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Ruling

Subject: Fees or charges under Division 81

Question 1

Are fees paid or payable to an Australian government agency (you) in relation to:

· Making an application for a review by a ratings review panel

· Making an application for the highest rating

· Making a re-application for the highest rating

· Making an application for a qualification to be assessed for inclusion on lists of approved qualifications

· Making an application for the determination of equivalent qualification

fees or charges that do not constitute consideration for the purposes of Division 81 of A New Tax System (Goods and Services Tax) Act 1999 (the GST Act)?.

Answer

Yes. From 1 July 2012 all the fees paid or payable to you in relation to the above supplies are fees that do not constitute consideration for the purposes of Division 81 of the GST Act. Therefore no GST is payable on these supplies.

Question 2

Should you claim back the GST submitted to ATO for the transactions incurred from 1 July 2012, and refund the same GST back to the customers, if your fees and charges are not subject to GST?

Answer

Where the recipient is not registered for GST and you first reimburse your customers the amount corresponding to the overpaid GST, you are not prevented from obtaining a refund of that amount.

Where the recipient is registered for GST, the Commissioner need not give you a refund in accordance with section 105-65 of the Taxation Administration Act 1953 (TAA).

Relevant facts and circumstances

You have already obtained a private ruling from the ATO relating to the GST treatment of a number of types of fees paid or payable to you.

This ruling found that a number of fees or charges were fees or charges of a type covered by subsection 81-10(5) of the GST Act (and therefore not subject to GST). However, a number of fees or charges (the five charges listed above) were not precluded from constituting consideration under Division 81 and so were subject to GST.

Section 81-15 of the GST Act allows for regulations to specify that the payment of a prescribed Australian fee or charge is not the provision of consideration. After the issue of your ruling, regulations under section 81-15 of the GST Act have been introduced that specify other fees and charges that do not constitute consideration. The relevant regulation, being regulation 81-15.01, took effect from 1 July2012.

You believe your previous private ruling may be impacted by the changes in the GST regulations, especially in relation to the five fees that were subject to GST and have asked us to review this ruling in light of the new regulation.

We have also relied on the facts provided for your previous ruling.

In particular we have considered your functions which are set out in relevant legislation:

· guiding the implementation and administration of quality frameworks and monitoring and promoting consistency in its implementation and administration

· reporting to and advising on the quality framework

· reporting to regulatory authorities and relevant Government agencies

· promoting continuous quality improvement

· keeping national information on the assessment, rating and regulation of services

· establishing, maintaining and publishing national registers of approved providers, approved services and certified supervisors

· publishing, monitoring and reviewing ratings of approved services

· educating and informing services and the community about the quality frameworks

· publishing guidelines and resources to support services and users in understanding quality in relation to services

· determining the qualifications and providing support and training for staff of regulatory authorities, and

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

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 Division 81.

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 81-5.

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).

Taxation Administration Act 1953 section 106-65

Taxation Administration Act 1953 section 8AAZLF

Reasons for decision

Question 1

Summary

From 1 July 2012 all the fees paid or payable to you in relation to the supplies in question are fees that do not constitute consideration for the purposes of Division 81 of the GST Act. We consider that these fees will not be consideration for a supply from 1 July 2012 as a result of regulation 81-15.01.

Therefore no GST is payable on these supplies.

We also confirm that the fees previously ruled as not being consideration for a supply have not been impacted by the introduction of the new regulations. Our previous reasoning for these fees is confirmed. Our reasoning in relation to the supplies that were not previously covered by Division 81 is considered below.

Detailed reasoning

Division 81 of the GST Act

We refer to our previous ruling for a more detailed explanation of Division 81. We also confirm our previous decision that the fees you charge do not have the character of a tax. Rather, your fees come within the definition of an Australian fee or charge as they are fees you charge that are imposed under an Australian law and are payable to an Australian government agency.

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. In particular, 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 regulation 81-15.01 of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations). These new regulations 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.

...

We note that the new GST regulations that took effect from 1 July 2012 did not alter Division 81 of the GST Act as it stood at the time of your previous ruling.

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 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. 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.

Your functions include:

· guiding the implementation and administration of quality frameworks and monitoring and promoting consistency in its implementation and administration

· reporting to and advising on the quality framework

· reporting to regulatory authorities and relevant Government agencies

· promoting continuous quality improvement

· keeping national information on the assessment, rating and regulation of services

· establishing, maintaining and publishing national registers

· publishing, monitoring and reviewing ratings of approved services

· educating and informing services and the community about the quality frameworks

· publishing guidelines and resources to support services and users in understanding quality in relation to services

· determining the qualifications and providing support and training for staff of regulatory authorities, and

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

We consider that these functions indicate that your activities are of a regulatory nature.

In light of the new Regulations that have effect from 1 July 2012, we have reconsidered the fees from your previous ruling that were not already considered as not being subject to GST under Division 81. We note that while the Regulations may apply to all your fees and charges, where the fees are already not subject to GST under Division 81 it is not necessary to consider whether they are also not subject to GST under another part of the Division (for example if they are already exempt under section 81-10 it is not necessary to consider whether they are exempt under section 81-15).

Considering each of the Australian fees in turn:

Application for a review by the ratings review panel

Under the relevant legislation, following a review the panel may:

· confirm the rating levels determined

· amend the rating levels.

GST treatment prior to 1 July 2012

As we found in our previous decision, 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 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

In accordance with paragraph 81-15.01(1)(f) of the GST Regulations and subsection 81-15 of the GST Act, we consider that this is a fee or charge for a supply of a regulatory nature made by an Australian government agency. Therefore 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.

Application for the highest rating

Under the relevant legislation, where a service has received the second highest rating level the provider may apply to be assessed for the highest rating. The application must be in writing and the Approved Provider must pay the relevant fee.

GST treatment prior to 1 July 2012

As previously considered, the various approvals granted under the relevant laws come within the definition of a permission or licence. A rating level including the highest rating does not confer a permission to do something such that a rating level 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.

Further, there is insufficient relationship between the application for the highest rating and the provision, retention or amendment of a permission, exemption, authority or licence (Approval) for the purposes of subsection 81-10(4) of the GST Act.

As the fee payable in relation to the application for the highest 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 under Division 81 of the GST Act from constituting consideration for a supply (service) made.

Accordingly, as all the requirements of section 9-5 of the GST Act are satisfied, the supply for which the specific application fee (payable under the relevant state legislation) is consideration, is a taxable supply on which GST is payable.

GST treatment after 30 June 2012

The fee payable in relation to the application for highest rating is prescribed in Schedule 2 Part 1 to the Regulations.

In accordance with paragraph 81-15.01(1)(f) of the GST Regulations and subsection 81-15 of the GST Act, we consider that this is a fee or charge for a supply of a regulatory nature made by an Australian government agency. Therefore 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.

Re-application for the highest rating

An approved provider that has been awarded the highest rating level may reapply for the award of the highest rating level for the service. The application must include the payment of the prescribed fee.

GST treatment prior to 1 July 2012

As considered in our previous ruling, a rating level including the highest rating does not confer a permission to do something such that a rating level could be construed to be a 'permission, exemption, authority or licence' for the purposes of subsection 81-10(4) of the GST Act. A rating level is not a licence or permission.

Further, there is insufficient relationship between the re-application for the highest rating and the provision, retention or amendment of a permission, exemption, authority or licence (Approval) for the purposes of subsection 81-10(4) of the GST Act.

As the fee payable in relation to the re-application for the highest 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 under Division 81 of the GST Act from constituting consideration for a supply (services) made.

Accordingly, as all the requirements of section 9-5 of the GST Act are satisfied, the supply for which the re-application fee (under specific state legislation) is consideration, is a taxable supply on which GST is payable.

GST treatment after 30 June 2012

In accordance with paragraph 81-15.01(1)(f) of the GST Regulations and subsection 81-15 of the GST Act, we consider that this is a fee or charge for a supply of a regulatory nature made by an Australian government agency. Therefore 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.

Application for qualification to be assessed for inclusion on list of approved qualifications

Under the relevant laws a person may apply to assess a qualification for the purpose of approving that qualification under the relevant laws. The application must include the relevant fee.

GST treatment prior to 1 July 2012

As considered in our previous ruling, the application to have a qualification assessed is not an application for a provider approval, a service approval or a supervisor certificate. The fees paid do not relate to an application for the provision, retention or amendment under an Australian law of a permission, exemption, authority or licence pursuant to subsection 81-10(4) of the GST Act.

Notwithstanding that the services performed by the government body in dealing with the application and assessing qualifications may incidentally involve the processing or modifying of information, the fee relates to you assessing the relevant qualifications rather than recording and modifying information. On that basis, the fee is not of a kind covered by subsection 81-10(5) of the GST Act.

The fee accompanying the application is in connection with the services in dealing with the application and assessing qualifications for inclusion on the list of approved qualification and, as such, comes within the definition of consideration under subsection 9-15(1) of the GST Act.

As all the elements of section 9-5 of the GST Act are satisfied, the supply of services made by you, for which the fee is consideration, is a taxable supply on which GST is payable.

GST treatment after 30 June 2012

In accordance with paragraph 81-15.01(1)(f) of the GST Regulations and subsection 81-15 of the GST Act, we consider that this is a fee or charge for a supply of a regulatory nature made by an Australian government agency. Therefore 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.

Application for the determination of equivalent qualification

An application for a determination of an equivalent qualification must be accompanied by the relevant fee.

GST treatment prior to 1 July 2012

As considered in our previous ruling, the application to determine equivalent qualifications is not an application for a provider approval, a service approval or a supervisor certificate. The fees paid in this case do not relate to an application for the provision, retention or amendment under an Australian law of a permission, exemption, authority or licence pursuant to subsection 81-10(4) of the GST Act.

Notwithstanding that the services performed in determining equivalent qualifications may incidentally involve the processing or modifying of information, the fee relates to you determining equivalent qualifications rather than recording and modifying information. On that basis, the fee is not of a kind covered by subsection 81-10(5) of the GST Act.

The fee accompanying the application is in connection with the services involving dealing with the application and determining equivalent qualifications and, as such, comes within the definition of consideration under subsection 9-15(1) of the GST Act.

As all the elements of section 9-5 of the GST Act are satisfied, the service performed by you in dealing with the application and making a determination of equivalent qualifications for which the fee (under Regulation 139 of the GST Regulations) is consideration, is a taxable supply on which GST is payable.

GST treatment after 30 June 2012

In accordance with paragraph 81-15.01(1)(f) of the GST Regulations and subsection 81-15 of the GST Act, we consider that this is a fee or charge for a supply of a regulatory nature made by an Australian government agency. Therefore 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.

Reasons for decision

Question 2

Summary

Following the reasoning in Question 1, from 1 July 2012 the fees or charges listed are not subject to GST. Where you have already charged these fees and remitted GST to the ATO any refund sought is subject to section 105-65 of Schedule 1 to the TAA.

Where the recipient is not registered for GST and you first reimburse them the amount corresponding to the overpaid GST, you are not prevented from obtaining a refund of that amount.

Where the recipient is registered for GST, the Commissioner need not give you a refund in accordance with section 105-65 of the Taxation Administration Act 1953 (TAA).

Detailed reasoning

Under the general rules the Commissioner is required to give a refund, or apply an amount, in accordance with the running balance account provisions in Divisions 3 and 3A of Part IIB of the TAA.

However, the requirement to give a refund of overpaid GST is subject to section 105-65 of Schedule 1 to the TAA which modifies the general rules so that the Commissioner need not give a refund or apply that amount if an entity overpaid its net amount or an amount of GST where the requirements of the section are satisfied.

Subsection 105-65(1) of Schedule 1 to the TAA states:

(1) The Commissioner need not give you a refund of an amount to which this section applies, or apply (under Division 3 or 3A of Part IIB) an amount to which this section applies, if:

(a) you overpaid the amount, or the amount was not refunded to you, because a *supply was treated as a *taxable supply, or an *arrangement was treated as giving rise to a taxable supply to any extent; and

(b) the supply is not a taxable supply, or the arrangement was treated as giving rise to a taxable supply, to that extent (for example, because it is *GST free); and

(c) one of the following applies:

(i) the Commissioner is not satisfied that you have reimbursed a corresponding amount to the recipient of the supply or (in the case of an arrangement treated as giving rise to a taxable supply) to an entity treated as the recipient;

(ii) the recipient of the supply, or (in the case of an arrangement treated as giving rise to a taxable supply) the entity treated as the recipient, is *registered or *required to be registered.

Note: * asterisk denotes a defined term in the Act

Whether subsection 105-65(1) of Schedule 1 to the TAA applies to your circumstances

The restriction on refunds of overpaid GST under section 105-65 of Schedule 1 to the TAA will apply if all three of the following conditions are satisfied:

· there was an overpayment of GST,

· a supply was treated as a taxable supply when it was not a taxable supply or was taxable to a lesser extent, and

· either the recipient has not been reimbursed a corresponding amount of the overpaid GST and/or the recipient of the supply is registered or required to be registered for GST.

Miscellaneous Tax Ruling MT 2010/1 provides the view of the Commissioner on section 105-65 of Schedule 1 to the TAA.

Paragraph 20 of MT 2010/1 explains the meaning of "overpaid". In the context of section 105-65 of Schedule 1 to the TAA, "overpaid" means the amount that has been remitted must be in excess of what was legally payable on the particular supply in the relevant tax period prior to taking into account or applying section 105-65.

In the situation where Australian consumers are not registered for GST purposes, have overpaid GST on a supply that was treated as a taxable supply when it was not a taxable supply and have not yet been reimbursed by you for any amount corresponding to the GST overpaid, all three conditions are satisfied. Therefore section 105-65 of Schedule 1 to the TAA applies and the Commissioner has no obligation to pay a refund that would otherwise be payable under section 8AAZLF of the TAA.

However, where these consumers are first reimbursed an amount corresponding to the overpaid GST by you, then section 106-65 to the TAA will not apply (as the third requirement of the section is not met). In those circumstances you are therefore able to claim a refund. Please refer to the ATO fact sheet Correcting GST Mistakes (available on our website at www.ato.gov.au) for information on how to claim a refund by amending the appropriate Business Activity Statement(s).

Where Australian consumers are registered or required to be registered for GST purposes and have overpaid GST on a supply that was treated as a taxable supply when it was not a taxable supply subparagraph 105-65(1)(c)(ii) of Schedule 1 to the TAA is satisfied. Therefore the Commissioner has no obligation to pay a refund that would otherwise be payable under section 8AAZLF of the TAA. This is because generally the registered recipient will be entitled to input tax credits in this situation and, as such, has ultimately not borne the GST.