Edited version of your private ruling

Authorisation Number: 1012501164149

Ruling

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

Question

Are payments of the specified taxes, fees and charges imposed from 1 July 2013 excluded from GST because of the application of Division 81 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes. The payments of the following taxes, fees or charges are excluded from GST because of the application of Division 81 of the GST Act.

Relevant facts and circumstances

You are a government entity and registered for GST.

You are seeking a ruling in relation to specified taxes, fees and charges that you impose from 1 July 2013.

Relevant legislative provisions

A New Tax System (Goods and services Tax) Act 1999 Section 9-5,

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

A New Tax System (Goods and services Tax) Act 1999 Section 9-40,

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 81-10.01,

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)(c) ,

A New Tax System (Goods and Services Tax) Regulations 1999 Paragraph 81-10.01(1)(d),

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

Income Tax Assessment Act 1997 Section 995-1.

Reasons for decision

In this Ruling, unless otherwise stated, all legislative references are to A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

Section 9-40 provides that you must pay the GST payable on any taxable supply that you make.

Section 9-5 provides 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.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

Section 9-39 provides special rules in relation to making taxable supplies. In particular, item 8 in the table in section 9-39 provides that where there is a payment of taxes, fees and charges the special rules in Division 81 may apply.

Division 81

Section 81-5 considers the effect of the payment of a tax and 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 tax.

Subsection 81-10(1) considers the effect of the payment of certain fees and charges and 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).

However, subsection 81-10(2) provides that a payment you make, or a discharging of your 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, or is of a kind, prescribed by the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations). Subsection 81-10(3) provides that for the purposes of subsection 81-10(2), 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 you.

Subsection 81-10(4) 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) covers a fee or charge paid to an Australian government agency if the fee or charge relates to the agency recording, copying, modifying, allowing access to, receiving, processing or searching for information.

The terms 'Australian tax' and 'Australian fee or charge' are defined in section 195-1 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 law' and 'Australian government agency' are defined in section 195-1 to have the meaning given by section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) which states:

Australian law means a Commonwealth law, a State law or a Territory law.

Australian government agency means:

(a) the Commonwealth, a State or a Territory; or

(b) an authority of the Commonwealth or of a State or a Territory.

Australian Government Agency

Guidance on what is an Australian government agency is provided in Payments to government agencies under Division 81 available on www.ato.gov.au. The guidance states that 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).

The entities satisfy the definition of Australian government agency in section 195-1 and section 995-1 of the ITAA 1997.

Each of the fees specified is imposed by the law of the State. That is, imposed under an Australian Law.

Australian Tax

'Tax' is not defined in the GST Act. However, the following is the usual description of a tax, as cited in the High Court case of Roy Morgan Research Pty Ltd v. CMR of Taxation [2011] HCA 35 (Roy Morgan), as per Latham CJ in Matthews v. Chicory Marketing Board (Vict ) (1938) 60 CLR 263.

...a compulsory exaction of money by a public authority for public purposes, enforceable by law, and is not a payment for services rendered...

The above description includes the words 'not a payment for services rendered'. It was discussed in Air Caledonie International v. Commonwealth (1988) 165 CLR 462 that in order to be classified as a fee for service rather than a tax, the fee or charge must be exacted for particular identified services provided or rendered individually to, or at the request or direction of, the particular person required to make the payment.

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 include: income tax, stamp duty, fringe benefits tax, payroll tax, the Medicare Levy, local government 'ordinary rates' and various industry levies.

We do not consider that any of the payments or the discharging of a liability to make such payments of the fees as listed by you are payment of taxes.

The entities satisfy the definition of Australian government agency in section 995-1 of the ITAA 1997. Also, the fees or charges are imposed under an Australian law and are payable to an Australian government agency. As such, the fees or charges are Australian fees or charges.

We will consider whether section 81-10 or the relevant GST Regulations apply to the listed fees or charges.

We consider the first list of specified fees and charges relate to or relate to an application for the provision, retention or amendment, under an Australian Law, of a permission, exemption, authority or license (however described).

We consider that the second list of specified fees and charges do not constitute consideration as they relate to a payment of a prescribed Australian fee or charge, or an Australian fee or charge of a prescribed kind, or the discharging of a liability to make such a payment, in the GST Regulations.

Fees and Charges

Permission, exemption, authority or license

Paragraph 4.27 of the Explanatory Memorandum to the Tax Laws Amendment (2011 Measures No. 2) Act 2011 includes but is not limited to the following examples of fees and charges that are covered by subsection 81-10(4):

· 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, pilots' licences, heavy vehicle drivers' licences and adjustments to such licences); and

· regulatory charges imposed to undertake an activity (for example, compulsory testing fees for regulatory purposes, compulsory inspection fees for regulatory purposes, a permit for restaurants to occupy the footpath, and a licence for an event to close roads).

We consider the following payments, or the discharging of a liability to make such payments, specified are for the provision, retention, or amendment, under an Australian law, of a permission, exemption, authority or licence.

The supplying entity requires the payment of these fees and charges in relation to applications for the permission, exemption, authority or licence which allow particular activities.

The supplying entity requires the payment of these fees in relation to applications for the permission, exemption, authority or license which allow particular activities in relation to a particular activity.

The supplying entity requires the payment of these fees and charges in relation to applications for the permission, exemption, authority or licence which allow particular activities.

The supplying entity requires the payment of these fees and charges in relation to applications for the permission, exemption, authority or licence which allow the carrying out particular activities.

The supplying entity requires the payment of these fees and charges in relation to applications for the permission, exemption, authority or licence which allow a license in respect of an activity.

On this basis, the fees and charges specified are covered by subsection 81-10(4) of the GST Act.

Subsections 81-10(2) and (3) narrow the operation of subsection 81-10(1) by treating payment of the fees or charges that are prescribed in regulation 81-10.01 of the GST Regulations as the provision of consideration for a supply.

Sub-Regulation 81-10.01(1) of the GST Regulations makes payment of fees or charges that would otherwise be exempt from GST under the operation of subsections 81-10(4) and (5), potentially made for consideration and may give rise to taxable supplies.

We consider the fees or charges prescribed in sub-regulation 81-10.01(1) of the GST Regulations do not apply to the fees or charges specified. Therefore, subsection 81-10(2) does not apply to treat these fees as the provision of consideration and the fees do not give rise to taxable supplies.

Fees and charges that do not constitute consideration

Pursuant to section 81-15 the GST Regulations may provide that the payment of a prescribed Australian fee or charge, or 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.

Regulation 81-15.01 of the GST Regulations prescribes fees and charges for the purposes of section 81-15. This regulation adds to the kinds of fees and charges that are made exempt from GST under subsections 81-10(4) and (5).

We consider the following fees do not constitute consideration.

Fees and charges imposed on industries and intended to finance regulatory or other government activities connected with the industry

Paragraph 81-15.01(1)(c) of the GST Regulations provides that payment of a fee or charge will not be for consideration where the fee or charge is imposed on an industry to finance regulatory or other government activities connected with the industry.

The Explanatory Statement to the A New Tax System (Goods and Services Tax) Amendment Regulation 2012 (No. 2) discussed paragraph 81-15.01(1)(c) of the GST Regulations and states:

This paragraph ensures that fees and charges imposed on industries to finance related regulatory or other government activities are not treated as the provision of consideration and therefore do not give rise to taxable supplies.

These fees and charges are not paid for the provision of specific supplies. Rather, they are a compulsory impost on particular industries for which no specific supply is provided in return. This treatment is consistent with the Intergovernmental Agreement as they are regulatory charges that do not relate to particular goods or services.

The specified fee or charge payable to the entity is covered by paragraph 81-15.01(1)(c) of the GST Regulations as the fee paid to the entity is a fee imposed on an industry to finance regulatory or other government activities connected with the industry.

The specified fee or charge, payable to the supplying entity is covered by paragraph 81-15.01(1)(c) of the GST Regulations as the fee paid to the supplying entity is a fee imposed on an industry to finance regulatory or other government activities connected with the industry.

The specified fee or charge paid by a license holder to the entity is covered by paragraph 81-15.01(1)(c) of the GST Regulations as the fee paid to the entity is a fee imposed on an industry to finance regulatory or other government activities connected with the industry.

As such, the payment of these fees or charges will not be the provision of consideration under section 81-15 and therefore will not give rise to taxable supplies.

On this basis, the fees and charges specified are covered by section 81-15.

Conclusion

The payments of the fees and charges that are specified first are covered by subsection 81-10(4). Accordingly, subsection 81-10(1) applies to treat these payments as not the provision of consideration. Therefore, the payments of these fees or charges will be excluded form GST under division 81.

The payments of the fees and charges that are specified second are covered by regulation 81-15.01 of the GST Regulations. Accordingly, section 81-15 applies to treat these payments as not constituting consideration. Therefore, the payments of these fees or charges will be excluded from GST under division 81.