Edited version of private advice

Authorisation Number: 1012626104794

Subject: GST and Division 81 taxes, fees and charges

Question

Are the fees and charges listed in the table below, consideration for a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Decision

Unless otherwise stated, all legislative references in this Ruling are to the GST Act. The relevant legislative provisions are discussed in the 'Reasons for Decision'.

The following table sets out the GST treatment. When we indicate that section 9-5 is satisfied, it means that the supply meets all of the requirements of section 9-5. If a fee or charge is not consideration for a supply by virtue of Division 81, it is referred to as being exempt.

Relevant facts and circumstances

You are registered for GST.

You levy various fees and charges in accordance with laws. You have provided a description of the fees and charges and the relevant laws that they are levied under. This is expressed in both the 'Fees and Charges' and 'Description' columns in the 'Decisions' section of this Ruling.

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 Subsection 81-5(1)

A New Tax System (Goods and Services Tax) Act 1999 Subsection 81-10(1)

A New Tax System (Goods and Services Tax) Act 1999 Subsection 81-10(2)

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

A New Tax System (Goods and Services Tax) Act 1999 Section 38-140

A New Tax System (Goods and Services Tax) Act 1999 Section 38-145

A New Tax System (Goods and Services Tax) Act 1999 Section 38-150

A New Tax System (Goods and Services Tax) Act 1999 Section 38-285

A New Tax System (Goods and Services Tax) Act 1999 Section 38-300

Reasons for decision

Taxable Supply

Section 9-5 provides that you make a taxable supply if:

• you make the supply for consideration

• the supply is made in the course or furtherance of an enterprise that you carry on

• the supply is connected with Australia, and

• you are 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.

The first criterion that needs to be determined is whether there is a supply for consideration.

Section 9-39 provides special rules relating to taxable supplies. In particular, item 8 in the table in section 9-39 provides that for payments of taxes, fees and charges the special rules in Division 81 may apply.

Division 81

Division 81 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 A New Tax System (Goods and Service Tax ) ( Exempt Taxes, Fees and Charges) Determination 2011 (No. 1 ) (Treasurer's Determination) remain not subject to GST until 30 June 2013 and thereafter will be assessed under Division 81 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 with effect from 1 July 2011.

Australian Tax

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

81-5 Effect of payment of tax

Australian tax not consideration

(1) 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

(2) 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 the payment is an *Australian tax that is, or is of a kind, prescribed by the regulations.

(3) 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.

(* Asterisked terms are defined in the Dictionary in section 195-1)

The term 'Australian tax' is defined in section 195-1 as:

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

Australian Fees and Charges

Sections 81-10 and 81-15 consider the effect of certain fees and charges and state:

81-10 Effect of payment of certain fees and charges

Certain fees and charges not consideration

(1) 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 subsection (4) or (5).

Prescribed fees and charges treated as consideration

(2) 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 the payment is an *Australian fee or charge that is, or is of a kind, prescribed by the regulations.

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

Fees or charges paid for permissions etc.

(4) This subsection covers a fee or charge if the fee or charge:

(a) relates to; or

(b) relates to an application for;

the provision, retention, or amendment, under an *Australian law, of a permission, exemption, authority or licence (however described).

Fees or charges relating to information and record-keeping etc.

(5) This subsection 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:

(a) recording information;

(b) copying information;

(c) modifying information;

(d) allowing access to information;

(e) receiving information;

(f) processing information;

(g) searching for information.

81-15 Other fees and charges that do not constitute consideration

The regulations may provide that the payment of a prescribed *Australian fee or charge, or of an Australian fee or charge of a prescribed kind, or the discharging of a liability to make such a payment, is not the provision of *consideration.

The term 'Australian fee or charge' is defined in section 195-1 as:

Australian fee or charge means a fee or charge (however described), other than an Australian tax, imposed under an *Australian law and payable to an *Australian government agency.

Australian Law

The term 'Australian law' is defined in section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) and relevantly includes a State law. It includes acts and law making powers which are delegated by parliaments, such as regulations, by-laws, proclamations and orders made under Acts.

Australian Government Agency

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

• the Commonwealth, a State or Territory; or

• an authority of the Commonwealth or of a State or a Territory.

GST Regulations - a fee or charge that is consideration for a supply

Subsection 81-10(2) provides that fees and charges that are covered by subsection 81-10(1) by virtue of subsections 81-10(4) or (5) can still be consideration for a supply if the fees and charges are a payment you make, or the discharging of your liability to make a payment to the extent the payment is an Australian fee or charge that is, or is of a kind, prescribed by the GST Regulations.

Paragraph 81-10.01(1)(c) of the GST Regulations specifies 'a fee for hire, use of, or entry to a facility, except for an entry fee to a national park'. Therefore, any fee charged by an Australian government agency that comes under subsection 81-10(1) and is for the hire, use of or entry to a facility is consideration for a supply. The only exception is if the fee is charged by an Australian government agency and is for an entry fee to a national park.

Paragraph 81-10.01(1)(d) of the GST Regulations provides that 'a fee for the use of a waste disposal facility' is consideration for a supply.

Paragraph 81-10.01(1)(e) of the GST Regulations specifies:

(e) a fee for pre-lodgement advice if:

(i) the advice relates to an application to which subsection 81-10(4) of the Act applies; and

(ii) it is not compulsory to seek the advice.

Therefore, if there is an Australian law that regulates that it is compulsory to seek advice for pre-lodgement of an application that is an approval etc, paragraph 81-10.01(1)(e) of the GST Regulations would not apply. An example of where paragraph 81-10.01(1)(e) of the GST Regulations would apply is pre-lodgement advice in relation to the lodging of a development approval application.

Paragraph 81-10.01(1)(g) of the GST Regulations specifies 'a fee or charge for a supply of a non-regulatory nature. In relation to this paragraph the explanatory statement to the A New Tax System (Goods and Services Tax) Amendment Regulation 2012 (No. 2) (ES) states:

This paragraph ensures that the non-regulatory activities of government are subject to GST. This paragraph applies to supplies of goods and services for which fees are imposed where the consumer is provided with something that lacks a regulatory character. That is, the fee or charge does not arise under an Australian law which is intended, for example, to regulate behaviour, ensure consumer protection and ensure compliance with certain standards...

The ES provides examples of fees and charges that do not have a regulatory character. Of particular relevance in this case is a fee charged for exclusive right to a mausoleum or burial plot.

Paragraph 81-10.01(1)(h) of the GST Regulations specifies:

(h) a fee or charge for a supply by an Australian government agency, where the supply may also be made by a supplier that is not an Australian government agency.

The ES explains:

This paragraph ensures that the regulatory activities of government made in competition with the private sector are subject to GST where the other requirements of section 9-5 of the Act are satisfied. Fees and charges in this category are not excluded from being consideration for a taxable supply. This is consistent with the National Competition and Consumer Policy guidelines and ensures that a government entity is not given a competitive advantage over a private sector supplier making the same type of supply.

This covers situations in which government agencies have authorised private agencies to perform activities that form part of a regulatory process, for example, certification activities which are required for a regulatory process to be followed. Where government agencies, as well as government certifiers, have authorised private certifiers to perform certification activities these fees and charges will continue to be consideration for a supply that is subject to GST. This ensures competitive neutrality between supplies made by government and non-government agencies.

GST Regulations - a fee or charge that is not consideration for a supply

Regulation 81-15.01 of the GST Regulations sets out those fees and charges that are prescribed for section 81-15 and which do not constitute consideration. Of relevance to this ruling are the following paragraphs:

Paragraph 81-15.01(1)(a) of the GST Regulations refers to a fee or charge for the:

(i) kerbside collection of waste, or

(ii) supply, exchange or removal of bins or crates used in connection with kerbside collection of waste.

Paragraph 81-15.01(2) of the GST Regulations provides that waste includes green waste and recyclables.

The ES states:

This paragraph and subregulation ensure that fees and charges for the kerbside collection of waste are not treated as the provision of consideration, and therefore do not give rise to a taxable supply under Division 81.

Kerbside waste collection fees are often, but not always, covered by general Council rates. It is intended that all fees and charges for kerbside collection of waste are not consideration for a supply, so that these services are exempt from GST. This is regardless of whether the fees paid in relation to the service are compulsory or optional as kerbside collection of waste is a basic activity of local government.

Kerbside collection includes a regular waste collection service conducted by an Australian government agency where, for practical reasons, the waste must be collected from inside the property boundary of the ratepayer, such as a waste service for residents of a high-rise residential complex. However, additional waste collection undertaken by a commercial entity is not considered to be kerbside collection even though it may be collected from the kerbside in some circumstances…

Paragraph 81-15.01(1)(d) of the GST Regulations refers to a fee or charge to compensate an Australian government agency for costs incurred by the agency in undertaking regulatory activities. The ES states:

This paragraph ensures that fees and charges which are for services provided on a cost recovery basis by government agencies, and relate to activities that are regulatory in nature, are not treated as the provision of consideration and therefore do not give rise to a taxable supply…

Paragraph 81-15.01(1)(f) of the GST Regulations refers to 'a fee or charge for a supply of a regulatory nature made by an Australian government agency.'

The term 'regulatory nature' is not defined in the GST Regulations or the GST Act. The ES states:

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.

In some instances, although the consumer acquires something that may be of intrinsic value to the consumer, the acquisition is made in the context of satisfying a regulatory requirement of an Australian law…

Paragraph 81-15.01(1)(h) of the GST Regulations refers to any other fees or charges:

• specified in the Treasurer's Determination as in force immediately before the commencement of Schedule 4 of the Tax Laws Amendment (2011 Measures No. 2) Act 2011, and

• imposed before 1 July 2013 as not constituting consideration.

GST-free

Subsection 9-30(1) provides that a supply is GST-free if:

(a) it is GST-free under Division 38 or under a provision of another Act, or

(b) it is a supply of a right to receive a supply that would be GST-free under paragraph (a).

Water and drainage

Sections 38-285 and 38-300 relate to the supply of water and drainage services. These sections state:

38-285 Water

(1) A supply of water is GST-free.

(2) However, a supply of water is not GST-free under this section if it is

(a) supplied in a container; or

(b) transferred into a container;

that has a capacity of less than 100 litres or such other quantity as the regulations specify.

(3) It does not matter whether or not the amount of water supplied or transferred fills the container.

38-300 Drainage

A supply of a service that consists of draining storm water is GST-free.

Goods and Services Tax Ruling GSTR 2000/25 provides guidance on GST-free supplies of water, sewerage and sewerage like services, storm water draining services and emptying of a septic tank. Appendix 2 to GSTR 2000/25 lists the types of charges that are GST-free. Item 1 lists 'volumetric charges', item 2 'domestic and stock water supplies, item 3 'water access charges based on (a) property value/ area, (b) fixed rates, (c) short term levies, and (d) any combination of these, item 4 lists 'water connection charges for works conducted between the border of the recipients property and the existing water line of the supplier, when charged to the recipient of the water.'

Child care

Sections 38-140, 38-145 and 38-150 deal with the supplies of child care services either by registered carers under the family assistance law, approved child care services under the family assistance law and other child care services. Where one of these sections are satisfied the supply of your services are GST-free.

Bonds

Bonds are required and held by you for a variety of reasons.

Subsection 99-5(1) provides that a deposit held as security for the performance of an obligation is not treated as consideration for a supply, unless the deposit:

• is forfeited because of a failure to perform the obligation, or

• is applied as all or part of the consideration for a supply.

GSTR 2006/2 provides guidance on GST and deposits held as security for the performance of an obligation. It discusses the characteristics of a security deposit to which Division 99 applies and explains the meaning of a security deposit and the special rules for the attribution of GST on taxable supplies relating to security deposits.

For a payment to be considered a 'security deposit' for the purposes of Division 99, paragraph 20 of GSTR 2006/2 states that it should have the following characteristics:

• be held as a security for the performance of an obligation

• the contract, conduct and intent of the parties to the contract must be consistent with the payment being a security deposit

• be at risk of forfeiture upon failure to perform the obligation; and

• be a reasonable amount.

Where the deposit is refunded in full there are no GST consequences. Where the deposit is forfeited, the payment is applied to the underlying supply (the obligation that has not been satisfied) and the applicable application of GST to that supply. If the underlying supply is either GST-free or input taxed, the forfeited deposit will not be consideration for a taxable supply.

Fees and charges which are for services provided on a cost recovery basis by government agencies, and relate to activities that are regulatory in nature, are not treated as the provision of consideration under paragraph 81-15.01(1)(d) of the GST Regulations and therefore do not give rise to a taxable supply.

Where your equipment is lost or damaged, you may have a right to claim damages from the lessees for the cost or replacement value of the equipment. A charge to recover the replacement cost of your equipment is not regulatory in nature even if the equipment damaged or lost was used in undertaking regulatory activity. Recovery of costs in these circumstances will be consideration for a taxable supply.

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