Edited version of your private ruling

Authorisation Number: 1012449835392

Ruling

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

Question 1

Is the fee imposed after 1 July 2013, not consideration for a supply pursuant to Division 81 of the A New Tax System (Goods and Services Tax) Act 1999?

Answer

Yes.

Question 2

If the answer to Question 1 is no, if the fee is paid in instalments, will the GST be attributable on a periodic or progressive basis pursuant to Division 156 of the A New Tax System (Goods and Services Tax) Act 1999?

Answer

Not applicable.

This ruling applies for the following periods:

1 July 2013 onwards

The scheme commences on:

Relevant facts and circumstances

You are a government entity and are registered for GST.

You seek a ruling in relation to a specific fee that you impose from 1 July 2013.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 9-39,

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

A New Tax System (Goods and Services Tax) Act 1999 Subsection 81-10(1),

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(3),

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 81-15.01,

A New Tax System (Goods and Services Tax) Regulations 1999 Paragraph 81-15.01(1)(d) and

Income Tax Assessment Act 1997 Section 995-1.

Reasons for decision

Question 1

Section 9-39 of the A New Tax System (Goods and Services Tax) Act 1999 (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.

Taxes, fees and charges

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.

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.

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.

The terms 'Australian tax' and 'Australian fee or charge' are 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.

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:

o a Commonwealth, a State or a Territory or

o 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 mainly 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.

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.

The fee is not considered to be an Australian Tax.

An Australian government agency is defined in section 995-1 of the ITAA 1997 to include an authority of the Commonwealth or of a State or a Territory.

Guidance on what is an Australian government agency is provided in Payments to government agencies under Division 81 on www.ato.gov.au. Each of the following is an Australian government agency:

· the Commonwealth, a state or a territory

· a Commonwealth, state or territory government department

· a body (whether or not it is an entity) established by the Commonwealth, a state or a territory to carry on activities

· a body (whether or not it is an entity) established for a public purpose by an Australian law

· a local governing body established by a state or territory law (such as a local municipal council).

You satisfy the definition of Australian government agency in section 995-1 of the ITAA 1997.

The fees are imposed under an Australian Law and are payable to an Australian government agency. As such, the fee is an Australian fee or charge.

Fees and charges that do not constitute consideration

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. 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.

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 payable to you is covered by paragraph 81-15.01(1)(d) of the GST Regulations as the fee is paid to you on a cost recovery basis for a regulatory activity.

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.

Conclusion

The payments of fees are covered by paragraph 81-15.01(1)(d) 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 are excluded from GST under Division 81 of the GST Act.