GST and the recovery of waste levies and carbon pricing mechanism costs by waste disposal facility operators

Is the entity, a waste disposal facility operator, liable for GST on the total amount charged to customers for allowing them to dispose of waste at the facility, when the total includes amounts for the recovery of waste levies under relevant state or territory environment protection legislation and regulations and carbon pricing mechanism costs under Commonwealth legislation, which may be identified separately on the tax invoice?

Yes, the entity is liable for GST on the total amount charged to customers for allowing them to dispose of waste at a waste disposal facility, including amounts for the recovery of waste levies and carbon pricing mechanism costs, even if the amounts are identified separately in tax invoices issued to customers.

The GST registered entity operates a waste disposal facility and charges customers for allowing them to dispose of waste at the facility.

The entity incurs costs in relation to operating the waste disposal facility including: • levies for which the entity is liable under relevant state or territory environment protection legislation and regulations (waste levies), payable to a state or territory environment protection authority (EPA); and • Costs under the carbon pricing mechanism (CPM costs) of the Clean Energy Act 2011 (CE Act), as a 'liable entity' under Subdivision B of Division 2 of Part 3 of the CE Act.

When the entity pays the waste levies and the CPM costs to the relevant Australian government agency, Division 81 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) applies to the payments and these payments are not subject to GST. This is because these amounts are Australian fees or charges imposed on the entity under an Australian law that are payable to an Australian government agency, and the entity is the entity that is liable to pay for these amounts under the relevant law.

The entity recovers the waste levies and CPM costs by including amounts in relation to these costs in the total amount charged to customers when they dispose of waste at the facility.

In some cases, the amounts recovered in relation to the waste levies and CPM costs are identified separately in the tax invoices issued to customers.

Division 81 of the (GST Act) applies to the payment (or the discharging of the liability to make a payment) of Australian taxes or Australian fees or charges, to an Australian government agency by an entity that is liable for the tax, fee or charge under the provisions of the applicable Australian law. The payment of fees or charges to which Division 81 applies is not subject to GST.

When the entity allows customers to dispose of waste at its waste disposal facility and charges customers a fee, the entity is making a taxable supply of waste management services under section 9-5 of the GST Act and the fee charged is consideration for that supply. The entity calculates the fee charged on a commercial basis. Generally, the calculation of such fees can be affected by many factors and typically reflect the costs of providing the services including, for example, costs of Australian taxes and Australian fees and charges for which the entity is liable and which the entity may seek to recover.

In the present case, the entity may identify separate amounts in relation to the waste levies and CPM costs in the tax invoices issued to customers to indicate some or all of these costs are being recovered in the total amount charged for the services. While the total amount charged to customers may be calculated by reference to the waste levies and CPM costs, the amount paid by the customer to the entity does not meet the requirements of Division 81 as they are not being paid to an Australian government agency under an Australian law. That is, the amount identified as being for the recovery of the waste levies and CPM costs are subject to GST. This is consistent with the view explained at paragraphs 8 and 9 of Goods and Services Tax Determination GSTD 2000/10 Goods and services tax: are outgoings payable by a tenant under a commercial property lease part of the consideration for the supply of the premises?.

Therefore, the total amount charged to customers, including amounts for the recovery of waste levies and CPM cost, is the consideration for the taxable supply of waste management services made by the entity and the entity is liable to pay GST on the total amount. That is, the entity does not exclude the amounts included for recovery of these costs when calculating the GST payable, even if the amounts are identified separately in tax invoices issued to customers. Note: From the 1 July 2014, the Clean Energy Act 2011 is repealed and therefore from this date, there will be no liable entities incurring CPM costs.

Date of amendment Part Comment 25 July 2014 Note Deleted note referring to subsection 81-10(2) of A New Tax System (Goods and Services Tax) Act 1999 and paragraph 81-10.01(1)(d) of the A New Tax System (Goods and Services Tax) Regulations to improve clarity. These provisions are not relevant to the decision. All parts Editing to improve clarity. These amendments do not change the substance of the advice in this ATO ID. Note Added note about the repeal of the Clean Energy Act 2011.

Date of amendment | Part | Comment

25 July 2014 | Note | Deleted note referring to subsection 81-10(2) of A New Tax System (Goods and Services Tax) Act 1999 and paragraph 81-10.01(1)(d) of the A New Tax System (Goods and Services Tax) Regulations to improve clarity. These provisions are not relevant to the decision.

All parts | Editing to improve clarity. These amendments do not change the substance of the advice in this ATO ID.

Note | Added note about the repeal of the Clean Energy Act 2011.