GST and Division 81 of the GST Act: fee imposed before 1 July 2012 that was specified in the final Determination

Is the payment to the Australian government agency of the fee, imposed before 1 July 2012 and specified in the final Determination made under former Division 81 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), excluded from being the provision of consideration for GST purposes, under the grandfathered former subsection 81-5(2) of the GST Act?

Yes, payment to the entity of the fee, imposed before 1 July 2012, is excluded from being the provision of consideration for GST purposes under former subsection 81-5(2) of the GST Act. The payment is not subject to GST.

The entity is a Tribunal established under a State Act of Parliament. It is registered for GST, and is an 'Australian government agency' for the purposes of section 195-1 of the GST Act. A number of different 'fees' are payable to the Tribunal Registrar in accordance with the State Act, and as prescribed in regulations made under the State Act.

One of these fees is described as a 'daily hearing fee'. The fee is a 'user pays' fee intended to recoup the costs of providing the services of the Tribunal. The owner of a recently constructed domestic residence (a 'householder') may apply for a dispute the householder has with the builder of the house to be heard and resolved by the Tribunal. If the matter proceeds, a prescribed fee is imposed on the householder, based on the number of days over which the matter is actually heard.

Payment of the daily hearing fee is of a kind specified in the A New Tax System (Goods and Services Tax) (Exempt Taxes, Fees and Charges) Determination 2011 (No. 1), made on 15 December 2010, a legislative instrument made for the purposes of former subsection 81-5(2) of the GST Act, and in force immediately before 27 June 2011. This was the final Determination made under the former Division 81 of the GST Act.

For GST purposes, the amount imposed as a daily hearing fee is not an 'Australian tax', and is of the nature of a fee or charge.

The fee is imposed after 30 June 2011, but before 1 July 2012.

Tax Laws Amendment (2011 Measures No. 2) Act 2011 (the amending Act), replaces former Division 81 of the GST Act with a new Division 81. Item 16 of Schedule 4 to the amending Act provides: 16 Application provision (1) The amendments made by this Schedule apply in relation to the payment, or the discharging of liability to make a payment, relating to an Australian tax, or an Australian fee or charge, imposed on or after 1 July 2011. (2) However, the amendments do not apply in relation to a payment, or a discharge of a liability to make a payment, relating to an Australian tax, or an Australian fee or charge, imposed before 1 July 2012 if the payment is of a kind specified by legislative instrument (a Division 81 determination ): (a) made for the purposes of subsection 81-5(2) of the A New Tax System (Goods and Services Tax) Act 1999 ; and (b) in force immediately before the commencement of this item. [Editorial note: the item commenced on 27 June 2011.] (3) Despite the repeal of subsection 81-5(2) of the A New Tax System (Goods and Services Tax) Act 1999 by item 2 of this Schedule, a Division 81 determination continues to have effect, after the commencement of this item and before 1 July 2012, as if the repeal had not happened.

The daily hearing fee is imposed after 30 June 2011 but before 1 July 2012. Sub-item 16(2) of Schedule 4 to the amending Act is a 'grandfathering' provision that allows the former law to continue. In considering the possible effect of item 16 of Schedule 4 to the amending Act, it is necessary as a preliminary step to confirm that the 'daily hearing fee' falls within the definition of an 'Australian tax' or an 'Australian fee or charge'.

The definition in section 195-1 of the GST Act of an 'Australian fee or charge' can be considered under the following three limbs: (i) a fee or charge (however described), other than an Australian tax: (ii) imposed under an 'Australian law'; and (iii) payable to an 'Australian government agency'.

The amount described as a 'daily hearing fee' is payable by a person who has applied for a Tribunal hearing. It is based on the number of days over which the Tribunal hears the matter. The facts state that for GST purposes the amount imposed is not an 'Australian tax', and is of the nature of a 'fee or charge'. The first limb of the definition of 'Australian fee or charge' is met.

An 'Australian law' has the meaning given by section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997). It is a 'Commonwealth law', a 'State law', or a 'Territory law'. A 'State law' is defined as a law of a State. This fee is imposed under a law of a State. Accordingly the second limb of the definition of 'Australian fee or charge' is met.

The facts state the entity is a Tribunal, and an Australian government agency and that the fee is payable to the Tribunal registrar. The third limb of the definition of an Australian fee or charge is met.

The daily hearing fee is therefore considered to be an 'Australian fee or charge' as defined.

Having reached this conclusion, it is necessary to determine whether the remaining requirements of sub-item 16(2) of Schedule 4 to the amending Act have been met. These requirements are: • the date of imposition of the fee or charge is before 1 July 2012, and • the payment of the fee or charge is of a kind specified in a Determination made for the purposes of subsection 81-5(2) of the GST Act that was in force immediately before the commencement of the item (27 June 2011).

The facts indicate that both of these requirements are met. Sub-item 16(2) of Schedule 4 to the amending Act is satisfied. Accordingly, the provisions of former Division 81 of the GST Act apply, and the provisions of new Division 81 do not apply.

Former subsection 81-5(2) provides that the payment of any 'Australian tax, fee or charge' that is specified by legislative instrument is not the provision of consideration.

The fee meets the old definition of an 'Australian tax, fee or charge' in that it is a fee or charge imposed under an 'Australian law' and payable to an 'Australian government agency'. Accordingly, payment of the fee is not the provision of consideration for GST purposes.

Because new Division 81 does not apply to payment of the fee, it is not necessary to consider whether the daily hearing fee is prescribed in any regulation made for the purposes of new subsection 81-10(2) of the GST Act, which is about making payments of certain fees and charges consideration for supplies.

No other part of the GST Act applies to make payment of the fee the provision of consideration. The basic rules apply.

Under the basic rules, GST is payable on taxable supplies (sections 9-40 and 9-70 of the GST Act). Under paragraph 9-5(a) of the GST Act, a necessary element for a taxable supply is that the supply is 'for consideration'. In this case, former subsection 81-5(2) provides that payment of the fee is not the provision of consideration. There is accordingly no taxable supply made.

Payment of the daily hearing fee, imposed prior to 1 July 2012, is not subject to GST. Note: For the GST treatment of the fee if imposed after 30 June 2012, see ATO ID 2012/ 22.