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Edited version of private advice
Authorisation Number: 1012626030857
Ruling
Subject: GST and appropriation
Question
Do payments made by the Department to schools satisfy subparagraph 9-17(3)(b)(i) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
No, payments made by the Department to schools do not satisfy subparagraph 9-17(3)(b)(i) of the GST Act.
Relevant facts and circumstances
The Department is registered for goods and services tax (GST).
The Department makes payments to schools to deliver education to students.
The payments are made under a Ministerial Order and not made pursuant to the Department's Annual Appropriation. The Department does not get any funds from the Consolidated Revenue Fund for this purpose. It merely distributes the fees as set out in the Ministerial Order.
The Ministerial Order is issued by the Minister pursuant to an Act.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 subparagraph 9-17(3)(b)(i)
Reasons for Decision
Subparagraph 9-17(3)(b)(i) of the GST Act provides that the payment must be covered by an appropriation under an Australian law.
Relevant guidance is contained in the Explanatory Memorandum to the Tax and Superannuation Laws Amendment (2012 Measures No.1) Bill 2012 (EM). In particular, paragraph 2.17 of the EM explains that a payment is covered by an appropriation under an Australian law if the payment is made pursuant to an appropriation.
Paragraph 2.18 of the EM provides that the payment need not be 'specifically covered' by an appropriation under an Australian law.
Paragraph 2.19 of the EM further explains that for subparagraph 9-17(3)(b)(i) of the GST Act to be satisfied, the government related entity supplier does not need to be specified under the terms of the appropriation, either by name, or as part of a class of government related entities. The subparagraph will be satisfied where the terms of the appropriation state the purpose for which funds are appropriated, rather than the entities to which the funds can be paid. A payment will, therefore, be covered by an appropriation if the terms of the appropriation authorise the payment to be made.
In this case, the Department makes payments to pursuant to the Ministerial Order which the Minister issues pursuant to the Act. The payments are not made from an appropriation fund. The payments are not made pursuant to the Department's Annual Appropriation and Consolidated funds.
It is the ATO's view that as the payments to the schools are made from fees that are paid by the students and not from the Department's Annual Appropriation and Consolidated funds, the payments are not covered by an appropriation under an Australian law. As such, subparagraph 9-17(3)(b)(i) of the GST Act is not satisfied.