Edited version of your private ruling

Authorisation Number: 1012297236147

This edited version of your ruling will be published in the public register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.

Ruling

Subject: GST and Division 81 fees and charges

Question 1

Does goods and services tax (GST) apply to the entity's charges for meetings that relate to applications where the charges are subsequently deducted from charges for the lodging of the application?

Answer

Yes.

Question 2

Does GST apply to the entity's charges for meetings that relate to applications where the charges are not subsequently deducted from charges for the lodging of the application?

Answer

Yes.

Relevant facts and circumstances

The entity is a government entity and is registered for GST.

The entity charges fees for applications and other matters under relevant legislation.

The entity also provides meeting services where applicants can meet with staff to help identify any problems with their application. The meetings are not compulsory. The entity charges for these meetings.

Where an application is lodged with the entity within a specified time frame of a meeting in relation to that proposed application and other requirements are satisfied, the amount of the meeting fee will be deducted from the application fees.

The entity advised that it fixes meeting charges under the cost recovery fee provisions in a relevant act and contends that, as per the new legislative changes, the charges for the meetings (irrespective of whether they are deducted from subsequent application fees) do not constitute consideration and hence, do not attract GST.

Documents on the entity's website show that the meeting fees are charged on a commercial charge.

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 paragraph 9-5(a)

A New Tax System (Goods and Services Tax) Act 1999 section 9-10

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(1)

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 section 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 Regulation

81-10.01

A New Tax System (Goods and Services Tax) Regulations 1999 Regulation

81-15.01

A New Tax System (Goods and Services Tax) Regulations 1999 Regulation

81-15.02

Income Tax Assessment Act 1997 section 995-1

Reasons for decision

Questions 1 and 2

Summary

The services provided by the entity at a meeting are a supply for GST purposes and, based on the information available, the meeting fee is not provided on a cost recovery basis. As well, the supply is not provided under any regulatory legislation and is therefore, non-regulatory in nature. As the meeting fee is non-regulatory in nature it satisfies the requirements to be a prescribed fee and as such, it will be consideration for a supply.

In addition, we consider that there is a nexus between the payment of the meeting fee and the supply of services provided by the entity. Therefore, there is a supply being made for consideration under paragraph 9-5(a) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). Furthermore, the facts show that all of the other requirements of section 9-5 of the GST Act are met in that the supply of the meeting is made in the course of the entity's enterprise which it carries on in Australia and the entity is registered for GST.

Therefore, the meeting fee is a taxable supply and thus, subject to GST, regardless of whether it is deducted from charges for an application or not.

Detailed reasoning

Whether or not a supply is a taxable supply and thus, subject to GST, 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 GST Act states:

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.

*denotes a defined term in section 195-1 of the GST Act.

The GST-free and input taxed provisions are not relevant to the supplies that are the subject of this ruling.

The first requirement to be satisfied under section 9-5 of the GST Act is whether a supply has been made for consideration (paragraph 9-5(a) of the GST Act).

Supply and consideration

The meaning of 'supply' is given in section 9-10 of the GST Act. Subsections 9-10(1) and (2) of the GST Act state:

9-10 Meaning of supply

(1) A supply is any form of supply whatsoever.

(2) Without limiting subsection (1), supply includes any of these:

a supply of goods;

a supply of services;

a provision of advice or information;

a grant, assignment or surrender of *real property;

a creation, grant, transfer assignment or surrender of any right;

a *financial supply;

an entry into, or release from, an obligation

(i) to do anything; or

(ii) to refrain from an act; or

(iii) to tolerate an act or situation;

any combination of any 2 or more of the matters referred to in paragraphs (a) to (g).

In this case, the entity provides meetings where applicants can meet with staff to help identify any problems with their applications. The services provided by the entity to the applicants at the meeting are a supply for GST purposes.

Guidance on the concept of supply is considered in Goods and Services Tax Ruling GSTR 2006/9: supplies. Paragraph 108 of GSTR 2006/9 explains that for a supply to be a taxable supply there must also be consideration and a sufficient nexus between the supply and consideration. In paragraph 180 of GSTR 2006/9 the Commissioner outlines how to determine whether a payment is consideration under section 9-15 of the GST Act and whether there is a 'supply for consideration'. Paragraph 180 of GSTR 2006/9 states:

180. In other GST rulings the Commissioner discusses the close coupling between supply and consideration in the GST Act.^F53 In determining whether a payment is consideration under section 9-15 and whether there is a 'supply for consideration' those rulings take the view that:

· the test is whether there is a sufficient nexus between the supply and the payment made;^F54 this test is objective;

· regard needs to be had to the true character of the transaction; and

· an arrangement between parties will be characterised not merely by the description that the parties give to the arrangement, but by looking at all of the transactions entered into and the circumstances in which the transactions are made.

The term 'consideration' is defined in section 195-1 of the GST Act to mean any consideration, within the meaning given by section 9-15 of the GST Act, in connection with the supply or acquisition. Subsections 9-15(1) and (2) of the GST Act state:

Consideration includes:

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

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

It does not matter whether the payment, act or forbearance was voluntary…

It is considered that the expansive definition of 'consideration' in section 9-15 of the GST Act would include the charges paid to the entity for the meetings.

However, section 9-39 of the GST Act provides 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.

Division 81 of the GST Act

Division 81 of the GST Act exempts certain Australian taxes, fees and charges from GST by treating these payments as not being the provision of consideration for a supply.

Prior to 1 July 2011, those Australian taxes, fees and charges that were exempt from GST were listed in a written determination of the Treasurer. However, with effect from 1 July 2011, Division 81 of the GST Act was amended 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.

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 that the payment is an Australian tax.

The term 'Australian tax' is defined in section 195-1 of the GST Act as:

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

The term 'Australian law' is defined in section 995-1 of the Income Tax Assessment Act 1997 and relevantly includes a State law.

The term 'Australian law' includes Acts and law making powers which are delegated by parliaments, such as regulations, by-laws, proclamations and orders made under Acts.

The entity advised that it fixes the fees or charges for the provision of meetings under the cost recovery fee provisions of the relevant act which is an Australian law. However, this is not supported by the other provisions in the relevant legislation or the documents on the entity's website. Therefore, the meeting fee is not a cost-recovery fee under the relevant act or any other Australian law.

In addition, in relation to the word 'tax', Latham CJ in the High Court's decision in Matthews v Chicory Marketing Board (Vic) (1938) 60 CLR 263 at 276 (Matthews), described the characteristics and features of a tax as:

'…a compulsory exaction of money by a public authority for public purposes, enforceable by law, and is not a payment for services rendered'.

Having regard to these characteristics or features, we consider a fee paid for a meeting is not a tax as it is a payment for services provided by the entity.

As the meeting fee is not an Australian tax it is necessary to consider if it is an Australian fee or charge.

According to section 195-1 of the GST Act, an Australian fee or charge is a fee or charge (however described), other than an Australian tax, imposed under an Australian law and payable to an Australian government agency.

We accept that the entity is an Australian government agency for the purposes of the GST legislation and that the relevant act gives it the power or authority to charge a fee for the meetings. Therefore, the meeting fee is an Australian fee or charge as it has been imposed under an Australian law and it is payable to an Australian government agency, being the entity.

However, for the meeting fee to be exempt from GST it must satisfy one of the provisions in Division 81 of the GST Act.

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.

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, or

· searching for information.

Based on the information provided, it is considered that the main aim of the meetings is not to receive information for record-keeping purposes and therefore, subsection 81-10(5) of the GST Act does not apply in this case.

For the meeting fee to be covered by subsection 81-10(4) of the GST Act the fee must relate to, or relate to an application for, the provision, retention, or amendment, under an Australian law, of a permission, exemption, authority or licence.

The terms 'permission, exemption, authority or licence' are not defined in the GST Act and are therefore, interpreted in accordance with their ordinary meaning.

They are defined in the Macquarie Dictionary [Multimedia] version 5.0.0, 01/10/01 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.

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 …

exemption noun

1. the act of exempting

2. the state of being exempted; immunity

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.

Relevant to this case is the word 'permission' which clearly connotes allowing, permitting or consenting to something being done. In this case, the entity provides services at meetings to applicants who may lodge future applications. An application has the aims of obtaining or is lodged for the purposes of obtaining a formal permission from the consent authority to do something. It follows that the consent comes within the ordinary meaning of 'permission' in the context of the GST Act and nothing in that context indicates otherwise.

It is, therefore, necessary to determine if the meeting relates to the application.

With regard to the words 'relate to', paragraph 113 of Goods and Services Tax Ruling GSTR 2008/1 refers to the observations of Hill J in HP Mercantile Pty Limited v Commissioner of Taxation (2005) 143 FCR 553; [2005] FCAFC 126:

113. With regard to the requirement in paragraph 11-15(2)(a) that the acquisition 'relates to making supplies that would be input taxed', Hill J commented:

... the words 'relates to' are wide words signifying some connection between 2 subject matters. The connection or association signified by the words may be direct or indirect, substantial or real. It must be relevant and usually a remote connection would not suffice. The sufficiency of the connection or association will be a matter for judgment which will depend, among other things, upon the subject matter of the inquiry, the legislative history, and the facts of the case. Put simply, the degree of relationship implied by the necessity to find a relationship will depend upon the context in which the words are found. So much appears from the various cases referred to by the tribunal when discussing the meaning of these words...

In the present case, while attending the meetings is not compulsory, it does relate to a proposed application for the provision of a permission. The meeting therefore relates to an application to which subsection 81-10(4) of the GST Act applies.

However, subsection 81-10(2) of the GST Act provides that the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations) can prescribe that certain Australian fees and charges are treated as consideration.

In respect to prescribed fees, Regulation 81-10.01 of the GST Regulations states:

(1) For subsection 81-10(2) of the Act, the following kinds of Australian fee or charge are prescribed:

(e) a fee for pre-lodgment advice if:

(i) the advice relates to an application to which subsection 81-10(4) of the Act applies; and

(ii) it is not compulsory to seek the advice;

(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;

(g) a fee or charge for a supply of a non-regulatory nature;

…

In this case, paragraph 81-10.01(1)(e) of the GST Regulations applies to the payment for the meetings as the services (advice) provided by the entity relates to an application for a permission under subsection 81-10(4) of the GST Act and it is not compulsory to seek the advice or attend the meeting. Therefore, the meeting fee is a prescribed Australian fee or charge under subsection 81-10(2) of the GST Act.

However, section 81-15 of the GST Act provides that a prescribed Australian fee or charge is not the provision of consideration in certain situations. Regulation 81-15.01 of the GST Regulations lists fees and charges which do not constitute consideration.

Of relevance to this case are paragraphs 81-15.01(1)(d) and (f) of the GST Regulations which state:

(d) a fee or charge to compensate an Australian government agency for costs incurred by the agency in undertaking regulatory activities,…

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

For paragraph 81-15.01(1)(d) of the GST Regulations to apply the fee or charge must be charged on a cost recovery basis. The entity contends that its charge for the meeting is such that it is seen as a recovery of costs by it. However, the meeting fee does not satisfy the requirements in the relevant act to be a cost recovery fee. As well, documents on the entity's website show the meeting fee as a commercial charge and not as a recovery of costs. Therefore, paragraph 81-15.01(1)(d) of the GST Regulations does not apply.

In respect of paragraph 81-15.01(1)(f) of the GST Regulations the Australian fee or charge must be for a supply of a regulatory nature. The term 'regulatory' is not defined in the GST Act.

The explanatory statement to the A New Tax System (Goods and Services Tax) Amendment Regulation 2012 (No.2) (ES) gives Parliament's intent of the term 'regulatory' and states:

The term 'regulatory' captures those supplies made by a government agency, where that agency is legislatively empowered to make the relevant supply and the supply is to satisfy a regulatory purpose.

Also of relevance in the ES is Item [2] - paragraph 81-10.01(1)(g) where it states:

This paragraph ensures that the non-regulatory activities of government are subject to GST. This paragraph applies to supplies of goods and services for which fees are imposed where the consumer is provided with something that lacks a regulatory character. That is, the fee or charge does not arise under an Australian law which is intended, for example, to regulate behaviour, ensure consumer protection and ensure compliance with certain standards. (Emphases added).

In respect of the meetings, they are not covered by an Australian law and they are not compulsory. Rather, it is optional to attend. Therefore, the services provided by the entity at the meetings are not made to regulate behaviour, ensure consumer protection or ensure compliance with certain standards.

In addition, the fee for the meeting is shown as a commercial charge and it is not shown as being imposed under any legislation. Therefore, it is considered to be of a 'non-regulatory nature'. As such paragraph 81-15.01(1)(f) of the GST Regulations does not apply.

As the meeting fee is not for a supply of a 'regulatory' nature then it must be a fee for a supply of a 'non-regulatory' nature. As stated previously, paragraph 81-10.01(1)(g) of the GST Regulations deals with 'a fee or charge for a supply of a non-regulatory nature' and provides that these fees are prescribed fees for the purposes of subsections 81-10(2) of the GST Act:

According to subsection 81-10(2) of the GST Act a prescribed fee is the provision of consideration.

As the meeting fee is a prescribed fee, it will be consideration for a supply and we consider that there is a nexus between the payment of the meeting fee and the supply of services provided by the entity. Therefore, there is a supply being made for consideration under paragraph 9-5(a) of the GST Act.

In addition, the facts show that all of the other requirements of section 9-5 of the GST Act are met in that the supply of the meeting is made in the course of the entity's enterprise which it carries on in Australia and it is registered for GST.

Therefore the meeting fee is a taxable supply and thus, subject to GST, regardless of whether it is deducted from charges for an application or not.