Edited version of your private ruling

Authorisation Number: 1012448191722

Ruling

Subject: GST status of fees and charges

Question 1

Are you an Australian government agency for the purposes of Division 81 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes.

Question 2

Are the National Boards, which represent each profession and are part of the National registration and accreditation scheme, Australian government agencies for the purposes of Division 81 of the GST Act?

Answer

As no fees are paid or payable to these boards it is unnecessary to consider the application of Division 81 of the GST Act.

Please refer to our reasons for decision.

Question 3

Are the fees and charges currently received, or anticipated to be received, by you in relation to the National Boards precluded from constituting consideration for goods and services tax (GST) purposes from 1 July 20XX?

Answer

Yes, for the specific fees and charges in the circumstances described in the reasons for decision.

Relevant facts and circumstances

· You are registered for GST.

· You were established under an agreement to implement a national scheme for the registration of certain professionals and students in Australia, and accreditation of training courses for them. These matters had previously been regulated by various state boards.

· You are established as a statutory corporation by relevant legislation.

· This Act was then repealed by further legislation. Complementary legislation was passed in each of the states and territories.

· A number of National Boards were established under the National Scheme to regulate the professions (collectively referred to as the National Boards).

· The National Boards are established for functions including:

o Registering practitioners to practise in Australia

o Approve accredited programs of study for practitioners, and

o Oversee assessments and training of overseas practitioners seeking registration in Australia.

· The National Boards are constituted by members appointed by the Ministerial Council, and are deemed to be bodies corporate.

· You have advised in your submissions that the accounts are audited by a public sector auditor.

· Under the National Law, you administer the National Scheme and provide support to the National Boards.

· You receive the following payments in relation to the National Boards:

o Registration fees from practitioners;

o Fees for services relating to access to information contained in registers maintained by you in relation to a National Board, including fees for providing copies of a register or an extract from a register (you have advised that you currently charge GST on these fees and remit the GST component to the ATO);

o Fees for issuing replacement registration certificates to practitioners;

o Fees for providing certificates of registration status to overseas regulating authorities (for Australian registrants who wish to register and work overseas);

o Fees from registrants for examinations, performance assessments and pre-employment interviews conducted by you; and

o A small number of miscellaneous fees.

· You distribute the above fees and charges directly to the relevant National Board. There are no other fees or charges levied by you in relation to the National Boards, or levied by the National Boards.

· You also expect to launch a new subscription service in the relevant year which, for a fee, will provide employers with extracts from the national registers relating to their employees and proposed employees, as well as updates regarding the registration status of current employees. This involves searching the relevant register and providing extracts from the register.

· A number of your fees have previously been listed in the A New Tax System (Goods and Services Tax)(Exempt Taxes, Fees and Charges) Determination 2011 (No 1) (Cth) (the Determination). They have been listed at various items for the various states.

Accreditation functions

· The National Boards also perform an accreditation function. This involves the National Board working with independent accreditation authorities and education providers to ensure graduating students are suitably qualified and skilled to apply for registration.

· This work (for all but a few of the National Boards) is performed by independent accreditation authorities. Those accreditation authorities charge the education providers for accrediting their courses.

· The remaining Boards are working with you to develop an arrangement where you will provide accreditation services for those Boards, and you will charge the education providers for accrediting their courses (this arrangement has not yet commenced). In other words, you have advised that the proposed arrangement is that you will provide accreditation services to those National Boards for a fee payable by relevant education providers.

· You have sought our view on the appropriate GST treatment where the relevant National Board determines that there is a supplier other than an Australian government agency that is capable of providing the same or similar services.

· You have also sought our view on the appropriate GST treatment where the National Board determines that there is no supplier other than an Australian government agency that is capable of providing the same or similar accreditation services.

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 81, and

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

Reasons for decision

General 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.

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).

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. Fees and charges of the types discussed in this ruling are listed in the Determination at various items for the various states (although you have advised that you are currently charging and remitting GST on fees relating to access to information contained in registers you maintain) .

We note that the Commissioner has recently issued Law Administration Practice Statement PSLA 3618 (draft). This explains the administrative approach the ATO will take regarding the GST treatment of Australian taxes, fees and charges under Division 81 of the GST Act from 1 July 2013. In particular, this provides that if an Australian government agency classifies existing Australian fees or charges as being 'exempt' (under subsection 81-10(1) and/or Regulation 81-15.01) in accordance with the Treasurer's determination, the Commissioner will not disturb that treatment retrospectively.

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 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).

Question 1

Summary

We accept that you are an Australian government agency for the purposes of Division 81 of the GST Act.

Detailed reasoning

Australian government agency has the meaning given by section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) (see section 195-1 of the GST Act). Section 995-1 ITAA 1997 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 you are carrying out relevant functions that would otherwise have to be carried out by the individual States and Territories. We also consider that you have the authority of the relevant governments to do this, and that your activities are in the public interest.

In particular, under the National Law the Ministerial Council may give directions about the policies to be applied in exercising your functions under the National Law. You must comply with a direction given to you by the Ministerial Council. The Ministerial Council is comprised of Ministers (with relevant portfolio responsibilities) of the Governments of the participating jurisdictions.

The books and records kept by the national agency in relation to the agency fund must be presented for audit by a qualified person when directed by the Ministerial Council. You have advised in your submissions that the accounts are audited by a public sector auditor.

Taking all these factors into account, we consider that you are therefore an authority of the Commonwealth, states and territories. We therefore accept that you meet the definition of an Australian government agency for the purposes of Division 81 of the GST Act.

All fees, costs and expenses paid or recovered under the National Law are payable into a fund that is to be administered by you. As you are an Australian government agency, we consider that the requirement that the fees or charges are payable to an Australian government agency is met.

Australian law

An Australian law means a Commonwealth, state or territory law. There must also be a clear authority to impose a particular fee or charge before it can be considered to be imposed under an Australian law.

We consider that the National Law is an Australian law. It is a law that has been enacted in each state and territory to give effect to the National Scheme.

The National Law also requires that you must enter into an agreement with each National Board that includes determining the fees that will be payable under the National Law by the practitioners. We therefore consider that the fees are imposed under an Australian law.

Conclusion

Therefore the fees or charges are Australian fees or charges.

Whether they are exempt fees or charges under Division 81 is considered at Question 3.

Question 2

Summary

For the purposes of Division 81 of the GST Act we do not consider it necessary to determine whether the National Boards, which represent each profession and are part of the National registration and accreditation scheme, are Australian government agencies.

Detailed reasoning

According to the information provided in your ruling, all fees and charges are payable to you. You distribute the fees and charges directly to the relevant National Board. There are no other fees or charges levied by you in relation to the National Boards, or levied by the National Boards.

The National Law confirms that all fees, costs and expenses paid or recovered under the Law are payable into the agency fund, and the agency fund is administered by you.

We therefore consider, as discussed above, that the Australian fees or charges are payable to an Australian government agency (you).

It is not necessary to consider whether the National Boards are Australian government agencies for the purposes of Division 81 of the GST Act as no fees or charges are paid to them. They therefore do not make any supplies for consideration, and therefore do not make taxable supplies.

Therefore it is not necessary or relevant to consider the operation of Division 81 in these circumstances.

Question 3

Summary

The fees and charges currently received, or anticipated to be received, by you in relation to the National Boards are excluded from being consideration as discussed below.

Detailed reasoning

As considered above, we accept that you are an Australian government agency. We also accept that the fees and charges are imposed under an Australian law. Each fee or charge you impose is considered below to determine whether their payment is the provision of consideration in light of Division 81.

Registration fees (including late fees)

Currently you charge fees for practitioners to register with a National Board. It is necessary for a practitioner to register with the relevant National Board in order to be permitted to practise in Australia.

A payment (or the discharging of a liability to make a payment) is not the provision of consideration to the extent that the payment is an Australian fee or charge that relates to the provision, retention, or amendment, under an Australian law, of a permission, authority or licence (see subsections 81-10(1) and (4) of the GST Act).

A purpose of the National Law is to establish a national registration scheme for practitioners. Therefore the fee for registration relates to the provision or retention of a permission, authority or licence to practise under an Australian law. We therefore accept that a payment of such fee is not the provision of consideration as it is covered by subsection 81-10(4) of the GST Act.

Paragraph 4.27 of the Explanatory Memorandum to the Tax Laws Amendment (2011 Measures No.2) Act 2011 (the EM for the Legislation) confirms that a fee or charge intended to be exempt under this subsection includes a permission, authority or licence (however described), and includes (but is not limited to) professionals' right of practice licences. We accept that registration is a necessary element of the right to practice, and therefore the registration fees are not consideration and therefore not taxable.

We consider that the fees required to be paid in the event of a late registration are for the same purpose (the right to practice) and are therefore eligible for the same GST treatment. That is, they are not consideration for a supply and are not taxable.

It is also possible that these fees could be classified as fees relating to information and record keeping, as they relate to maintaining correct and accurate registers of professionals. However it is unnecessary to consider this further as we have already concluded that they are not subject to GST.

Fees for registration certificates, register extracts or access to information in registers you maintain

You will charge fees for copies of a register, for your services in accessing the information in the registers, for issuing replacement registration certificates to practitioners and for providing registration certificates to overseas regulating authorities. You also propose to establish a subscription service whereby you provide searches of the register and extracts.

Australian fees or charges that are paid to an Australian government agency and relate to the agency recording, copying, processing, allowing access to or searching for information are not the provision of consideration (see subsections 81-10(1) and 81-10(5) of the GST Act).

Paragraph 4.29 of the EM for the Legislation confirms that examples of fees and charges that are not subject to GST are those for searches and extracts from registers and copies of official documents. We therefore consider that the fees and charges in the above scenarios relate to your dealings with information and are therefore not the provision of consideration, and therefore are not subject to GST

Fees for examinations, performance assessments and interviews

You charge fees for examinations, performance assessments and interviews that are conducted by you.

These activities, and the fees associated, are essential under the National Law in qualifying for or retaining registration as a practitioner. Therefore the fees relate to the provision or retention of a permission, authority or licence to practise under an Australian law. We therefore accept that a payment of such fee is not the provision of consideration as it is covered by subsection 81-10(4) of the GST Act.

This view is also confirmed at paragraph 4.27 of the EM for the Legislation, which provides that compulsory testing fees for regulatory purposes are considered to be in relation to the provision, amendment or retention of a permission, authority or licence and therefore not subject to GST.

Accreditation functions

The National Boards perform an accreditation function whereby they work with independent accreditation authorities and education providers to ensure graduating students are suitably qualified and skilled to apply for registration.

Work done by independent accreditation authorities not exempt

Currently all but a few of the National Boards have their accreditation work done by independent accreditation authorities. The independent accreditation authorities charge the education providers for their services in accrediting their courses. In these circumstances the fees are not paid to an Australian government agency. Therefore they do not meet the preliminary requirements of Division 81, and are therefore not eligible to be exempt under the Division.

Normal GST principles will apply to this arrangement. Where the accreditation authority (as the supplier) is registered for GST, and supplies their services for consideration, it is anticipated that GST would apply. We note that some supplies of education may be GST-free (see subdivision 38-C of the GST Act), but there are no provisions in that subdivision to make accreditation services GST-free.

For general information it should be noted that where the education provider is the recipient of a taxable supply they will be entitled to input tax credits.

Work done by you - not exempt under 81-10(4)

For the remaining agencies you intend to provide the accreditation services for a fee payable by the specific provider. You have advised that there may, or may not, be suppliers other than an Australian government agency that are capable of providing the same or similar accreditation services.

In this scenario the fee is paid to an Australian government agency (you). However, we do not consider that this fee relates to (or relates to an application for) the provision or similar of a permission, authority or licence by a (potential) practitioner.

Similarly, we do not consider that the accreditation fees charged relate sufficiently to the provision, retention or amendment of a permission, authority or licence for the educational institution to operate (or to operate the particular courses). While it relates to your recognition of the qualification, this is not sufficiently connected to the institution's ability to provide the course in the first place. Rather, the fee is for services involved in assessing qualifications for inclusion on your list of recognised qualifications. It is to certify whether a course meets your official requirements, as opposed to providing approval to conduct the course, as the accreditation does not confer a permission to do something.

The consequence of refusing approval is that the National Board must give written notice of the refusal, including the reasons for the refusal, to the accreditation authority that submitted the program and the accreditation authority is entitled to publish any information or advice it gave the Board about the program.

This indicates that you (or the Board) do not grant any permission or licence to the relevant education institution, nor is it compulsory that a course is assessed by you (unless the course seeks inclusion on your list). The fees or charges therefore do not directly relate to the provision or retention of permission, authority or licence by the educational institution (or an application for the same). We consider this conclusion is consistent with the comments in paragraph 4.28 of the EM to the Legislation, and with our previous decisions on similar issues.

Work done by you may be exempt under Regulations

Under subsection 81-15 of the GST Act, regulations may be made that specify further fees and charges that do not constitute consideration. Regulations made under section 81-15 of the GST Act add to the operation of subsections 81-10(4) and (5) and may exempt further Australian fees and charges.

To this end, regulation 81-15.01 of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations) has been introduced (effective 1 July 2012). Relevantly, it provides that fees or charges for a supply of a regulatory nature are not consideration for a supply (paragraph 81-15.01(1)(f) GST Regulations).

The Explanatory Statement to Select Legislative Instrument 201 No. 148 (Explanatory Statement) explains that 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. An activity has a regulatory character where it is for the purpose of ensuring consumer protection or compliance with certain standards.

We consider that the National Law establishes a national registration and accreditation scheme, which is of a regulatory nature. Your activities are therefore regulatory in nature. As a result the fee does not constitute consideration by virtue of paragraph 81-15.01(1)(f) of the GST Regulations, as the accreditation services (and the fee for those services) have a regulatory nature.

However, the regulatory activities of government that are made in competition with the private sector are intended to be subject to GST. Fees and charges in this category are not excluded from being consideration for a taxable supply.

In particular, paragraph 81-10.01(1)(h) of the GST Regulations prescribes 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, will constitute consideration. In the event that this paragraph applies, the fee or charge will be treated as the provision of consideration even though it may also have a regulatory nature.

You have advised that there may be a supplier (or suppliers) other than an Australian government agency capable of providing the same or similar accreditation services. This is also demonstrated by your use of independent accreditation authorities. Where there are alternative suppliers the services will be subject to GST, even if they are actually provided by you.

If there are no non-government suppliers able to provide accreditation services for a particular National Board then we accept that paragraph 81-10.01(h) of the GST Regulations will not apply. Therefore the fee or charge paid by the education provider to you will be GST-free (as it will not be consideration for a supply because of paragraph 81-15.01(1)(f) of the GST Regulations).

Miscellaneous fees

You have advised in your application that there are possibly other fees that may be charged in future, which you have referred to as 'miscellaneous fees'.

Without any information on the nature of these fees it is not possible to determine the appropriate characterisation of those fees.

However, the above comments may be of assistance, in particular regulation 81-15.01 of the GST regulations regarding fees or charges for a supply of a regulatory nature or to compensate an Australian government agency for costs incurred by the agency in undertaking regulatory activities.