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Ruling

Subject: GST and bailiff fees

Question 1

Is goods and services tax (GST) payable on fees, charges and costs charged to creditors by private sector bailiffs appointed under contract by the Government Department (the Department)?

Answer

No

Question 2

Is GST payable in cases where the Department collects the above moneys and passes them on to private sector bailiffs appointed under contract by the Department?

Answer

No

Relevant facts and circumstances

The term "bailiff" refers to private contractors, some police officers and government employees engaged by the sheriff's office.

The Sheriff is responsible for all Court execution and is assisted in the metropolitan area by the Department employees.

In rural areas the Sheriff is assisted by appointed private and police bailiffs, for actions arising in all jurisdictions

The bailiff's work is administered and controlled by the Sheriff who is an officer of the Department.

Private bailiffs are appointed under a particular Act and work in the jurisdiction of the Court but are not an employee of the Court, the Department or a State or Commonwealth government body.

The duties of private bailiffs include: serving summonses and other legal documents; and executing court orders (including the seizure and sale of goods and delivery of goods) and executing civil arrest warrants.

Private bailiffs are not paid a retainer or a salary for their services. Their fees and charges are set out in and limited by particular Regulations (regulations). Their activities and fee arrangements are summarised below.

Functions

The appointment and functions of the Bailiff is provided for in the particular Act. The private bailiff's functions are to serve and execute court processes that principally involve the execution of orders issued by the court.

Fees and/Fines

A section of the particular Act establishes that the bailiff is entitled to recompense in the form of bailiff's fees.

The bailiff's fees are prescribed in the regulations. The Court on application by the plaintiff or their solicitor applies for a Property (Seizure and Sale) Order (PSSO) for satisfaction of a judgment debt, On the face of the Order is:

· The amount of outstanding debt to be recovered made up from the balance of the unpaid judgment debt, interest, and allowed costs of previous recovery attempts.

· The court enforcement application fee, (if not already included in past attempted recovery fees):

· The bailiff's fee, made up of the Enforcement fee plus an amount for travel;

· Any allowable Lawyers costs.

The court enforcement fee is paid into the Department's general funds and the initial bailiff's fees are assessed by the Clerk of the Court and collected from the judgment creditor. The court pays the bailiff's fee including the enforcement fee and sheriff's mileage either by electronic transfer or in the form of a trust cheque. The Lawyers Costs shown on the Order are not prepaid but taken out of the proceeds from the amount collected under the Property (seizure and sale) Order, including any sale of the debtor's property.

Once the bailiff commences execution of the Order, they proceed to accumulate charges that are added to the Order based on the legislated schedules, So for example, the bailiff may incur travel costs to the property, attendance fees, storage and auctioneers fees, The amount that the bailiff may claim is stated in the Regulations.

Though the bailiff is considered an officer of the court, the bailiff is liable on any negligence that results in a loss to either party.

Your contentions

The existing practice, outlined above, results in the creditors having to pay GST in cases where bailiff services have been contracted out to private sector bailiffs; whereas in cases where the Department utilises it employees to undertake bailiff services, no GST is payable on the services provided to the creditor. This practice is compliant with the strict ATO interpretation of taxable supply but is considered to be inequitable. A private ruling is sought on the basis that no GST should apply to outsourced bailiff fees.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999:

Section 9-5

Paragraph 9-5(a)

Section 9-10

Section 81-5

Section 81-10

Subsection 81-10(1)

Subsection 81-10(2)

Subsection 81-10(4)

Subsection 81-10(5)

Section 81-15

Section 195-1

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

Regulation 81-10.01

Regulation 81-15.01

Regulation 81-15.02

Income Tax Assessment Act 1997

Section 995-1

Reasons for decision

Issue 1

Question 1

Summary

Bailiff's fees, charged by a bailiff, are covered by Division 81 of the GST Act and regulation 81-15.01 of A New Tax System (Goods and Services Tax) Regulations 1999 and therefore are not subject to GST.

Detailed reasoning

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, but that the non-commercial activities of government would be outside the scope of the GST.

Until 1 July 2011, various exemptions were set out in detail in the A New Tax System (Goods and Services Tax) (Exempt Taxes, Fees and Charges) Determination 2011 (No. 1) (the Determination). As a transitional measure, fees and charges listed in the Treasurer's determination as at 30 June 2011 remain exempt until 1 July 2013. The bailiff fees prescribed under a particular Act are not listed in the Determination.

The amended Division 81 of the GST Act was introduced on 1 July 2011. It is legislation to enact the intention that regulatory charges that do not relate to particular goods or services will be exempt from GST, including licences, permits and certifications that are required by government prior to undertaking a general activity.

In this context, Division 81 of the GST Act allows entities to self assess the GST treatment of a payment of an Australian fee or charge in accordance with certain principles. Specifically, section 81-10 of the GST Act considers the effect of payment of certain Australian fees and charges.

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 (section 195-1 GST Act). An Australian law means a Commonwealth, State or Territory law, and Australian government agency means (a) the Commonwealth, a State or Territory, or (b) an authority of the Commonwealth or of a State or Territory (section 195-1 GST Act, as defined by reference to section 995-1, Income Tax Assessment Act 1997).

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

The definition in section 995-1 of the ITAA 1997 requires us to consider if a private bailiff, in the capacity as a bailiff contracted by the Department, are an Australian government agency.

Commonwealth, State or a Territory

We do not consider a bailiff is the Commonwealth, a State or a Territory for the purposes of paragraph (a) of the definition of Australian government agency. However, for reasons that follow it is not necessary to discuss paragraph (a).

Authority of the Commonwealth or of a State or a Territory

The phrase 'authority of the Commonwealth or of a State or a Territory' as used in section 995-1 of the ITAA 1997 is not defined in that Act. But, the meaning of terms such as 'authority', 'public authority' and 'authority of the State' have been the subject of a number of Australian Court decisions.

In Renmark Hotel Inc v. Federal Commissioner of Taxation (1949) 79 CLR 10 (Renmark Hotel), Rich J said at page 18:

Coercive powers over the individual are given to many governmental authorities which could be called public authorities, but it is not an essential part of a conception of a public authority that it should have coercive powers, whether of an administrative or a legislative character. It may, however, be an essential characteristic of the conception that it should have exceptional powers or authority. Some exceptional powers of doing what an ordinary private individual may not do are generally found in any body which we would describe as a public authority.

In Federal Commissioner of Taxation v. Silverton Tramway Co Ltd (1953) 88 CLR 559 (Silverton), Dixon CJ stated at page 565 that:

in relation to such a public affair as public transport the use of the word "authority" as a description of a person or body implies he or it is an agency or instrument set up to exercise control or execute a function in the public interest whether as an emanation of the general government or as an adjunct of local government or as a specially constituted officer or body. The word "authority" would not readily be applied in ordinary speech to a company carrying on an undertaking for private profit, even if the undertaking were a public utility and the company had secured a grant of statutory powers to enable it to do so.

More recently, in Committee of Direction of Fruit Marketing v. Delegate of the Australian Postal Commission (1980) 144 CLR 577 (Fruit Marketing), Gibbs J stated at page 580:

The words 'authority of State' naturally mean a body which is given by the State the power to direct or control the affairs of others on behalf of the State i.e. for the purposes of and in the interest of the community or some section of it. In some cases it may be decisive that the body concerned is given exceptional powers of a kind not ordinarily possessed by an individual or a company, and that those powers are intended to be exercised for a purpose that would ordinarily be regarded as a purpose of government. On the other hand, in some cases it may be decisive that the body is conducted in the interest and for the profit of its members. In all cases, however, it is necessary to have regard to all the relevant circumstances in order to determine the character of the body in question.

And, at page 593 Mason and Wilson JJ said:

The question to be determined is whether the appellant is or is not "the Commonwealth, a State or an authority of the Commonwealth or of a State". No other test is provided. Nevertheless the totality of the provision is instructive, and some conclusions may be drawn from it. Clearly, it is not confined to the Crown and those bodies which are so closely identified with the Crown as to enjoy its immunities. Consequently, the provisions of s. 6 (4) cannot be decisive in favour of the appellant. Again, the test is not whether the body in question draws its funds from government sources.

In our opinion, the focus is upon government, and the function of government.

Renmark Hotel, Silverton and Fruit Marketing indicate that:

· an authority's powers do not have to be coercive (Renmark Hotel)

· some exceptional powers of doing what an ordinary private individual may not do are generally found in any body which we would describe as a public authority (Renmark Hotel)

· the word authority would not readily be applied in ordinary speech to a company carrying on an undertaking for private profit (Silverton)

· an authority is a body which is given by the State the power to direct or control the affairs of others on behalf of the State (Fruit Marketing)

· it is necessary to have regard to all the relevant circumstances in order to determine the character of the body in question (Fruit Marketing), and

· the test is not whether the body in question draws its funds from government sources (Fruit Marketing).

All the relevant circumstances

The appointment and functions of the Bailiff is provided for in a particular section of a particular Act.

The appointment of a private bailiff is established to assist the Court in the administration of justice. Their fees are derived from the public duties they perform in their role as bailiff and they do not have the ability to set those fees. The fact that they receive for their own use the prescribed fees, either direct or through the Court does not in itself mean they are not an authority. As was pointed out in Fruit Marketing the test is not whether the body in question draws its funds from government sources. Private bailiffs are not capable of setting their fees in a commercial context and as envisaged in the Silverton sense are not carrying on an undertaking for private profit as the office of bailiff is not established for a profit making purpose.

In this sense, private bailiffs can be contrasted with a commercial enterprise established for a profit making purpose. The position of bailiff, to which a private bailiff is appointed, is established for the execution of a function of government as opposed to an enterprise established for a profit making purpose which may then be given certain statutory powers. Whilst the commercial enterprise may fulfil some duties to the public, it is at the same time still conducting a profit making enterprise.

The serving of process, judgments and enforcement of warrants is considered a core function of government. A particular section of a particular Act provides the authority, as given by the State for the bailiff to direct or control the affairs of others through the service and execution of the process, judgements and orders (Fruit Marketing). Some of these powers are exceptional in that an ordinary person can not do them (Renmark Hotel). Indeed, a bailiff is given certain coercive and statutory powers especially in regard to the enforcement of warrants and orders of the court. No other private entity can undertake this function which can be seen as a traditional and inalienable function of government.

Some of the activities are not coercive but, as was pointed out in Renmark Hotel, the bailiff's powers do not have to be coercive to be acting as an authority. However, although a private person acting in the capacity of bailiff in serving and executing process these actions carry no legislative indemnity. In the circumstances we do not see the absence of indemnity for some of the activities as precluding a bailiff being an authority of the State.

Considering all of the relevant facts (Fruit Marketing) we consider that private bailiffs appointed under contract by the Department are an authority of a State.

Conclusion

Section 81-10 of the GST Act considers the effect of payment of certain Australian fees and charges. Australian fees or charges are not treated as the provision of consideration for a supply at first instance where they are of the nature described in this section. Subsection 81-10(4) of the GST Act considers that a payment is not the provision of consideration to the extent that the fee or charge relates to an application for, the provision, retention, or amendment, under an Australian law, of a permission, exemption, authority or licence (however described).

We consider that your circumstances do not involve a fee or charge relating to an application for, the provision, retention, or amendment, under an Australian law, of a permission, exemption, authority or licence.

Subsection 81-10(5) of the GST Act considers that a payment is not the provision of consideration 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

We consider that the prescribed fees issued under the regulations do not relate to private bailiffs doing any of the activities that are listed in paragraphs 81-10(5)(a) to 81-10(5)(g) of the GST Act. As the fees are not covered by subsections 81-10(4) and 81-10(5), subsection 81-10(1) does not apply.

However, section 81-10(2) of the GST Act also provides that 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.

Regulations for this purpose have been made at regulation 81-10.01 of the GST Regulations. They include 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 (regulation 81-10.01 (f)); a fee or charge for a supply of a non-regulatory nature (regulation 81-10.01(g)), and a fee or charge for a supply by an Australian government agency, where the supply may also be made by a supplier that is not an Australian government agency (regulation 81-10.01(h)).

In your case we consider that the bailiff fee is of a regulatory nature and therefore regulation 81-10.01 does not apply.

The word 'regulatory' is not defined in the GST Act or the GST Regulations. However, the Explanatory Statement (ES) to A New Tax System (Goods and Services Tax) Amendment Regulation 2012 (No. 2) 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."

Section 81-15 must also be considered, as regulations may be made that provide that the payment of an Australian fee or charge, or an Australian fee or charge of a prescribed kind, is not the provision of consideration. Such regulations have been made at regulation 81-15.01. Where a fee or charge is covered by Regulations 81-10.01 and 81-15.01 there are tie-breaker regulations at 81-15.02 that must be considered.

The ES provides a number of examples that would fall under paragraph 81-15.01(1)(0067) and states the following:

These are fees and charges associated with the right to access the legal system and with the enforcement of court decisions, which is important to the integrity of the justice system.

Examples of Australian fees and charges that fall within this paragraph include, but are not limited to:

· Fees charged by a Sheriff's Office related to serving and executing documents and writs;

· Court and Tribunal related infringement fees and charges; and

· Court and Tribunal filing and hearing fees and charges.

Sub-regulation 81-15.01(1) of the GST Regulations contains a list of fees and charges that will not be subject to GST because they are taken not to constitute consideration. This list includes:

(e) a fee or charge imposed in relation to a court, tribunal, commission of inquiry or Sheriff's office.

In this case the fees are charged or imposed by the Department in accordance with the regulations. Therefore, regulation 81-15.01 would apply and the private bailiff's fees and charges do not constitute consideration for a supply and are not subject to GST.

Question 2

Summary

Bailiff's fees collected by the Department and passed on to private sector bailiffs appointed under contract by the Department are covered by Division 81 of the GST Act and regulation 81-15.01 of the GST Regulations and therefore are not subject to GST.

Detailed reasoning

See reasoning above