Edited version of your written advice

Authorisation Number: 1051304682010

Date of advice: 17 November 2017

Ruling

Subject: GST and entrance fees to a waste facility

Question

Is the entrance fee to a waste facility (Facility) consideration for a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes, the entrance fee to the Facility is consideration for a taxable supply under section 9-5 of the GST Act. Therefore, you are liable to pay GST on the supply.

The full amount of the entrance fee (without reduction for any part thereof which you have determined is for the recovery of an amount payable by you as a levy under a State environment protection law (EP Act)) is consideration for the supply of allowing a customer to use the Facility to dispose of waste.

Relevant facts and circumstances

You are a local government entity and you are registered for GST.

You operate the Facility, which includes a landfill site, where you receive and process dry waste from council, commercial and domestic customers.

The Facility is a waste facility to which the EP Act applies, which requires you to pay a levy to the State Environment Protection Authority (EPA levy).

You make taxable supplies of allowing customers to use the Facility to dispose of waste.

You charge customers GST-inclusive entrance fees to the Facility.

You determine your entrance fees in a way that takes into account the recovery of amounts payable by you as a levy to the EPA.

The amounts payable by you as a levy to the EPA do not include GST.

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 9-15

A New Tax System (Goods and Services Tax) Act 1999 section 9-17

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 section 195-1

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

Reasons for decision

All legislative references are to the GST Act unless otherwise stated.

Section 9-40 provides that an entity must pay GST on any taxable supply that it makes.

Under section 9-5, an entity makes a taxable supply if:

● the entity makes the supply for consideration

● the supply is made in the course or furtherance of an enterprise that the entity carries on

● the supply is connected with the indirect tax zone (being Australia with some exclusions), and

● the entity is registered or required to be registered for GST.

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

If all of the requirements of section 9-5 are satisfied, a supplier is making a taxable supply and is liable to pay GST, unless the supply is GST-free or input taxed.

The first requirement of a taxable supply to be satisfied is that there is a supply for consideration.

The term ‘consideration’ is defined in section 195-1 as having the meaning given in sections 9-15 and 9-17. Section 9-15 provides that consideration includes any payment. In transactions involving money only, the consideration is the amount of the payment (without any discount for the amount of GST (if any) payable on the supply).

In your case, you make taxable supplies of allowing customers to use the Facility to dispose of waste. You determine your entrance fees in a way that takes into account the recovery of amounts payable by you as a levy to the EPA.

You have asked us to examine if the way in which you determine your entrance fees, by taking into account the cost of the EPA levy payable by you, has the effect of reducing the consideration for the taxable supplies you make to an amount that is less than the full amount of the entrance fee you charge.

In particular, you have asked us to examine if Division 81, which is about payments of Australian taxes, fees and charges that are excluded from the GST, is relevant to ascertaining the amount of the entrance fee which is treated as the consideration for your supplies.

Division 81

Special rules in Division 81 apply to the payment (or the discharging of the liability to make a payment) of certain Australian taxes, fees and charges, to an Australian government agency by an entity which is liable for the tax, fee or charge under the provisions of the applicable Australian law. The payment of amounts to which Division 81 applies is treated as not being the provision of consideration and is not subject to GST.

In your case, you are required to pay the EPA levy under the EP Act. Your liability to pay this amount arises in relation to the application of this Australian law to your operation of the Facility.

Division 81 does not apply to an amount, for the recovery of a tax, fee or charge, which is included in the final price charged to customers for a supply by an entity which is legally liable for the tax, fee or charge. The final price of a good or service typically reflects the costs that go into producing it. The costs can be affected by many factors, including taxes, fees and charges for which an entity is liable.

Division 81 does not apply to the amount you have determined as being for the recovery of your costs of the EPA levy, which you include in the final price you charge customers for use of the Facility.

Your customers are not liable for the EPA levy. Determining your entrance fees in a way that takes into account the recovery of this amount for which you are liable does not make your customers liable under that Australian law. Therefore, your method of determining your entrance fees does not have the effect of passing on this legal liability to your customers. The EPA levy is a cost to you of doing business.

Therefore, Division 81 does not apply to your cost of the EPA levy in doing business, which you take into account in determining your entrance fees and is not relevant to ascertaining the amount of the consideration for your supplies.

Consideration for a supply

In further examining the GST treatment of the entrance fees you charge as consideration for a supply, relevant guidance is provided in Goods and Services Tax Determination GSTD 2000/10 Goods and services tax: are outgoings payable by a tenant under a commercial property lease part of the consideration for the supply of the premises? (GSTD 2000/10).

In particular, paragraph 7 of GSTD 2000/10 explains that, if a single supply is made under the lease, the payment of the outgoings by the tenant is not a payment for a supply that has the same character as the supply made by a third party to the landlord. Paragraphs 8 and 9 discuss circumstances where a supply to the landlord is not subject to GST because of Division 81 and state:

8. Payment by the landlord of local council rates, land tax or other charges may not be subject to GST because of the operation of Division 81. If the tenant is required under the terms of the lease to reimburse the landlord’s expenditure of an Australian tax or an Australian fee or charge under Division 81 of the GST Act, this is not the payment of an Australian tax or an Australian fee or charge by the tenant. Division 81 of the GST Act does not apply to the tenant’s reimbursement of the rates, land tax or other charges.

9. If the tenant makes payment directly to the entity levying the tax, fee or charge, this payment will be consideration for the supply of the premises not payment for a supply that the entity levying the tax, fee or charge makes to the tenant. Therefore Division 81 does not apply to payments for the supply by a landlord under a lease and the payment of the tax, fee or charge by the tenant forms part of the consideration for the supply of the premises.

In your circumstances, it is considered the principle contained in this guidance in GSTD 2000/10 applies so that the full amount of the entrance fee received from customers (without reduction for any part thereof which you have determined is for the recovery of the levy payable by you to the EPA) is consideration for the supply of allowing customers to use the Facility to dispose of waste.

Therefore, the entrance fee is the consideration for the taxable supply you make and you are liable to pay GST on the supply.

Additional information

Subsection 81-10(2) provides that a fee or charge may be prescribed by the regulations as being a fee or charge that constitutes consideration. Fees for the use of a waste disposal facility are covered by paragraph 81-10.01(1)(d) of the A New Tax System (Goods and Services Tax) Regulations 1999. This means that payment of the entrance fee is specifically treated as consideration for a supply.