Edited version of private advice

Authorisation Number: 1052027566036

Date of advice: 30 August 2022

Ruling

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

Question

Is the payment of fees and charges imposed by Entity A, 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 is exempt from GST?

Answer

No.The payment of the fees and charges imposed by Entity A is consideration for a taxable supply as the requirements of section 9-5 of the GST Act are met.

This ruling applies for the following period:

30 August 2022 to 30 June 2027

The scheme commences on:

30 August 2022

Relevant facts and circumstances

You are an Australian government agency and you are registered for GST.

You are governed by and operate under various statutes.

You are appointed by court or tribunal order to provide financial management services to people with impaired decision-making capacity.

You impose various fees with respect to the services you provide. The fees are imposed in accordance with certain statutes.

The financial management services you provide encompass personal financial administration, asset management, taxation services, property services, investment services and additional related services.

The services you provide can also be provided by individuals and non-government agencies.

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 Division 81

A New Tax System (Goods and Services Tax) Regulations 2019 Division 81

Reasons for decision

Under section 9-40 of the GST Act you must pay the GST payable on any taxable supply that you make. However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

The GST-free and input taxed provisions set out in Divisions 38 and 40 of the GST Act are not applicable to the supplies (financial management services) which are the subject of this private ruling.

The term 'supply' is defined in section 9-10 of the GST Act as 'any form of supply whatsoever' and includes amongst other things, a supply of services, a provision of advice or information and would include the supply of financial management services.

Subsection 9-15(1) of the GST Act provides that consideration includes any payment, or any act or forbearance, in connection with, in response to or for the inducement of a supply of anything.

The definition of consideration in section 9-15 of the GST Act is so broad that it would include the fees and charges you charge for the supply of financial management services.

On the facts provided, your supply of financial management services would satisfy all the requirements of section 9-5 of the GST Act and as such would be taxable supplies. This would be the case unless Division 81 of the GST Act comes into operation to preclude the fees and charges in question from being the provision of consideration.

The Tax Laws Amendment (2011 Measures No 2) Bill 2011 (Explanatory Memorandum) sets out the basic policy understanding of parliament in substituting the new Division 81 in 2011. It states at 4.6 that when the GST was introduced, the Commonwealth, States and Territories agreed that the GST would apply to the commercial activities of government at all levels and the non-commercial activities of government would be outside the scope of the GST.

The Explanatory Memorandum at 4.7 provides that under the Intergovernmental Agreement on Federal Financial Relations (IGA) the Parties agreed that Division 81 of the GST Act will exempt Australian taxes, fees and charges from GST where taxes are in the nature of a compulsory impost for general purposes and compulsory charges by the way of fines or penalties. Also, regulatory charges that do not relate to particular goods or services will be exempt from GST.

Subsection 81-10(1) of the GST Act relevantly 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) of the GST Act.

Subsection 81-10(4) of the GST Act covers a fee or charge if the fee or charge 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) of the GST Act 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:

•                    recording information

•                    copying information

•                    modifying information

•                    allowing access to information

•                    receiving information

•                    processing information, and

•                    searching for information.

The fees and charges for your supply of financial management services are not in relation to a permission, exemption, authority or licence as set out in subsection 81-10(4) of the GST Act or to the services listed in subsection 81-10(5) of the GST Act and therefore section 81-10 of the GST Act does not apply to you.

Section 81-15 of the GST Act provides that where a fee or charge is prescribed by regulation, the payment of the fee or charge is not treated as the provision of consideration. Accordingly, a supply to which the fee or charge may relate will not be subject to GST.

Section 81-15 of the GST Act refers to the A New Tax System (Goods and Services Tax) Regulations 2019 (GST Regulations). The GST Regulations provide that the non-regulatory activities of government are subject to GST. Regulation 81-15.01 of the GST Regulations sets out those fees and charges that are expressly excluded from being the provision of consideration for a supply. Relevant to your circumstance is paragraph 81-15.01(f) of the GST Regulation which states:

"a fee or charge for a supply of a regulatory nature made by an Australian government agency"

The meaning of the term 'regulatory' is not defined in the GST Regulations or the GST Act. The Explanatory Statement to the A New Tax System (Goods and Services Tax) Amendment Regulation 2012 (No.2) (ES) 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. The ES refers to regulatory activities of the government as those for example to regulate behaviour, ensure consumer protection and ensure compliance with certain standards.

You submit that you are appointed to supply financial management services under statute and therefore you are "legislatively empowered to provide financial management services, and as such, the supply of the services is to satisfy a regulatory purpose".

You further submit that the fees you impose "are not subject to GST, as the fees satisfy the definition of an Australian fee or charge, the supply of financial management services are of a regulatory nature, and the Public Trustee is an Australian government agency".

We disagree with your submissions that the supply of financial management services is of a regulatory nature. Generally, financial management services like financial advice and administration, taxation services, property services undertaken by an entity as part of its enterprise are regular commercial activities of that entity. These services are not regulatory in nature as the supply of these financial management services do not serve to regulate behaviour.

Your appointment as administrator or manager under statute does not of itself change the nature of these financial management services to make them regulatory in nature. Further, government regulation of prices for a service does not of itself mean that the fee or charge is for a supply that is regulatory in nature.

The Explanatory Memorandum in discussing the policy intent of Division 81 of the GST Act states that when GST was introduced, the Commonwealth, States and Territories agreed that the GST would apply to the commercial activities of government at all levels and only the non-commercial activities of government would be outside the scope of the GST.

We consider that the financial management services you provide are commercial activities that you undertake as part of your enterprise. This is despite the fact that in certain cases you are appointed by court or tribunal order to provide the financial management services.

Based on the above, we do not consider that your supply of financial management services would constitute 'a supply of a regulatory nature' as required by paragraph 81-15.01(f) of the GST Regulations. Therefore, the payment of fees and charges for your supply of financial management services do not meet the requirements of Division 81 of the GST Act. On this basis, as the requirements of section 9-5 of the GST Act are met, the supply of financial management services by you as set out in Table A will be taxable supplies.