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Ruling

Subject: GST treatment of various fees and charges under Division 81

Question 1

Are charges for attending incidents and statutory safety charges subject to goods and services tax (GST)?

Answer

No.

Relevant facts and circumstances

· You are a state government agency.

· You are registered for GST.

· You are responsible for the management of various emergency situations.

· To assist with funding your operations, you impose various fees and charges in relation to the services you perform under your relevant legislation.

· The amounts of the charges are specified in Regulations.

· You have advised that there may be some instances where private suppliers perform some similar safety services (for example providing safety training). However, you have not specifically authorised or endorsed these supplies, and all statutory charges are always billed and payable to you.

· Currently these statutory charges are specified in the A New Tax System (Goods and Services Tax) (Exempt Taxes, Fees and Charges) Determination 2011 (No.1) (the Determination).

Relevant legislative provisions

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

Section 9-5

Division 81

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

Division 81

Reasons for decision

Summary

Division 81 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) operates to exempt the charges imposed from being consideration for any supply that you may make. Therefore no taxable supply is made and GST is not payable on these charges.

Detailed reasoning

Background

GST is payable on taxable supplies. Section 9-5 of the GST Act provides that 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.

Also, relevant to your circumstances, chapter 4 of the GST Act contains special GST rules that apply in particular circumstances. The special rules modify the application of the basic GST rules. Rules in Division 81 of the GST Act provide that certain payments to Australian government agencies are not the provision of consideration. The application of this Division must be considered in your circumstances.

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. Division 81 of the GST Act gives effect to this agreement.

Until 1 July 2011, various exemptions were set out in detail in 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. Currently the relevant charges are specified in the Determination and are therefore exempt from being subject to GST until 1 July 2013 by virtue of paragraph 81-15.01(1)(h) of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations).

Division 81 of the GST Act was amended as of 1 July 2011. The amended legislation continues the intention that regulatory charges that do not relate to particular goods or services will be exempt from GST. 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.

Australian tax, fee or charge

It is necessary to determine whether the fees or charges described meet the specific requirements of an Australian fee or charge before the further substantive requirements of Division 81 (and the regulations made under Division 81) can be considered.

An Australian fee or charge is a fee or charge (however described), 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. Australian government agency means the Commonwealth, a state or territory, or 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 (ITAA 1997)).

Australian government agency has the meaning given by section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997). This in turn provides that Australian government agency means the Commonwealth, a State or a Territory, or an authority of the Commonwealth or of a State or a Territory.

We consider that under this definition you are an Australian government agency. We consider that you impose the relevant charge, and are given the authority to do so under the relevant state law (an Australian law).

Therefore, as you impose a fee under a state law and the fee is payable to an Australian government agency this will meet the requirements of an Australian fee or charge.

Payment of the Australian fee or charge is not consideration

Section 81-15 of the GST Act provides that regulations may be made with the effect that payment a prescribed 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 under the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations)(see regulation 81-15.01).

We consider that paragraph 81-15.01(d) is particularly relevant in your circumstances. This provides that a fee or charge to compensate an Australian government agency for costs incurred by the agency in undertaking regulatory activities does not constitute consideration.

As well as fees in certain circumstances for attending incidents you may also charge fees that relate to inspections of premises or equipment, services or repairs, providing advice or reports on safety equipment or similar, conducting training courses or any other service specified in the regulations.

The fees and charges in question provide funding for your operations which include the management of emergencies, responding to incidents and similar. We consider that these activities are pursuant to your duties under the relevant legislation, and are of a regulatory nature.

The term 'regulatory' captures those activities of a government agency, where the agency is legislatively empowered to undertake those activities and they are for a regulatory purpose¹. You are also authorised generally under your Act to take measures anywhere in the State for protecting persons from injury or death and property from damage.

Therefore you are required to protect the community at large. The charges do not relate to particular goods or services, and are therefore not intended to be subject to GST. We therefore consider that this meets the requirements that the fee or charge is for funding your regulatory activities.

Examples given in the Explanatory Statement of fees that are considered to be exempt under this paragraph include, but are not limited to, fees charged in carrying out statutory duties, fees for false fire alarms and fees and charges in relation to hazardous material incidents. We consider that the contributions that are required to be made to you are of this nature.

This confirms that they are appropriately treated as being exempt from being consideration under this paragraph.

We note that you have advised that private entities may also undertake similar activities such as safety inspections, equipment inspections, providing advice or reports or conducting training courses. We must therefore consider whether paragraph 81-10.01(1)(h) of the GST Regulations applies, as it provides that 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, does constitute consideration.

Where a fee or charge is covered by both this paragraph and regulation 81-15.01 (as is the case in your circumstances) it is to be treated as the provision of consideration².

As explained in the Explanatory Statement, this paragraph is intended to ensure that the regulatory activities of government made in competition with the private sector are subject to GST. This is to ensure that a government entity is not given a competitive advantage over a private sector supplier making the same type of supply.

The paragraph only applies where private suppliers have been accredited or authorised to make a supply over which the agency would otherwise have a monopoly. As this is not the case in your circumstances, the paragraph does not apply.

Conclusion

Therefore it remains that the fees and charges are appropriately treated as being exempt from being consideration. That is, any supplies to which they relate are not taxable supplies.

As we have considered that the amount is not consideration under paragraph 81-15.01(d) it is not necessary to consider whether it is also exempt under any other paragraph.