Edited version of your private ruling

Authorisation Number: 1012483218793

Ruling

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

Question 1

Is the payment of the tax, fee or charge 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 it is imposed on or after 1 July 2013?

· Support Fund levy.

Answer

Yes. The Support Fund levy is exempt from being consideration for any supply, by virtue of the operation of Division 81 of the GST Act.

Relevant facts and circumstances

Background

· 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 Support Fund levy (the levy) is a new (proposed) tax, fee or charge and is therefore not 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).

· However, you have advised that another State Government has a 'support fund levy' listed in the Determination.

· The description of the charge in the Determination is a 'levy payable by policyholders in respect of the support authority fund in order to fund the activities of the Support Authority, including monies collected by insurers on behalf of the Authority on account of the fund levy.' You have advised that this is similar to the proposed levy.

The Support Scheme

· A person who is catastrophically injured in a motor vehicle accident will be eligible to participate in the Support Scheme (the scheme) where the vehicle accident occurs after 1 July 2014.

· The scheme will meet the cost of reasonable and necessary expenses incurred by (or on behalf of) the injured person for their lifetime treatment and care needs arising from the injury caused by the motor vehicle accident. For example, assistance, appliances, modifications other treatment or care but not including income support.

· To fund the scheme the levy will be imposed from 1 July 2014.

· The levy will be imposed under relevant legislation.

· It will be imposed on all persons who apply for the registration of a motor vehicle; an exemption from registration in respect of a motor vehicle; or a permit in respect of a motor vehicle.

· Relevant legislation will provide that a vehicle cannot be registered unless the levy is paid.

· The levy will be payable to the Support Authority (the Authority), although it will be collected initially by the relevant motor vehicle authority.

· The Authority will be established under the Act. It is to be a body corporate, and will be an instrumentality of the Crown and hold its property on behalf of the Crown. The Authority is subject to the general control and direction of the Minister.

· The Authority will be registered for GST.

· Under the Act, the Authority must establish and maintain a Support Scheme Fund (the Fund). Levies paid to the Authority must be paid into the Fund.

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 Levy 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 Determination. As a transitional measure, fees and charges listed in the Determination as at 30 June 2011 remain exempt until 1 July 2013. As your fee is a new fee it is not listed in the Determination (although we have noted that a similar fee in another jurisdiction is).

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 tax, fee or charge described meets 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. The levy is payable under a state law. Therefore it is payable under an Australian 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)).

We consider that the levy is payable to the Authority. Even where it is collected initially by the relevant motor vehicle authority, this is done on the Authority's behalf and so the levy is always payable to the Authority (although we note that the relevant motor vehicle authority is appointed by the Governor and satisfies the definition of Australian government agency).

The Authority is an Australian government agency for the purposes of Division 81 as we accept that it is the State or an authority of the State. The relevant Act advises that the Authority is an instrumentality of the Crown and holds its property on behalf of the Crown. It is also subject to Ministerial direction and control.

Therefore as the levy is paid to an Australian government agency and is imposed under an Australian law it is an Australian tax, fee or charge.

Division 81

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.

We consider that the fee relates to the provision under an Australian law of a permission or authority (see section 81-10(4) of the GST Act). The payment of the levy relates to the provision or retention of the permission or authority (the car registration). It is a necessary condition of holding the registration, and therefore the permission to drive the vehicle. We accept that in these circumstances the payment relates to the provision of a permission under section 81-10(4) of the GST Act and is therefore not the provision of consideration (see section 81-10(1) of the GST Act).

Under section 81-10(2) of the GST Act it is also necessary to consider whether the payment is prescribed as being treated as the provision of consideration by the GST Regulations.

Fees that are prescribed as being consideration include a toll for driving a motor vehicle on a road (paragraph 81-10.01(b)), a fee or charge for a supply of a non-regulatory nature (paragraph 81-10.01(g)), or 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 (paragraph 81-10.01(h)).

We do not consider that any of these scenarios apply.

The levy is not a fee for driving on a toll road.

The nature of the fee is that it is regulatory, and therefore it is not a fee or charge which is consideration under paragraph 81-10.01(g) of the GST Regulations (which relates to non-regulatory fees or charges). Rather, it is prescribed as not being consideration under paragraph 81-15.01(f) of the GST Regulations (as it is a fee or charge of a regulatory nature).

Furthermore, vehicle registration (of which the Levy is a compulsory component) can only be supplied by the relevant motor vehicle authority (an Australian government agency) and not by any entity that is not an Australian government agency.

As the fee is not consideration for a supply, no taxable supply is made in relation to the Levy.

As the Levy is not consideration under the above reasoning it is unnecessary to consider whether the Levy is also an Australian tax (and therefore not consideration under section 81-5 of the GST Act).

Conclusion

For the reasons provided, the Levy is excluded from being subject to GST by Division 81 of the GST Act.