Edited version of private advice

Authorisation Number: 1052097586700

Date of advice: 21 March 2023

Ruling

Subject: GST - excess passed on

Question 1

Are fees for the supply of additional bins to individual ratepayers exempt from GST under section 81-15 of the GST Act and regulation 81-15.01(a)(ii) of the GST Regulations?

Answer

Yes, fees charged for the supply of additional bins are exempt from GST.

Question 2

Did you pass on excess GST when you supplied additional bins to individual rate payers (not registered for GST) under section 142-10 of the GST Act?

Answer

No, you have not passed on excess GST when you supplied individual ratepayers (not registered for GST) with additional waste bins.

Question 3

If the answer to Question 2 is No, are you able to amend its activity statements for the relevant periods to be refunded excess GST paid?

Answer

Yes, you are able to amend its activity statements to be refunded the excess GST paid, if the activity statements are within the period of review as specified in section 155-35 of Schedule 1 to the Taxation Administration Act 1953.

This ruling applies for the following period

1 December 20XX to 30 June 20XX

Relevant facts and circumstances

You charged fees for the supply of additional waste bins to individual ratepayers.

You treated the fees as exempt from GST since the 20XX/XX financial year as evidenced by your fees and charge schedule.

You reported and paid the Australian Taxation Office (ATO) a GST amount in relation to those fees through your business activity statements (BAS).

In 20XX you discovered an accounting system error that allocated a GST amount to the supply of additional waste bin fees and subsequently corrected the issue from 1 July 20XX.

You are seeking a refund of excess GST paid to the ATO on the supply of additional waste bins for individual ratepayers not registered for GST.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 81-15

A New Tax System (Goods and Services Tax) Act 1999 section 142-5

A New Tax System (Goods and Services Tax) Act 1999 section 142-10

A New Tax System (Goods and Services Tax) Regulations 2019 regulation 81-15.01

Taxation Administration Act 1953 section 155-50

Taxation Administration Act 1953 section 155-75

Reasons for decision

Question 1

Division 81 of the GST Act provides the GST treatment of Australian taxes and Australian fees or charges received by Australian government agencies for supplies that they make.

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. Regulation 81-15.01 of the GST Regulations set out those kind of Australian fees and charges that are prescribed for section 81-15 of the GST Act and which do not constitute consideration.

The fees are exempt from GST because they are an Australian fee or charge for the supply, exchange or removal of bins or crates used in connection with kerbside collection of waste. This exemption arises under section 81-15 of the GST Act and regulation 81-15.01(a)(ii) of the GST Regulations.

An Australian fee or charge is defined in the GST Act to include a fee or charge imposed under a state law that is payable to an Australian government agency. The fees are imposed by and Australian government agency.

Question 2

Was there excess GST?

Subsection 142-5(1) of the GST Act describes excess GST as:

This Subdivision applies if, after disregarding any amounts covered by subsection (2), your *assessed net amount for a tax period takes into account an amount of GST exceeding that which is payable.

*to find the definition of asterisked terms, see the Dictionary, starting at section 195-1 of the GST Act.

Subsection 142-5(2) of the GST Act provides that when working out the amount of excess GST, the following amounts are disregarded:

a)    an amount of GST that is correctly payable and attributable to the tax period, but which later becomes the subject of a decreasing adjustment

b)    an amount of GST that is payable, but is correctly attributable to a different tax period, and

c)    an amount of GST to which section 142-16 (about low value goods - see section 40-730 of the GST Act applies.

In this case, for the purposes of subsection 142-5 of the GST Act, there are no amounts to be disregarded under subsection 142-5(2) of the GST Act.

You self-reported and paid to the Australian Taxation Office (ATO) a GST amount in relation to those fees via monthly returns lodged in its business activity statements (BAS) on supplies that were exempt from GST (as established in Question 1). Accordingly, the amount of GST incorrectly included in your assessed net amount which exceeded the amount of GST payable constitutes excess GST.

Was excess GST passed on?

Under section 142-10 of the GST Act, you will only be eligible for a refund of excess GST paid during the relevant period if excess GST was not 'passed on' to the recipient of the supplies or, if it was passed on, the recipients have been reimbursed for the overpayment.

The Commissioner's view on when excess GST has been passed on or been reimbursed is outlined in Goods and Services Tax Ruling GSTR 2015/1: the meaning of the terms 'passed on' and 'reimburse' for the purposes of Division 142 of the A New Tax System (Goods and Services Tax) Act 1999 (GSTR 2015/1).

The term 'passed on' is defined in section 195-1 of the GST Act as having the meaning affected by section 142-25 of the GST Act.

GSTR 2015/1 states at paragraph 28, that the following factors are relevant to consider when determining whether or not excess GST has been passed on:

•         the manner in which the excess GST arose;

•         the supplier's pricing policy and practice;

•         the documentary evidence surrounding the transaction, and

•         any other relevant circumstances.

Paragraph 25 of GSTR 2015/1, provides that whether excess GST has been passed on is a question of fact and must be determined on a case by case basis taking into account the particular circumstances of each case.

However, section 142-25, and the policy and scheme of the GST Act more generally, gives rise to an expectation that excess GST will be passed on in most cases.

Matters relevant to determining whether excess GST has been passed on

1.The manner in which the excess GST arose

Paragraph 32 of GSTR 2015/1 states that a simple transcription error may point towards a finding that excess GST has not been passed on.

Paragraph 33 further states that where excess GST arises as a result of an error made before setting the prices (for example, where the supplier incorrectly treats a GST-free or input taxed supply as a taxable supply), this error will generally flow through to the sale price paid by the recipient and is likely to point towards a finding that excess GST has been passed on.

You set the prices on the basis that supply of additional waste bins to individual ratepayers was exempt from GST. The mistake occurred after the prices were set via an error in your accounting systems. Therefore, this error does not flow through to the sale price and points towards excess GST not being passed on.

2.     The supplier's pricing policy and practice

Paragraph 40 of GSTR 2015/1 states that this factor involves considering the supplier's conduct and knowledge at the time of setting the price of a supply, and whether there have been any changes in the price to account for GST.

The price is listed on the Schedule of Fees and Charges as GST-exempt. The price has not been changed to incorporate GST after you discovered the error. You have therefore absorbed and not passed on the cost of excess GST.

3.     Documentary evidence surrounding the transaction

Subsection 142-25(2) of the GST Act provides that a tax invoice, issued to or by another entity, containing enough information to allow the amount of GST payable in relation to the supply to be clearly ascertained, is prima facie evidence of the excess GST having been passed on.

However, paragraph 60 of GSTR 2015/1 states that the tax invoice is only prima facie evidence. It is not conclusive evidence and there may be other documentary evidence to indicate that excess GST has not been passed on. For example, a written agreement entered into by the supplier and recipient on the basis that a supply is GST-free is documentary evidence indicating that the excess GST has not been passed on, even though a tax invoice showing an amount of GST was inadvertently created and issued by the supplier. Under these circumstances, the recipient would not be entitled to claim an input tax credit.

The tax invoice issued by you to individual ratepayers with a GST amount is prima facie evidence of excess GST having been passed on. There is no written agreement entered into by you and individual ratepayers to indicate that the supply was exempt from GST. However, the Schedule of Fees and Charges, which is publicly available suggests that GST has not been passed on.

4.     Any other relevant circumstances

The case Otto Australia Pty Ltd v Commissioner of Taxation (1991) provides that:

1.    the question of whether sales tax is passed on requires no separate identification of sales tax in the price.

2.    sales tax would clearly be passed on in circumstances where the evidence was that the price was calculated so as to include within it a sales tax component.

3.    where the evidence in the case falls short of (2) the finder of fact may be satisfied that sales tax has been passed on unless satisfied that the sales tax was not in fact included in the price. Sales tax will not have been passed on where the taxpayer bears the tax personally.

In Avon, the High Court further provides that subsection 51(1) of the Sales tax Assessment Act 1992 evinces a stance against automatic recovery of sales tax merely upon proof that it has been overpaid. The reason for this in an indirect tax system is the underlying premise that a supplier who remits the tax is not bearing the cost of the tax, and would receive a windfall gain if permitted to automatically receive a refund of an overpaid amount.

You treated the supply as GST-exempt and therefore decided on a price that did not include a GST component.

You did not seek a reimbursement from individual ratepayers and as a result, there is no windfall gain as you bear the tax personally.

Question 3

Detailed reasoning

Based on the reasoning in Question, as per Note 2 at the end of subsection 142-10 of the GST Act, you are not prevented from recovering excess GST that is not passed on as described in section 155-75 in Schedule 1 to the Taxation Administration Act 1953.

Consequently, you are able to amend its activity statements to be refunded excess GST paid, if the activity statements are within the period of review as specified in section 155-35 of Schedule 1 to the Taxation Administration Act 1953 (TAA).