Edited version of your private ruling

Authorisation Number: 1012590058847

Ruling

Subject: GST and the supply of a referral service

Question

Is your supply a taxable supply for the purposes of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes

Relevant facts and circumstances

You are registered for GST and were established under a state Act (the Act). You are a statutory corporation, wholly owned by a state Government.

You are carrying out the relevant business or functions that would otherwise be carried out by the State. You intend to operate a program and advised that you intend to offer a referral service to your customers having specified problems.

For each referral you will charge a set referral fee. You have advised that the fee does not satisfy the definition of an Australian fee or charge under the GST Act.

You have not provided this service or undertaken this activity before and the fees described are not currently listed as exempt in the A New Tax System (Goods and Services Tax)(Exempt Taxes, Fees and Charges) Determination 2011 (No 1) (Cth) (the Determination).

You supplied a draft Referral Deed which specifies the agreement between yourself and the Entity.

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.

Reasons for decision

In this ruling, please note that unless otherwise stated:

· all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

· all terms marked with an asterisk are a defined in section 195-1 in the GST Act.

Goods and Services Tax (GST) is payable on taxable supplies. 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, a supply is not a taxable supply to the extent that it is GST-free or input taxed.

In your case:

§ you are supplying a referral service to an Entity for a payment

§ the supply is made in the course of your enterprise and is connected with Australia

§ you are registered for GST.

In addition, this supply will not be input taxed or GST free.

Therefore your supply will be a taxable supply unless the payment you receive is exempted by Division 81 of the GST Act.

Division 81, subject to the relevant regulations, sets out when certain payments to Australian government agencies are, or are not the provision of consideration. The application of this Division must be considered in your circumstances.

When 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.

In particular section 81-5 of the GST Act provides when the payment of an Australian tax is not consideration, and section 81-10 of the GST Act provides when the payment of certain fees and charges is not consideration.

Regulations pursuant to Division 81 of the GST Act 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).

As a starting point, it is necessary to determine whether the payments described meet the specific requirements of an Australian tax or an Australian fee or charge before the further substantive requirements of Division 81 of the GST Act and the regulations made under Division 81 of the GST Act can be considered. We note that you have advised that the fee does not satisfy the definition of an Australian fee or charge.

Taxes (Section 81-5)

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 that 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 the referral fee does not have the characteristics or features of an Australian tax.

Fees and charges (Section 81-10) and Australian Government Agency

An Australian fee or charge is a fee or charge (however described), imposed under an Australian law and payable to an Australian government agency. (See section 195-1 of the GST Act).

As previously explained an Australian law means a Commonwealth, State or Territory Law. Australian government agency means the Commonwealth, a State or Territory, or an authority of the Commonwealth or of a State or Territory, or a body established by the Commonwealth, a state or a territory to carry on activities established for a public purpose by an Australian law.

In your case you are a statutory authority established by a state law to carry out the functions that would otherwise be carried out by the State.

Therefore we accept that you meet the definition of an Australian government agency for the purposes of Division 81 of the GST Act.

You have advised us that the fee charged does not satisfy the definition of an Australian fee or charge for the purposes of the GST Act. If the referral fees do not satisfy the definition of an Australian fee or charge because they are not imposed under an Australian law, Division 81 can have no application. Therefore your referral service will be a taxable supply and you will be liable for GST on the supply.

However for completeness we will explain how a fee or charge of this nature would be treated if it was imposed under an Australian law.

Subsection 81-10 (1) provides that a payment is not consideration to the extent that it is a fee or charge that is of a kind prescribed in subsections (4) and (5).

Subsection 81-10 (4) relates to fees or charges paid for permissions.

Subsection 81-10 (5) relates to fees or charges paid for information and record keeping.

In your case your fees are not for permissions or information and record keeping therefore the fees you charge are not excluded from being consideration under these sections.

Subsection 81-10 (2) provides that a payment for a fee is consideration to the extent that it is prescribed in the regulations and section 81-15 provides that the regulations may provide that payment of a prescribe fee or charge is not the provision of consideration.

Regulation 81-15-01 provides a 'list' of prescribed fees and charges which do not constitute consideration. Based on the facts you have provided your referral fee does not match any of these.

Paragraph 81-10.01(1)(g) of the GST Regulations provides that a fee or charge for a supply of a non-regulatory nature constitutes consideration.

The policy intention in relation to paragraph 81-10.01(1)(g) of the GST Regulations is explained in the A New Tax System (Goods and Services Tax) Amendment Regulation 2012 (No. 2) (Explanatory Statement):

This paragraph ensures that the non-regulatory activities of government are subject to GST. This paragraph applies to supplies of goods and services for which fees are imposed where the consumer is provided with something that lacks a regulatory character. That is, the fee or charge does not arise under an Australian law which is intended, for example, to regulate behaviour, ensure consumer protection and ensure compliance with certain standards. The paragraph applies even though it may be the sole responsibility of a government agency to supply the goods or services for which the fees are imposed, and such supplies are in the public interest.

The following are examples of fees and charges that do not have a regulatory character:

· A fare charged for travel on a transportation service;

· A fee paid by the media to a council for immediate access to traffic information; and

· A fee charged for exclusive rights to a mausoleum or burial plot.

Note: some fees and charges covered by this regulation may also be covered by other regulations made for subsection 81-10(2) of the Act.

As your referral fees are not of a regulatory nature we consider that your fee, if imposed under an Australian law would satisfy paragraph 81-10.01 (g) of the GST Regulations. Therefore the payment of this fee is the provision of consideration under subsection 81-10(2). Accordingly this fee is not exempted by Division 81 and your referral fees will be consideration for taxable supplies.