Edited version of your private ruling

Authorisation Number: 1012521624233

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Ruling

Subject: GST and application of Division 81 of the GST Act

Question

From 1 July 2012, is payment of the fees and charges listed as group A and group B in the table to be treated as not the provision of consideration under Division 81 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) and therefore not subject to GST?

Answer

The GST implications are as follows:

a. Payment of the group A fees and charges that are listed in the A New Tax System (Goods and Services Tax) (Exempt Taxes, Fees and Charge) Determination 2011 (no.1) (Treasurer's Determination) will continue to be exempt from GST up until 30 June 2013.

b. From 1 July 2013, payment of group A fees and charges will be treated as not the provision of consideration for the purposes of section 81-15 of the GST Act. Therefore, payment of these fees and charges are also exempt from GST from 1 July 2013.

c. From 1 July 2012, payment of the group B fees and charges will be subject to GST where all the other requirements of a taxable supply under section 9-5 of the GST Act are satisfied.

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You are an Australian government agency of a particular State and registered for Australian GST purposes.

You have provided a copy of the legislative instruments that impose and prescribe the fees for the services you provide.

You have listed the various fees and charges that are the subject of this ruling.

The fees and charges within group A are collectively specified in the Treasurer's Determination. On this basis, these fees and charges have historically been treated by you as not subject to GST.

The fees and charges within group B are not listed in the Treasurer's Determination and accordingly have historically been treated as subject to GST.

Services you provide for which group A fees or charges are imposed can also be provided by a supplier that is a non-government agency. However, only one party is authorised to provide the services by an appointment order made by the court or tribunal.

Services you provide for which group B fees and charges are imposed may also be provided by other suppliers.

You have no intention to make a profit from the services you provide in relation to group B fees and charges. Overall, group B fees are used to cover most of the expenses or costs, direct and indirect, incurred by you in performing your services. Cost recovery cannot be identified on a case to case basis due to the great variability of the matters dealt with, both in complexity and cost to your organisation. Also, you waive fees and commissions under a variety of circumstances.

You confirm that all group B fees relate to matters included under your statutory functions.

Information contained on your website includes the specified services you provide and indicate you are operating in competition with other suppliers in respect of the same supplies.

Relevant legislative provisions

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

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

A New Tax System (Goods and Services Tax) Act 1999 Section 9-15

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

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

Income tax Assessment Act 1997 Section 995-1

Reasons for decision

In providing advice in this ruling we will address the following issues:

1. Taxable supply

2. Meaning of 'consideration'

3. Australian Tax

4. Australian fee or charges

5. Application of Division 81 and regulations made under the Division

1. Taxable supply

Section 9-40 of the GST Act states that an entity must pay the GST payable on any taxable supply that the entity makes, and section 9-5 provides:

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.

Paragraph 9-5(a) of the GST Act requires that the supply is made for 'consideration'. In this instance, it is relevant to consider whether payment of the fees and charges listed in the tables satisfies the meaning of 'consideration' for GST purposes.

2. Meaning of 'consideration'

Section 195-1 of the GST Act states:

consideration, for a supply or acquisition, means any consideration, within the meaning given by sections 9-15 and 9-17, in connection with the supply or acquisition.

Subsection 9-15(1) of the GST Act provides:

(1) 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 special rules in Division 81 provide for the payment of certain taxes, fees and charges to be treated as not the provision of 'consideration' and for this reason such a payment is exempt from GST.

Section 81-20 of the GST Act states that this Division has effect despite sections 9-15 and 9-17 (which are about consideration).

Accordingly, we need to consider the application of Division 81 to the payment of the relevant fees and charges.

3. Australian Tax

Subsections 81-5(1) and (2) of the GST Act provide:

Australian tax not consideration

(1) 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.

Regulations may provide for exceptions

(2) However, 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 tax that is, or is of a kind, prescribed by the regulations.

Currently, for the purposes of subsection 81-5(2) of the GST Act, the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations) does not prescribe any payment.

Section 195-1 of the GST Act defines an Australian tax to mean a tax (however described) imposed under an Australian law. An Australian law has the meaning given by section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997), which states that an Australian law is a Commonwealth law, a State law or a Territory law.

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

On the facts provided, we consider each of the fees or charges in question does not have the characteristics or features of an Australian tax. Therefore, section 81-5 of the GST Act does not apply. We consider the fees or charges fall within the concept of a 'fee for service' rather than a tax. Accordingly, consideration must be given as to whether the fees or charges listed in the tables are 'Australian fees or charges'.

4. Australian fee or charge

An 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 government agency has the meaning given by section 995-1 of the ITAA 1997 which states that an 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.

As noted, the definition of an Australian fee or charge includes that it is:

· a fee or charge (however described), other than an Australian tax

· imposed under an Australian law

· payable to an Australian government agency.

On the facts provided, we consider the relevant fees and charges are imposed and prescribed by state laws and payable to you a state government agency.

Accordingly, we consider the relevant fees and charges are imposed by an Australian law and payable to an Australian government agency. As the fees and charges are also determined earlier in this ruling as not an Australian tax, each of these fees and charges satisfies the definition of an 'Australian fee or charge' for GST purposes.

Having determined that each of the relevant fees or charges is an Australian fee or charge, we need to consider the application of Division 81 of the GST Act to the fees or charges.

5. Application of Division 81 and the GST Regulations to fees and charges

Fees and charges within group A:

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.

Under the transitional arrangements, those Australian taxes, fees and charges that were not subject to GST under the Treasurer's Determination remain not subject to GST until 30 June 2013 and thereafter will be assessed under Division 81 of the GST Act as amended.

The GST treatment of all Australian taxes or Australian fees or charges that were not listed in the Treasurer's Determination will be self assessed under the changes made to Division 81 of the GST Act with effect from 1 July 2011.

Prior to 1 July 2013

On the facts provided, all of the fees within group A are specified in the Treasurer's Determination. Accordingly, these fees will continue to be exempt from GST up until 30 June 2013.

From 1 July 2013:

Sections 81-10 and 81-15 of the GST Act consider the effect of certain fees and charges, and state:

81-10 Effect of payment of certain fees and charges

Certain fees and charges not consideration

(1) 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 subsection (4) or (5).

Prescribed fees and charges treated as consideration

(2) However, 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 regulations.

(3) For the purposes of subsection (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.

Fees or charges paid for permissions etc.

(4) This subsection covers a fee or charge if the fee or charge:

(a) relates to; or

(b) relates to an application for;

the provision, retention, or amendment, under an *Australian law, of a permission, exemption, authority or licence (however described).

Fees or charges relating to information and record-keeping etc.

(5) This subsection covers a fee or charge paid to an *Australian government agency if the fee or charge relates to the agency doing any of the following:

(a) recording information;

(b) copying information;

(c) modifying information;

(d) allowing access to information;

(e) receiving information;

(f) processing information;

(g) searching for information.

81-15 Other fees and charges that do not constitute consideration

The regulations may provide that the payment of a prescribed *Australian fee or charge, or of 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.

On the facts provided, we consider payment of the fees for the specified services is not of the kind covered by subsections 81-10(4) or (5) of the GST Act. Accordingly, payment of these fees or charges would not be excluded from being consideration by subsection 81-10(1) and will potentially make the impost subject to GST in accordance with the normal GST rules. This is unless section 81-15 applies.

Regulation 81-15.01 of the GST Regulations is effective from 1 July 2012. Regulation 81-15.01 sets out those fees and charges that are prescribed for section 81-15 of the GST Act and which do not constitute consideration.

The explanatory statement to the A New Tax System (Goods and Services Tax) Amendment Regulation 2012 (No. 2) (the Explanatory Statement) states:

Item [4] - regulation 81-15.01

Regulation 81-15.01 prescribes fees and charges for the purposes of section 81-15 of the Act. The fees and charges prescribed in regulation 81-15.01 are regulatory in nature and are considered to fall within the principles contained in the Intergovernmental Agreement and are therefore intended to be exempt from GST.

The payment of fees and charges of a kind prescribed by regulation 81-15.01 are not the provision of consideration and therefore do not give rise to a taxable supply. The regulation adds to the kinds of fees and charges that are already made exempt from

GST under the operation of subsections 81-10(4) and (5) of the Act.

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.

In some instances, although the consumer acquires something that may be of intrinsic value to the consumer, the acquisition is made in the context of satisfying a regulatory requirement of an Australian law....

However, if both regulations 81-15.01 and 81-10.01 of the GST Regulations apply, then regulation 81-15.02 provides for a tie-breaking decision.

Regulation 81-10.01

Of relevance is paragraph 81-10.01(1)(h) of the GST Regulations which states 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'.

The policy intention in relation to paragraph 81-10.01(1)(h) of the GST Regulations is explained in the Explanatory Statement:

This paragraph ensures that the regulatory activities of government made in competition with the private sector are subject to GST where the other requirements of section 9-5 of the Act are satisfied.

Fees and charges in this category are not excluded from being consideration for a taxable supply. This is consistent with the National Competition and Consumer

Policy guidelines and ensures that a government entity is not given a competitive advantage over a private sector supplier making the same type of supply.

This covers situations in which government agencies have authorised private agencies to perform activities that form part of a regulatory process, for example, certification activities which are required for a regulatory process to be followed. Where government agencies, as well as government certifiers, have authorised private certifiers to perform certification activities these fees and charges will continue to be consideration for a supply that is subject to GST. This ensures competitive neutrality between supplies made by government and non-government agencies.

This paragraph applies only where a government agency is providing a supply in a competitive market, or where private suppliers have been accredited or authorised to make a supply over which the agency would otherwise have a monopoly.

You can only be appointed to as manager to provide the specified services by way of an order made by the specified court or tribunal. In certain cases a private manager may be appointed to the role.

In accordance with the policy intention, we consider that although the supply of the specified services can be provided by either you on appointment or the appointed private manager, we do not consider either party will be making the supply in competition with the other.

Accordingly, we consider paragraph 81-10.01(1)(h) of the GST Regulations does not apply to the fees within group A.

Regulation 81-15.01

Paragraph 81-15.01(1)(f) of the GST Regulations is relevant for consideration. The paragraph refers to 'a fee or charge for a supply of a regulatory nature made by an Australian government agency'.

The term 'regulatory nature' is not defined in the GST Regulations or the GST Act. As stated earlier, the 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.

In this case, your appointment as the manager to supply the specified services is made under state law. Accordingly, we consider you are legislatively empowered to make the specified services and the supply of the services is to satisfy a regulatory purpose. As paragraph 81-15.01(1)(f) of the GST Regulations applies, the payment of the fees within group A is not the provision of consideration for the purposes of section 81-15 of the GST Act. Therefore, these fees or charges are exempt from GST from 1 July 2013.

Fees and charges within group B:

On the facts provided, we consider payment of the fees for trustee services is not of the kind covered by subsections 81-10(4) or (5) of the GST Act. Accordingly, payment of these fees or charges would not be excluded from being consideration by subsection 81-10(1). This is unless section 81-15 of the GST Act, which provides for fee and charges that do not constitute consideration, applies.

Regulation 81-15.01

As stated earlier, regulation 81-15.01 of the GST Regulations is effective from 1 July 2012, and under this regulation certain kinds of Australian fees or charges are prescribed as not constituting consideration.

Of relevance is paragraph 81-15.01(1)(f) of the GST Regulations which prescribes for 'a fee or charge for a supply of a regulatory nature made by an Australian government agency'.

In this case, the provision of your services is made and prescribed under state law. Accordingly, we consider the fees or charges for the relevant services would potentially be exempt from GST by virtue of paragraph 81-15.01(1)(f) of the GST Regulations. However, we need to consider if regulation 81-10.01 applies for the fees or charges to be treated as consideration.

Regulation 81-10.01

It is relevant to consider paragraph 81-10.01(1)(h) of the GST Regulations. As stated earlier, the paragraph states that a payment of a fee or charge is treated as the provision of consideration to the extent the payment is, or is of a kind, 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.

The Explanatory Statement in relation to paragraph 81-10.01(1)(h) of the GST Regulations, as referred to earlier in this ruling, includes that this paragraph applies only where a government agency is providing a supply in a competitive market.

Information contained on your website includes that the supplies you make in respect of the specified services are in competition with other professionals in the private sector who also make these supplies. Other information on your website confirms that you are in competition as the website information explains why you should be selected instead of your competition.

Based on the information contained on your website, we consider you are providing your specified services in a competitive market and paragraph 81-10.01(1)(h) of the GST Regulations applies. Therefore, payment of these fees or charges will be treated as the provision of consideration under subsection 81-10(2) of the GST Act.

Regulation 81-15.02

As both regulations 81-10.01 and 81-15.01 of the GST Regulations apply to the relevant fees and charges, we need to consider the application of regulation 81-15.02:

81-15.02 Fees and charges covered by regulations 81-10.01 and 81-15.01

(1) The payment of a fee or charge covered by both paragraph 81-10.01(1)(g) and regulation 81-15.01, or the discharge of a liability to pay the fee or charge, is not to be treated as the provision of consideration.

(1) The payment of a fee or charge covered by both paragraph 81-10.01(1)(a), (b), (c), (d), (e), (f) or (h) and regulation 81-15.01, or the discharge of a liability to pay the fee or charge, is to be treated as the provision of consideration.

In this instance, as both paragraphs 81-10.01(1)(h) and 81-15.01(1)(f) of the GST Regulations apply to the relevant fees or charges we consider payment of the fees or charges within group B is to be treated as the provision of consideration. This means that the relevant fees or charges will be subject to GST where all the other requirements of a taxable supply under section 9-5 of the GST Act are satisfied.

In your submission you made reference to paragraph 81-15.01(1)(d) of the GST Regulations in relation to the specified services provided by you.

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 is a prescribed fee for the purpose of subsection 81-15 of the GST Act. Under section 81-15 a prescribed fee or charge is not the provision of consideration.

The Explanatory Statement explains:

Fees and charges imposed to compensate an Australian government agency for costs in undertaking regulatory activities

Item [4] - paragraph 81-15.01(1)(d)

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.

Under paragraph 81-15.01(1)(d) of the GST Regulations, the fee or charge must be for services that are undertaken for regulatory activities and the fee for these services is provided on a cost recovery basis.

In considering whether the requirements of paragraph 81-15.01(1)(d) of the GST Regulations are satisfied, we have taken into account the provisions in the relevant state law and your submission. We are unable to determine definitively whether the relevant fees and charges for the specified services satisfy paragraph 81-15.01(1)(d).

Notwithstanding the above, we consider that if the relevant fees or charges were to satisfy paragraph 81-15.01(1)(d) of the GST Regulations, the application of subregulation 81-15.02(2) would also apply to treat the payment as the provision of consideration.