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Ruling

Subject: GST and Waste Management Levy

Question

From 1 July 2012, is the levy imposed subject to goods and services tax (GST)?

Answer

No, from 1 July 2012 the levy is exempt from GST under Division 81 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

An entity is liable to pay the levy.

The levy is imposed under a Government Act.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Division 81

A New Tax System (Goods and Services Tax) Act 1999 Section 81-5

A New Tax System (Goods and Services Tax) Act 1999 Section 195-1

Income Tax Assessment Act 1997 section 995-1.

Reasons for decision

Division 81 of the GST Act was amended with effect from 1 July 2011 to allow entities to self assess the GST treatment of a payment of an Australian tax or an Australian fee or charge in accordance with certain principles.

Under the transitional arrangements, those Australian taxes, fees and charges that were not subject to GST under the Treasurer's Determination remain not subject to GST until 30 June 2013 and thereafter will be assessed under Division 81 of the GST Act as amended.

The GST treatment of all Australian taxes or Australian fees or charges that were not listed in the Treasurer's Determination will be self assessed under the changes made to Division 81 of the GST Act with effect from 1 July 2011.

Australian Tax

Section 81-5 of the GST Act considers the effect of the payment of a tax. It states:

81-5 Effect of payment of tax

…Australian tax not consideration

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 tax.

Regulations may provide for exceptions

However, a payment you make, or a discharging of your liability to make a payment, is treated as the provision of *consideration to the extent that payment is an *Australian tax that is, or is of a kind, prescribed by the regulations.

For the purposes of subsection (2), the *consideration is taken to be provided to the entity to which the tax is payable, for a supply that the entity makes to you.

Currently, there are no regulations that prescribe the payment of an Australian tax to be the provision of consideration.

The term 'Australian tax' is defined in section 195-1 of the GST Act as:

Australian tax means a tax (however described) imposed under an *Australian law.

The term 'Australian law' is defined by section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) and relevantly includes a State law.

An Australian law includes Acts and law making powers which are delegated by parliaments, such as regulations, by-laws, proclamations and orders made under Acts.

You derive your authority to impose the levy under a Government Act. Therefore, the levy is imposed under an Australian law for the purposes of Division 81 of the GST Act.

The term 'Australian government agency' is defined by section 995-1 of the ITAA 1997. 'Australian government agency' means:

For the purposes of Division 81 of the GST Act, it is accepted that you come within the definition of an Australian government agency.

The usual description of a tax, as cited in the High Court case of Roy Morgan Research Pty Ltd v CMR of Taxation [2011] HCA 35 (Roy Morgan), as per Latham CJ in Matthews v Chicory Marketing Board (Vict) (1938) 60 CLR 26, is that it is:

The levy is imposed on entities. You raise amounts under the Government Act. Entities are liable to pay the levy under the Government Act which provides recovery options where the levy is not paid. Therefore, the levy is a compulsory exaction of money that is enforceable by law.

The levy is levied by a public authority. Legislation empowers you to enforce their payment and, as opposed to being payment for services rendered, the levy is on all entities in the area. The levy is used to cover costs and is for public purposes.

As the levy satisfies the usual description of a 'tax' as cited in the High Court case of Roy Morgan, the Commissioner considers the levy to be a payment of an Australian tax for the purposes of section 81-5 of the GST Act. Therefore, the payment of the levy is exempt from GST under Division 81 of the GST Act.

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