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Ruling

Subject: Division 81 and the GST treatment of particular taxes, fees or charges

Question 1

Are payments of the taxes, fees or charges listed below excluded from goods and services tax (GST) under Division 81 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when they are imposed on or after 1 July 2013?

· Industry Training Levy

· Assessment (and subsequent revision where required) of the requirements for the provision of water supply or sewerage services

· Fees associated with the nomination of a candidate for election

· Employer registration fee

· Minimum fee and retrieval of records fee

Answer

Yes.

Relevant facts and circumstances

· You are authorised to seek a ruling on behalf of the relevant government entities in relation to taxes, fees and charges they impose.

· The relevant entities are all registered for GST.

· The fees or charges considered in this ruling are currently listed as exempt under the A New Tax System (Goods and Services Tax)(Exempt Taxes, Fees and Charges) Determination 2011 (No 1) (the Determination).

· The fees or charges are described in further detail below:

Industry Training Levy

· The levy is imposed under relevant legislation. The rate of the levy is specified in a relevant section.

· Another section of the Act establishes the Board to whom the levy is paid. The legislation outlines that the Board is not part of the Crown, nor is it an instrumentality of the Crown.

· However, you consider that the Board is a public authority for the purposes of relevant State legislation as the Board is required to be audited by another government department.

· Levies collected are required to be used for the purposes set out in legislation.

· This includes that funds are to be used for the implementation of a training plan for the purposes of improving the quality of training and increasing the level of skills in the industry.

Fees for assessment for water supply or sewerage services

· An assessment fee is imposed, and the amount to be charged is specified, in relevant legislation.

· The assessment fee is paid to the entity by the developer. You have advised that the entity to which the amount is paid is a State public authority.

· Under relevant legislation no development may be undertaken unless it is an approved development under the Act.

· The legislation also provides the matters against which a development must be assessed.

· You have advised that the fees are primarily for an assessment of the required supply for a proposed development. A developer sends in basic development plans or a development application and the entity charges a fee to assess what water and wastewater supplies will be required.

· Upon payment of the fee, and after the entity has performed the assessment, the developer receives a written assessment which includes an indicative plan of what reticulation mains or augmentation of the system is required for their development.

· You have advised that the private sector is unable to perform this assessment as it is an assessment by the entity of their infrastructure in order to determine how the property can be supplied with water and sewerage.

Fees associated with nomination of election candidates

· A government body has responsibility for managing parliamentary elections.

· The government body is registered for GST.

· A nomination of candidate fee is payable to the body. The amount payable is specified in Regulations.

· To make a nomination the registered officer of a registered political party lodges a nomination paper and deposit of the prescribed amount in respect of all candidates nominated on behalf of their party.

· A single candidate may also nominate for election. They must also provide a nomination paper and deposit of the prescribed amount.

· The relevant legislation considers where a deposit may be forfeited in certain cases. The deposit made is retained pending the election, and must be returned to the candidate (or authorised person) if the candidate is elected, the total number of first preference votes exceeds a certain percentage of the total formal votes cast, or where the candidate is a member of a group the total first preference group votes exceeds a percentage of total formal votes cast. Otherwise the deposit is forfeited to the Crown.

Registration Fees

· A division of a relevant department has responsibility for certain aspects of health, safety and welfare.

· The Department is a State government agency and is registered for GST.

· Certain entities must be registered under particular legislation, and pay a specified periodical fee in relation to registration.

· The registration fee payable is payable to, and set by, another entity that is a State government statutory corporation and is registered for GST.

· That entity registers relevant entities under the Act in conjunction with registering them under its own Act.

· The registration fee is added to another levy/premium and covers costs associated with health and safety activities of the State Government.

· The collecting corporation must forward a prescribed percentage of the registration fee to the Department, and retains the remainder.

· Regulations provide the matters the fee set by the collecting corporation should have regard to, the prescribed fee and prescribed percentage payable to the Department.

· You seek confirmation of the GST treatment of the registration fee paid to the collecting corporation as well as the transfer payment to the Department.

Minimum fee and retrieval of records fee

· A division of a State government Department has responsibility under legislation for the preservation and management of official State Government records.

· The Department is a State government agency and is registered for GST.

· The minimum fee and retrieval of records fee are imposed via Regulations.

· The minimum fee applies to the copying service. It is applied to requests for copies of records from persons (general public) who are not able to visit facilities, and large copying requests from persons who do visit. The fee covers the cost of staff time to prepare a quote, identify the relevant records and retrieve them from the repository. It does not cover the cost of staff time involved in copying or the cost of materials - this is covered (partially) in the fee for photocopying.

· The retrieval of records fee applies when agencies request to have their archived records retrieved from the repository and returned to them temporarily. It is set at a level to recover the cost of staff time to fulfil the request.

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

For the reasons discussed below, payment of the taxes, fees or charges in question is not the provision of consideration for a supply. Therefore taxable supplies are not made, and the transactions are not subject to GST.

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 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. We acknowledge that the fees considered in this ruling are covered by the Determination and therefore remain exempt until that time.

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 tax or an Australian fee or charge in accordance with certain principles.

In particular section 81-5 of the GST Act provides that the payment of an Australian tax is not consideration, and section 81-10 of the GST Act considers that the payment of certain Australian fees and charges are not consideration. Regulations pursuant to Division 81 have also been made that specifically include or exempt certain payments from being the provision of consideration (see regulations 81-10.01 and 81-15.01 of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations).

Australian tax, fee or charge

As a starting point, it is necessary to determine whether the taxes, fees or charges described meet the specific requirements of an Australian tax, fee or charge before the further substantive requirements of Division 81 and the regulations made under Division 81 can be considered.

An Australian tax is a tax (however described) imposed under an Australian law. 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.

There also needs to be a clear authority to impose a particular tax, fee or charge before it can be considered to be imposed under a state law.

Each of the taxes, fees or charges imposed are considered below to determine whether their payment is the provision of consideration in light of Division 81.

Industry Training Levy

Where the Levy is paid to an Australian government agency and is imposed under an Australian law (which includes a law of a State) it will be an Australian fee or charge.

The Levy is imposed under a relevant Act. Subject to the Act, a levy is imposed in respect of any relevant activities which commenced after the commencement of that Act. We consider that this is a state law, and therefore satisfies the definition of an Australian law. Therefore the Levy is imposed under an Australian law.

We also consider that the fee is payable to an Australian government agency. The constitution of the Board is outlined in the Act. While this states that the Board is not an agency or instrumentality of the Crown, we consider that this does not preclude the Board from being the State, or an authority of the State, under the terms of the GST Act.

The Board is carrying out the relevant business or functions that would be carried out by the State, including in imposing the compulsory levy. It is responsible for advising the Minister, the Minister can appoint members to the Board and certain other activities require approval of the Minister (eg appointing authorised officers).

Your relevant State legislation defines a public authority as including a statutory authority that is an instrumentality of the Crown or the accounts of which the State is required by law to audit. Relevant legislation provides that the State may at any time, and must at least once in every year, audit the accounts of the Board. Therefore the Board is a public authority for the purposes of your State legislation.

We therefore accept that in your circumstances, based on these relevant factors, the Board therefore meets the definition of an Australian government agency for the purposes of Division 81 of the GST Act.

Having established that the Levy is an Australian fee or charge, it is necessary to consider whether it is a fee or charge that does not constitute consideration under Division 81 of the GST Act and is therefore not subject to GST.

Section 81-15 of the GST Act allows the making of regulations that 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. Such regulations have been made at Division 81 of the GST Regulations. In particular, regulation 81-15.01 of the GST Regulations prescribes fees and charges which do not constitute consideration.

Relevant to your circumstances is paragraph 81-15.01(c) of the GST Regulations. This provides that a fee or charge imposed on an industry to finance regulatory or other government activities connected with the industry will not constitute consideration. We consider that this paragraph applies in your circumstances, and therefore the Levy is not subject to GST.

The Levy is a general impost without particular services provided. It is based on identifiable criteria with general application and is enforceable by law. Based on the broad application of the Levy to all relevant activities (except for specific exceptions) we consider that the Levy is an industry levy imposed on an industry, and that finances government activities (such as training) connected with the industry.

The fees and charges are not paid for the provision of specific supplies. Rather, they are a compulsory impost on the industry for which no specific supply is provided in return. Therefore it is consistent with the principles of Division 81 of the GST Act (and the Intergovernmental Agreement) that the Levy is not subject to GST.

Fees for assessment for water supply or sewerage services

The relevant entity to which the amounts must be paid is a statutory corporation under, and according to legislation a public corporation which is an instrumentality of the Crown and holds its property on behalf of the Crown. Based on this we consider that the entity meets the definition of an Australian government agency (being an authority of the State) under section 995-1 of the ITAA 1997.

Where the fee or charge paid to the Australian government agency is imposed under an Australian law (which includes a law of a State) it will be an Australian fee or charge. In these circumstances the fee is imposed under Regulations. Therefore the fee in question is an Australian fee or charge.

Subsection 81-10(4) of the GST Act provides that a payment of an Australian fee or charge is not the provision of consideration to the extent that 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).

Relevantly, the assessment fee can be considered to relate to an application for the provision of a permission. The term 'relates to' requires a nexus, link or connection between the fee or charge and the provision of a permission. The meaning of "relates to" was considered by Hill J in HP Mercantile Pty Limited v FC of T 2005 ATC 4571 (at p 4578)

"the relationship was one which had to be a 'real' and substantial relationship - not one that was trivial ... 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 enquiry, 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."

This indicates that the interpretation of "relates to" may be a broad interpretation, but that some real or substantial connection is required. However, this connection may be direct or indirect. It must be a relevant connection, and not a mere remote link.

In this instance the fee in question is for a report that is prepared in association with proposed developments, and approval of such a report is required as part of the process of obtaining the necessary approval or permission to proceed with the proposed development. That is, it relates to an application for the provision of a permission.

The assessment is a prerequisite for developments and therefore payment of the fee is necessary before the permission can ultimately be provided. Therefore there is a real connection between the fee and the permission, such that the fee can be said to relate to the permission.

Even though the final permission to develop is granted by another entity, it is not specified in the legislation that a fee or charge paid in the course of the application process to an agency other than the Australian Government agency that provides the final permission is precluded from being covered by subsection 81-10(4) of the GST Act. In contrast, the Explanatory Memorandum to this legislation makes it clear that fees paid to a private entity as part of the permissions process will not be exempted (see also regulation 81-10.01(h) of the GST Regulations).

Therefore we accept that the assessment fee relates to an application for the provision of a permission that would be granted under an Australian law by a relevant authority, and is therefore a fee of the type covered in subsection 81-10(4) of the GST Act. That is, it relates to an application for provision of a permission as described in subsection (4).

As this fee is of the type covered by Division 81 of the GST Act, the payment of the fee will not be consideration for a supply. Specifically, this means that the provision of the assessment will not be a taxable supply as the supply is not for consideration.

We note for the sake of completeness that the assessment service and fee, while having some connection to a supply of water, is a separate supply to the supply of water. Therefore the assessment fee is not GST-free under Division 38 of the GST Act.

Fees associated with nomination of election candidates

The relevant body was first established as the State electoral department. We therefore consider that the body meets the definition of an Australian government agency under section 995-1 ITAA 1997.

Where the fee or charge paid to the Australian government agency is imposed under an Australian law it will be an Australian fee or charge. In these circumstances the fee is imposed under a Regulation, which also prescribes the amount of the deposit to be paid in respect of each candidate in nominating for an election. As the fee is imposed under an Australian law by an Australian government agency it is an Australian fee or charge.

We consider that the payment of the amount of the deposit (being an Australian fee or charge), including where surrendered, is part of the requirements to be given an authority or permission to participate as a candidate for election. Therefore it is a fee or charge that relates to a permission or authority under subsection 81-10(4)(a) of the GST Act, and is therefore not the provision of consideration pursuant to subsection 81-10(1) of the GST Act.

Whilst we are satisfied of the above, we note that we also consider that the fee or charge could be considered to be a fee or charge for a supply of a regulatory nature, and therefore a fee or charge which does not constitute consideration under sub-regulation 81-15.01(f) of the GST Regulations. We agree that the deposit assists in regulating and managing the electoral process.

Therefore the payment in question is not consideration for a supply, and no taxable supply is made. GST is not payable.

Registration Fees

The entity to whom the fees are paid is a State government statutory corporation established under legislation. Under the legislation it holds its property on behalf of the Crown, and is also subject to Ministerial control and direction. Based on this we consider that the entity meets the definition of an Australian government agency (being an authority of the State) under section 995-1 of the ITAA 1997.

Where the fee or charge paid to the Australian government agency is imposed under an Australian law (which includes a law of a State) it will be an Australian fee or charge. In these circumstances the ability to register entities, and set a fee for registration, is found in relevant legislation. Therefore the fee in question is an Australian fee or charge.

You have advised that the registration fee is added to other premiums or levies and covers costs associated with health and safety activities undertaken by government.

The nature of the fee or charge when paid to the entity is that of a fee or charge imposed on an industry to finance regulatory or other government activities, and therefore not consideration for a supply (under regulation 81-15.01(c) of the GST Regulations). In particular, it is not paid for the provision of specific supplies. Rather, it is a compulsory impost on particular industries or activities for which no specific supply is provided in return. The explanatory statement to the GST Regulations explains that this treatment (as not being consideration) is consistent with the Intergovernmental Agreement as they are regulatory charges that do not relate to particular goods or services.

Whilst we do not consider the payment of the registration fee to be for a supply, even if it was interpreted as being for the supply of registration as required the fee would be considered to be a fee or charge for a supply of a regulatory nature made by an Australian government agency (and therefore the fee would not constitute consideration under regulation 81-15.01(f) of the GST Regulations).

We also note that legislation provides that a prescribed percentage of the fee payable must be paid to the Department. Payment of this amount, if it were payment for a supply, would also be an Australian fee or charge. However, we consider that this is a transfer of funds for no supply, under the administrative arrangements in place.

As the registration fee is not consideration for a supply, no taxable supply has been made and the fee is not subject to GST.

Minimum fee and retrieval of records fee

The entity to which the payment is made is part of a State government department, and so is an Australian government agency.

The fees in question are imposed under the State regulations, and therefore imposed under an Australian law. Therefore the fees are Australian fees or charges.

The payment of an Australian fee or charge, to an Australian government agency, in relation to the agency recording, copying, allowing access to or searching for information is not the provision of consideration (subsection 81-10(5) of the GST Act). Examples of such fees and charges are those paid in order to obtain information from a government agency by searches and extracts of registers, copies of official documents and similar¹. Your fees are not provided for commercial sales of information (for example in a bookshop).

Therefore payments of the minimum fee and the retrieval of records fee are not consideration for a supply. Therefore as no taxable supply is made the fees are not subject to GST.

Conclusion

For the reasons provided, all of the fees or charges described are excluded from being subject to GST by Division 81 of the GST Act.