Issue
Is the entity, a local government council, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it makes a supply of water, sewerage or drainage services and the charges for that supply are specified in a written determination of the Treasurer?
Decision
No, the entity is not making a taxable supply under section 9-5 of the GST Act when it makes a supply of water, sewerage or drainage services and the charges for that supply are specified in a written determination of the Treasurer.
As the payment of these charges is not treated as consideration, the supply is outside the scope of the GST Act.
Facts
The entity is a local government council. The entity makes supplies of water, sewerage or drainage services.
The charges applied to these services are specified in a written determination of the Treasurer.
The entity is registered for goods and services tax (GST).
Reasons for Decision:
To be a taxable supply, one of the requirements of section 9-5 of the GST Act that must be satisfied is that an entity makes the supply for consideration (paragraph 9-5(a) of the GST Act).
Subsection 81-5(1) of the GST Act specifically provides that payments of any Australian taxes, fees or charges are treated as the provision of consideration. However, under subsection 81-5(2) of the GST Act, any such payments that are specified in a written determination of the Treasurer are not the provision of consideration.
As the entity is a local government council that supplies water, sewerage or drainage services, the charge applied to these services could be the provision of consideration under subsection 81-5(1) of the GST Act. However, as the charges are specified in a written determination of the Treasurer, they are not treated as the provision of consideration and paragraph 9-5(a) of the GST Act is not satisfied.
As the entity's supply of water, sewerage or drainage services does not meet the requirements of section 9-5 of the GST Act, the supply by the entity is outside the scope of the GST Act.
Note 1. As the supply is out of scope of the GST Act, it does not need to be recorded on the relevant Business activity statement (BAS).
Note 2. If the charges were not specified in a written determination of the Treasurer, the supply of water, sewerage or drainage services could be GST-free under Subdivision 38-I of the GST Act. If the supply is GST-free, then it would need to be recorded on the relevant BAS.