Edited version of your private ruling

Authorisation Number: 1012426324823

Ruling

Subject: Goods and services tax (GST) and taxes, fees and charges

Question

Are payments of the specified taxes, fees and charges imposed after 1 July 2013 excluded from GST under Division 81 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes. The payments of the taxes, fees or charges specified are excluded from GST either because of the application of Division 81 of the GST Act or because they are out of scope of GST.

Relevant facts and circumstances

You are a government entity and are registered for GST.

You are seeking a ruling in relation to specified taxes, fees and charges that you impose from 1 July 2013.

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 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 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(1) and

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

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:

(a) you make the supply for consideration

(b) the supply is made in the course or furtherance of an enterprise that you carry on

(c) the supply is connected with Australia, and

(d) 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 explained 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

Until 1 July 2011, payment of Australian taxes, fees or charges were treated as consideration for a supply, except to the extent that the Australian tax, fee or charge was listed in the Treasurer's Determination.

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.

As a transitional measure, taxes, fees or charges listed in the Treasurer's Determination as at 30 June 2011 remain exempt where they are imposed before 1 July 2013.

Australian tax

Section 81-5 of the GST Act states 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.

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.

An Australian government agency and an Australian law are terms defined in section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) as:

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

Australian government agency means:

(a) a Commonwealth, a State or a Territory or

(b) an authority of the Commonwealth or of a State or a Territory.

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 prescribed by the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations). Pursuant to subsection 81-10(3) of the GST Act, 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(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 applies to fees or charges relating to information and record keeping. A payment is not the provision of consideration to the extent that the fee or charge is paid to an Australian government agency and relates to the agency recording, copying, modifying, allowing access to, receiving, processing or searching for information.

Are the items listed in the table an Australian tax, fee or charge?

An Australian tax is a tax (however described) imposed under a Commonwealth law, a State law or a Territory law.

Paragraph 4.22 of the Explanatory Memorandum to the Tax Laws Amendment (2011 Measures No.2) Act 2011 provides the following examples of Australian taxes imposed under an Australian law: income tax, stamp duty, fringe benefits tax, payroll tax, the Medicare Levy, local government 'ordinary rates' and various industry levies.

We consider that the levies specified are Australian taxes.

As such, the payment of the levies is not consideration for a supply and therefore is not subject to GST.

The payments specified are not considered to be an Australian tax, fee or charge.

The relevant government entities satisfy the definition of Australian government agency in section 995-1 of the ITAA 1997. Accordingly, the fees or charges are Australian fees or charges as they are imposed under an Australian law and are payable to an Australian government agency.

However, we will consider whether subsections 81-10(4) or 81-10(5) of the GST Act apply to the listed fees or charges.

Permission, exemption, authority or license

Subsection 81-10(4) covers a fee or charge that relates to, or relates to an application for the provision, retention or amendment of a permission, exemption, authority or licence (however described).

Paragraph 4.27 of the Explanatory Memorandum to the Tax Laws Amendment (2011 Measures No.2) Act 2011 provides examples of fees or charges that are covered by subsection 81-10(4) of the GST Act. In summary, these examples include application fees, licences, permits and certifications that are required by government prior to undertaking an occupation and regulatory charges imposed to undertake an activity.

We consider that the fee or charges specified relate to, or relate to an application for the provision, retention or amendment of a permission, exemption, authority or licence (however described).

The supplying entities require the payment of these fees in relation to applications for the provision of permission, exemption, authority or licence which allow particular activities to be undertaken.

On this basis, the fees or charges specified are covered by subsection 81-10(4) of the GST Act.

Subsections 81-10(2) and (3) of the GST Act narrow the operation of subsection 81-10(1) by treating fees or charges that are prescribed in regulation 81-10.01 of the GST Regulations as the provision of consideration for a supply.

Regulation 81-10.01 makes fees or charges that would otherwise be exempt from GST under the operation of subsections 81-10(4) and (5) of the GST Act, potentially made for consideration and may give rise to taxable supplies.

We consider that the fees or charges prescribed in regulation 81-10.01 of the GST Regulations do not apply to the fees or charges specified. Therefore, subsection 81-10(2) of the GST Act does not apply to treat these fees as the provision of consideration and the fees do not give rise to taxable supplies.

Information and record-keeping

Subsection 81-10(5) of the GST Act applies to fees or charges relating to information and record keeping. A payment is not the provision of consideration to the extent that the fee or charge is paid to an Australian government agency and relates to the agency recording, copying, modifying, allowing access to, receiving, processing or searching for information.

We consider that the fees specified relate to recording, copying, modifying, allowing access to, receiving, processing, and searching for information.

The fees payable on the provision of information/details are covered by section 81-10(5) of the GST Act as the fees are paid in order for the government agency to record, receive and process information.

Further, we consider that subsection 81-10(2) of the GST Act does not apply because these fees or charges are not prescribed in GST Regulation 81-10.01.

As such the fees or charges specified are not the provision of consideration and will not give rise to taxable supplies.

The payments for supplies that are specified are covered by subsections 81-10(4) or 81-10(5) of the GST Act. Accordingly, subsection 81-10 (1) applies to treat these payments as not the provision of consideration.

As the payment of these fees are not consideration for a supply, the supplies for these payments will not be a taxable supply because section 9-5 of the GST Act requires that the 'supply is for consideration'. Accordingly, GST does not apply to these fees or charges.

Fees and charges that do not constitute consideration

Pursuant to section 81-15 of the GST Act, the regulations may provide that the payment of a prescribed Australian fee or charge, or of an Australian fee or charge of a prescribed kind, or the discharging of a liability to make such a payment, is not the provision of consideration.

Regulation 81-15.01 of the GST Regulations prescribes fees and charges for the purposes of section 81-15 of the GST Act. This regulation adds to the kinds of fees and charges that are already made exempt from GST under subsections 81-10(4) and (5) of the GST Act.

We consider that the fees specified do not constitute consideration.

Compensate an Australian government agency for costs of regulatory activities

Paragraph 81-15.01(1)(d) of the GST Regulations provides that payment of a fee or charge will not be for consideration where the fee or charge is to compensate a government agency for costs incurred by the agency in undertaking regulatory activities.

The Explanatory Statement to the A New Tax System (Goods and Services Tax) Amendment Regulation 2012 (No.2) discusses paragraph 81-15.01(1)(d) of the GST Regulations and states:

This paragraph ensures that fees and charges which are for services provided on a cost recovery basis by government agencies, and relate to activities that are regulatory in nature, are not treated as the provision of consideration and therefore do not give rise to a taxable supply.

The Fee is covered by paragraph 81-15.01(1)(d) of the GST Regulations as the fees are paid to cover the Australian government agency costs (actual cost incurred), in undertaking its activity of regulating.

As such, payment of this fee will not be for the provision of consideration under section 81-15 of the GST Act and therefore will not give rise to a taxable supply.

As the payment of these fees are not consideration for a supply, the supplies for these payments will not be a taxable supply because section 9-5 of the GST Act requires that the 'supply is for consideration'. Accordingly, GST does not apply to these fees or charges.

Fine or Penalty

Paragraph 4.7 of the Explanatory Memorandum to the Tax Laws Amendment (2011 Measures No.2) Act 2011 provides that compulsory charges by way of fines or penalties will be exempt from GST. This is because the imposition of a penalty does not amount to a supply.

We consider that the fees specified are payment for a fine or penalty.

The penalty for default fees that the supplying entities charge are considered to be a penalty because no supply is provided in return for the charge. Therefore there is no 'supply for consideration' as defined in section 9-15 of the GST Act. This means that the payment of these funds is not in connection with a supply for the purposes of section 9-5 of the GST Act. Consequently GST does not apply to these fees.

Conclusion

The payments that are specified are Australian taxes covered by subsection 81-5(1) of the GST Act. As such, the payments are not the provision of consideration and are excluded from GST under division 81 of the GST Act.

The payments for supplies that are specified are covered by subsections 81-10(4) or 81-10(5) of the GST Act. Accordingly, subsection 81-10(1) of the GST Act applies to treat these payments as not the provision of consideration. Therefore, the payments of these fees will be excluded from GST under Division 81 of the GST Act.

The payments for supplies specified are covered by subsection 81-15.01(1) of the GST Regulations. Accordingly section 81-15 of the GST Act applies to treat these payments as not constituting consideration. Therefore, the payments of these fees will be excluded from GST under division 81 of the GST Act.

The payments that are specified are a fine or penalty paid for no supply. As such the payments are not the provision of consideration and are excluded from GST under section 9-5 of the GST Act.