Edited version of your private ruling

Authorisation Number: 1012442377299

Ruling

Subject: Goods and Services Tax: Division 81 and the GST treatment of certain taxes

Question 1

Are payments of 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?

A. Levies and fees for the issue or renewal of a certificate.

Fee associated with the application for a certificate.

B. Recoup from a Fund to reimburse the cost of administration of the Fund.

C. (i) Contributions to a fund; and

(ii) Fee associated with administering that fund.

D. Fee associated with an Act.

E. Reminder notice fee.

F. Refund fee.

Answer

All items other than D(i) and F are fees and charges exempt from GST under Division 81 of the GST Act.

Items at D(i) and F are not supplies and are therefore not subject to GST.

The scheme commences on:

1 July 2013

Relevant facts and circumstances

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

· The relevant entities are registered for GST.

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

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Division 9;

A New Tax System (Goods and Services Tax) Act 1999 Division 38;

A New Tax System (Goods and Services Tax) Act 1999 Division 40; and

A New Tax System (Goods and Services Tax) Act 1999 Division 81.

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

Income Tax Assessment Act 1997 section 995-1

Detailed reasoning

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

(*Asterisked terms are defined in the Dictionary in section 195-1)

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:

(a) any payment, or any act or forbearance, in connection with a supply of anything; and

(b) 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.

Chapter 4 of the GST Act contains special rules that modify the application of the basic GST rules. 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.

Prior to 1 July 2011 the 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 A New Tax System (Goods and Services Tax) (Exempt Taxes, Fees and Charges) Determination 2011 (No. 1) (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 in accordance with certain principles.

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 Treasurer's Determination and therefore remain exempt until that time.

The amendment to Division 81 of the GST Act continues the intention that regulatory changes that do not relate to particular goods or services will be exempt from GST. In particular section 81-5 of the GST Act provides that the payment of an Australian tax is not the provision of consideration and section 81-10 of the GST Act provides that the payment of certain Australian fees and charges are not consideration.

Regulations pursuant to Division 81 of the GST Act have also been made that specifically include or exempt certain payments from being the provision of consideration (see regulation 81-10.01 and 81.15.01 of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations)).

It is necessary to determine whether taxes, fees or charges meet the specific requirements of an Australian tax, fee or charge before the further substantive requirements of Division 81 of the GST Act and the GST Regulations made under Division 81 of the GST Act can be considered.

Taxes, fees and charges

The terms 'Australian fee or charge' and 'Australian tax' are defined in section 195-1 of the GST Act as:

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.

Australian tax means a tax (however described) imposed under an *Australian law.

Examples of Australian taxes imposed under an Australian law are given in paragraph 4.22 of the Explanatory Memorandum to the Tax Laws Amendment (2011 Measures No.2) Act 2011 and include income tax, stamp duty, fringe benefits tax, payroll tax, the Medicare Levy, local government 'ordinary rates' and various industry levies.

The terms 'Australian government agency' and 'Australian law' are 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.

There 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 items raised are considered below to determine whether their payment is the provision of consideration in light of Division 81 of the GST Act.

A. Levies and fees for the issue or renewal of a practising certificate

Under the relevant legislation, a person or company must not practice the profession unless they hold a practising certificate.

Once enrolled, they can apply for a practising certificate which is valid for a period up to 12 months and is renewed annually.

Applications must be accompanied by the payment of a fee and levy as prescribed in the relevant regulations. The same fees apply for a new application as for an application for renewal.

The fees and levies payable under the relevant legislation and associated regulations in relation to a practising certificate are accepted as being imposed under an Australian law.

It is accepted that the fee is payable to an Australian government agency for the purposes of Division 81 of the GST Act.

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).

Paragraph 4.27 of Explanatory Memorandum to the Tax Laws Amendment (2011 Measures No.2) Act 2011 gives examples of these fees and charges and includes

"…application fees, licences, permits and certifications that are required by government prior to undertaking an occupation (for example medical and legal professionals' right of practice licences…"

However, regulations may be made (under subsection 81-10(2) of the GST Act) that prescribe fees and charges that are to be treated as consideration. Such regulations have been made in Division 81 of the GST Regulations, at regulation 81-10.01. They include a fee or charge for a supply of a non-regulatory nature (regulation 81-10.01(g))

In your case we consider that subsection 81-10(2) of the GST Act does not apply because the application fee is of a regulatory nature and therefore regulation 81-10.01 of the GST Regulations does not apply.

As the fee is covered by subsection 81-10(4) of the GST Act, subsection 81-10(1) of the GST Act applies and there is no consideration for a supply. Therefore no taxable supply is made and the fees are not subject to GST.

B. Fees associated with the application for a certificate

The fee for an application for a certificate is imposed under legislation which satisfies the definition of an Australian law and is payable to an Australian government agency for the purposes of Division 81 of the GST Act.

Section 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 the fee is paid to an Australian government agency and relates to the agency recording, copying, modifying, allowing access to, receiving, processing or searching for information.

An application for a certificate must be accompanied by associated documents and the appropriate fee. We consider that this fee relates to:

· Receiving information and

· Processing information.

In this case we consider that subsection 81-10(2) of the GST Act does not apply because the application fee is of a regulatory nature and therefore regulation 81-10.01 of the GST Regulations does not apply.

As the fee is covered by subsection 81-10(5) of the GST Act, subsection 81-10(1) of the GST Act applies and there is no consideration for a supply. Therefore no taxable supply is made and the fees are not subject to GST.

C. Recoup from a Fund to reimburse the cost of administration of the Fund

The relevant legislation requires a person carrying on business in this industry to be licensed and only to carry on business from premises registered in his name. An application for licence must be accompanied by the fee fixed by regulation. The fee must be paid annually until the licence is surrendered or cancelled.

The relevant legislation establishes a Compensation Fund. In addition to licensing fees the amount prescribed in the regulations must paid into the Compensation Fund which the Commissioner has responsibility to administer.

The fund is established by legislation and expenses incurred in administering the fund are able to be recouped by an Australian government agency.

In this instance the reimbursement is not an Australian fee or charge covered by subsection 81-10(4) or 81-10(5) of the GST Act and therefore subsection 81-10(1) of the GST Act does not apply.

However, section 81-15 of the GST Act provides that the regulations may prescribe that the payment of an Australian fee or charge is not the provision of consideration, adding to the kinds of fees and charges that are made exempt under subsection 81-10(4) and (5) of the GST Act. Regulation 81-15.01 of the GST Regulations prescribes fees and charges for the purposes of section 81-15 of the GST Act.

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

The word 'regulatory' is not defined in the GST Act or the 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"

Generally where only Government organisations have the legislative authority to do certain things, it will be regulatory in nature.

We consider the amounts paid out of the fund as compensation for costs are incurred for regulatory activities and are covered by paragraph 81-15.01(1)(d) of the GST Regulations. They do not amount to consideration, no taxable supply is made and GST does not apply.

D. (i) Payments made into a fund

Before consideration is given to whether Division 81 of the GST Act applies in this instance it must be determined whether there is a supply.

The relevant acts and regulations do not prescribe fees or charges to be paid into the fund but rather, where funds are paid, provide direction regarding their safe keeping and disbursement.

On occasion the payments may be in the nature of a fine or penalty. Paragraph 4.7 of the Explanatory Memorandum to the Tax Laws Amendment (2011 Measures No.2) Act 2011 indicates that one of the principles to apply under Division 81 was 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. There is therefore no 'supply for consideration' as defined in section 9-15 of the GST Act.

Subject to any regulations for Division 81 of the GST Act, fines or penalties paid into the fund are exempt from GST.

For the remainder of payments into these funds it needs to be determined whether there is a supply.

The term "supply" is defined broadly, with section 9-10 of the GST Act defining a supply as any form of supply whatsoever. However, the definition of supply expressly excludes a supply of money unless the money is provided as consideration for a supply that is a supply of money.

The payments of these amounts into the fund are merely a supply of money and are therefore specifically excluded from the definition of supply.

Consequently GST does not apply to these payments.

D. (ii) fee associated with administering the fund

Relevant legislation and regulations prescribe fees that are payable where interest is credited to these funds.

We accept that these fees are imposed under an Australian law and payable to an Australian government agency for the purposes of Division 81 of the GST Act.

In this instance the above fee or charge is not an Australian fee or charge covered by subsection 81-10(4) or 81-10(5) of the GST Act and therefore subsection 81-10(1) of the GST Act does not apply.

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 relation to paragraph 81-15.01(1)(e) of the Regulation, the Explanatory Statement (ES) to A New Tax System (Goods and Services Tax) Amendment Regulation 2012 (No.2) states:

"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."

We consider fees associated with administering this fund are covered by paragraph 81-15.01(1)(e) of the GST Regulations and do not amount to consideration. Therefore no taxable supply is made and GST does not apply.

E. Fees associated with a Regulation

Under the relevant regulation fees are payable for:

· The approval of, amendment to, or revocation of a scheme; and

· An annual fee payable in respect of each member subject to a scheme.

We consider the regulations satisfy the definition of an Australian law and the fee is payable to an Australian government agency for the purposes of Division 81 of the GST Act.

Section 81-15 of the GST Act provides that the GST Regulations may prescribe that the payment of an Australian fee or charge 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.

Paragraph 81-15.01(1)(f) of the GST Regulations provides that a fee or charge will not be consideration where it is for a supply of a regulatory nature made by an Australian government agency.

We consider the application fee and the annual fees are regulatory in nature, and do not constitute consideration (per sub -regulation 81-15.01(f) of the GST Regulations) and are therefore not taxable supplies.

F. Reminder notice fee

If a fee is fixed by or under an Act, regulation or by-law a notice may be given to a person.

Where a notice has been issued and neither paid nor granted relief a reminder notice is required to be issued, before any further action is taken to enforce the original notice. If a reminder notice is issued, the prescribed fee will be added to the unpaid original fee, forming part of that fee.

We consider that the reminder fee is imposed under an Australian law and is payable to an Australian government agency for the purposes of Division 81 of the GST Act.

Where a fee or charge is in the nature of a fine or penalty then, subject to any regulations for Division 81 of the GST Act, we do not consider there is a supply and it will therefore be exempt from GST. However, in some cases the fee may be for services or interest rather than a fine or penalty and therefore will be subject to the general GST rules.

In this instance, a reminder notice must be sent before any further action may be taken. The relevant legislation stipulates that the prescribed fee forms part of the original unpaid fee. It is considered that the reminder fee takes on the character of the original fine or penalty and is not subject to GST.

G. Refund fees

Under the relevant legislation a refund may be issued in certain circumstances and an amount up to a specified rate may be deducted from the refund.

The charge is imposed under an Australian law by an Australian government agency and is an Australian fee or charge.

In this instance the fee charged is for processing the application for refund. The fact that an Australian agency has authority to charge for its administrative services does not mean that those charges will be exempt under Division 81 of the GST Act. The particular charges must be analysed to determine whether they come within any of the exemptions.

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

Section 81-10(5) of the GST Act only exempts charges relating to information and record keeping, not administration charges generally. Only a fee for doing anything specifically listed in 81-10(5) of the GST Act will be exempt. It is not considered that the fee charged when applying for a refund relates to information and record keeping.

However, 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.

The relevant legislation imposes amounts which are regulatory in nature and an application for a refund of an amount imposed is available in the specified circumstances.

The charge for processing these applications falls within paragraph 81-15.01(1)(d) of the GST Regulations being a fee or charge to compensate an Australian government agency for costs incurred by the agency in undertaking regulatory activities. The charge does not constitute consideration, no taxable supply is made and no GST is payable.