified personnel.

Therefore, in accordance with paragraph 81-15.01(1)(f) of the GST Regulations and subsection 81-15 of the GST Act, being a fee or charge for a supply of a regulatory nature made by an Australian government agency, payment of the fee does not constitute consideration.

As an essential requirement of section 9-5 of the GST Act that there is a supply for consideration has not been satisfied, the review of a rating is not a taxable supply and, as such, no GST is payable.

(2) Applications for the granting approvals or permissions to provide the various services.

As previously stated, the Law sets out a national system to approve new education and care services to replace current State and Territory licensing systems.

The process comprises three inter related approvals namely the Provider Approval, the Service Approval and Approval to hold a Supervisor Certificate. Under the National Law, becoming an approved provider is a precondition to operating one or more education and care service. An Approved Provider can apply to the Regulatory Authority for a Service Approval for an education and care service. Applications for a Provider Approval or a Service Approval or a Supervisor Certificate must include a payment of a prescribed fee.

The applications and associated fees relate to obtaining approvals or permissions to provide the various services.

Accordingly, the fee to obtain the relevant approval is of a kind covered by subsection 81-10(4) of the GST Act and is, therefore, not the provision of 'consideration'.

(3) Providing copies or extracts from various registers, and

Under of the National Law, the Regulatory Authority must keep various registers. The Regulatory Authority must provide copies of the registers.

The National Authority must maintain and publish the registers.

Pursuant to the National Law, a person may obtain a copy of, or extract from, the registers on payment of the prescribed fee.

In keeping the registers and providing a person with an extract from the register, a fee is paid that relates to activities listed in subsection 81-10(5) of the GST Act including allowing access to information. However, as noted previously, where the fee relates to the provision of information it is necessary to consider the effect of paragraph 81-10.01(f) to the GST Regulations.

On the facts provided, there is a requirement to provide information (included in the register) under an Australian law. That being the case, the fee to obtain a copy of, or extract from, the register is not of a kind prescribed by the GST Regulations for the purposes of subsection 81-10(2) of the GST Act.

Accordingly, the fee to obtain a copy of, or extract from, the registers is of a kind covered by subsection 81-10(5) of the GST Act and is, therefore, not the provision of 'consideration'.

As an essential requirement of section 9-5 of the GST Act that there is a supply for consideration has not been satisfied, the supply of a copy of, or extract from, the register of approved education and care services is not a taxable supply and, as such, no GST is payable.