South Australian Councils - GST treatment of fees and charges imposed

This Ruling sets out the Commissioner's opinion on the GST treatment for certain fees and charges imposed by South Australian Councils.

Full details of the scheme ruled upon are set out in paragraphs 10 to 15 of this Ruling.

All legislative references are to the provisions of A New Tax System (Goods and Services Tax) Act 1999 unless otherwise indicated. References to 'the GST Regulations' are to the A New Tax System (Goods and Services Tax) Regulations 2019 .

This Ruling applies to you if you are a Council that is a member of the Local Government Association of South Australia. These Councils are collectively referred to in this Ruling as 'the Council'.

This Ruling applies from 1 July 2019.

This Ruling addresses the GST treatment of supplies made by the Council in relation to: • matters involving permits, licences, development, planning, commercial services, community, information, animals, private works, waste management, water, and • payments received by the Council that are not in relation to supplies for which particular fees and charges are imposed.

When we indicate a fee or charge relates to a taxable supply under section 9-5, we assume that all of the requirements of section 9-5 have been met and that the supply is not otherwise GST-free or input taxed under other provisions of the GST Act.

In this Ruling, if a fee or charge is not consideration for a supply and is not subject to GST by virtue of Division 81, it is referred to as being 'exempt'.

The following tables set out the GST treatment.

The following description of the scheme (circumstances ruled upon) is based on information provided by the applicant. If the circumstances are not carried out as described, this Ruling cannot be relied upon.

The scheme for the purposes of this Ruling incorporates the supplies made by the Council in relation to matters involving permits, licences, development, planning, commercial services, community, information, animals, private works, waste management and water and payments received by the Council that are not in relation to such supplies.

The Council is registered for GST.

Under sections 35 and 36 of the Local Government Act 1999 (SA) (LG Act), the Council is a body corporate with perpetual succession and the legal capacity of a natural person.

The Council is an Australian government agency that is empowered under the LG Act to: • provide services and facilities that benefit its area, ratepayers, residents and visitors which include general public services or facilities (such as electricity, gas and water services and waste collection, control or disposal services or facilities) and health, welfare, cultural or community services or facilities • administer regulatory systems for the good rule and government of its area and for the convenience, comfort and safety of its community, under the LG Act or another Act • manage, improve and develop the resources available to the Council.

The Council levies fees and charges for goods and services and in relation to other matters under the LG Act and the South Australian statutes. [1] In particular, under section 188 of the LG Act a council may impose fees and charges for services it provides.

Subsection 7-1(1) provides that GST is payable on taxable supplies. As such, the Council is liable to pay the GST payable on any taxable supply it makes. Section 9-5 states: You make a taxable supply if: (a) you make the supply for *consideration; and (b) the supply is made in the course or furtherance of an *enterprise that you *carry on; and (c) the supply is *connected with the indirect tax zone; and (d) you are *registered, or *required to be registered. However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed.

As the Council is registered for GST and makes supplies in carrying on its enterprise in the indirect tax zone (being, generally, Australia), the issue that arises under section 9-5 is whether such supplies are supplies for consideration.

Section 9-39 provides special rules in relation to making taxable supplies. In particular, table item 8 in section 9-39 provides that where there is a payment of fees and charges the special rules in Division 81 may apply.

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

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.

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.

The term Australian government agency is defined in section 995-1 of the ITAA 1997 and means: (a) the Commonwealth, a State or Territory, or (b) an authority of the Commonwealth or of a State or a Territory. For the purposes of this Ruling it is accepted that the Council comes within the definition of Australian government agency.

Division 81 gives effect to the principles contained in the Intergovernmental Agreement on Federal Financial Relations. Payments of fees and charges generally constitute consideration and, if the requirements of section 9-5 of are satisfied, the payment will be for a taxable supply. Some supplies are excluded and will be exempt.

The GST Act provides for regulations to prescribe payments that constitute consideration for a supply and, conversely, prescribe payments that are otherwise taxable as being a fee or charge that does not constitute consideration.

Section 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. Section 81-15.01 of the GST Regulations states: Fees and charges which do not constitute consideration Subject to section 81-15.02 of this instrument, for the purposes of section 81-15 of the Act, payment of the following kinds of Australian fees and charges, or the discharging of a liability to make such a payment, is not the provision of consideration: (a) a fee or charge for: (i) the kerbside collection of waste; or (ii) the supply, exchange or removal of bins or crates used in connection with kerbside collection of waste; (b) royalties charged in relation to natural resources; (c) a fee or charge imposed on an industry to finance regulatory or other government activities connected with the industry; (d) a fee or charge to compensate an Australian government agency for costs incurred by the agency in undertaking regulatory activities; (e) a fee or charge imposed in relation to a court, tribunal, commission of inquiry or sheriffs office; (f) a fee or charge for a supply of a regulatory nature made by an Australian government agency; (g) a fee or charge for entry to a national park.

Section 81-10.01 of the GST Regulations sets out Australian fees and charges that are prescribed fees and charges which are treated as consideration for subsection 81-10(2). Subsection 81-10.01(1) of the GST Regulations states: Fees and charges which constitute consideration Subject to section 81-15.02 of this instrument, for the purposes of subsection 81-10(2) of the Act, the following kinds of Australian fee or charge are prescribed: (a) a fee for parking a motor vehicle in a ticketed or metered parking space; (b) a toll for driving a motor vehicle on a road; (c) a fee for hire, use of, or entry to a facility, except for an entry fee to a national park; (d) a fee for the use of a waste disposal facility; (e) a fee for pre-lodgment 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; (f) a fee or charge for the provision of information by an Australian government agency if the provision of the information is of a non-regulatory nature; (g) a fee or charge for a supply of a non-regulatory nature; (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.

Section 81-15.02 of the GST Regulations deals with how fees and charges are treated if they are covered by both sections 81-10.01 and 81-15.01 of the GST Regulations and states: Fees and charges covered by sections 81-10.01 and 81-15.01 Fee or charge for a supply of a non-regulatory nature is not consideration if covered by section 81-15.01 (1) For the purposes of section 81-15 of the Act, payment of, or the discharging of a liability to pay, a fee or charge covered by both paragraph 81-10.01(1)(g) and section 81-15.01 of this instrument is not the provision of consideration. Other fees or charges covered by section 81-10.01 are consideration even if covered by section 81-15.01 (2) Section 81-15.01 does not apply in relation to an Australian fee or charge covered by subsection 81-10.01(1) (other than one covered by paragraph 81-10.01(1)(g)).

Subsection 9-30(1) provides that a supply is not a taxable supply to the extent that it is GST-free and states: 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).

Subsection 9-30(2) provides that a supply is not a taxable supply to the extent that it is input taxed and states: A supply is input taxed if: (a) it is input taxed under Division 40 or under a provision of another Act; or (b) it is a supply of a right to receive a supply that would be input taxed under paragraph (a).

Division 82 provides that GST does not apply to transactions for making supplies (commonly referred to as in kind developer contributions) in return for the supply by an Australian government agency of a right to develop land. Subsections 82-5 and 82-10 state: 82-5 Supplies of rights to develop land do not constitute consideration in certain cases (1) The supply, by an *Australian government agency, of a right to develop land is not treated as *consideration for another supply if the other supply complies with requirements imposed by or under an *Australian law. (2) It does not matter whether the other supply is made to the *Australian government agency. (3) This section has effect despite section 9-15 (which is about consideration). 82-10 Supplies by Australian government agencies of rights to develop land are not for consideration (1) The supply, by an *Australian government agency, of a right to develop land is treated as a supply that is not made for *consideration to the extent that it is made in return for another supply that complies with requirements imposed by or under an *Australian law. (2) It does not matter whether the other supply is made to the *Australian government agency. (3) If the other supply constitutes the payment of: (a) an *Australian tax prescribed by regulations made for the purposes of subsection 81-5(2); or (b) an *Australian fee or charge prescribed by regulations made for the purposes of subsection 81-10(2); this section overrides those regulations in relation to the payment. (4) This section has effect despite section 9-15 (which is about consideration).

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 in certain circumstances and states: Giving a deposit as security does not constitute consideration (1) A deposit held as security for the performance of an obligation is not treated as *consideration for a supply, unless the deposit: (a) is forfeited because of a failure to perform the obligation; or (b) is applied as all or part of the consideration for a supply.

The following comments and explanations refer to particular groups of fees and charges in the tables at paragraph 9 of this Ruling.

Generally, the supplies of goods and services made by the Council for consideration are taxable supplies unless the supply is GST-free or input taxed.

Where the payment is not treated as consideration under Division 81, the supply is not a taxable supply under section 9-5.

Where the payment is treated as consideration under Division 81, and the positive requirements of section 9-5 are met, the supply is a taxable supply.

The payment of an Australian fee or charge that relates to, or relates to the application for, the provision, retention or amendment under an Australian law of a permission, exemption, authority or licence is not the provision of consideration under subsection 81-10(4). However, to the extent the fee is a fee for the hire, use of or entry into a facility (except for an entry fee to a national park), the payment will be consideration for a supply under paragraph 81-10.01(1)(c) of the GST Regulations.

Accordingly, a fee or charge for the hire or entry to a Council facility or the use of the Councils equipment is consideration for a supply. Where a supply satisfies the positive requirements of section 9-5, the supply is taxable. However, the supply is not a taxable supply to the extent that it is either GST-free or input taxed.

Subdivision 38-I deals with supplies of water, sewerage or sewerage like-services, emptying of septic tanks and drainage. Where the provisions of Subdivision 38-I are satisfied the supply of such services by the Council is GST-free. Goods and Services Tax Ruling GSTR 2000/25 Goods and services tax: GST-free supplies of water, sewerage and sewerage-like services, storm water draining services and emptying of a septic tank provides the Commissioners view on what activities are covered by the relevant supplies referred to in Subdivision 38-I.

Subdivision 38-D deals with supplies of child care services by approved child care services under the family assistance law or other child care services and supplies directly related to child care. Where the provisions of Subdivision 38-D are satisfied the supply of such services by the Council is GST-free.

Subdivisions 40-A and 40-B deal with financial supplies and supplies of residential premises. Where the provisions of these Subdivisions are satisfied such supplies made by the Council are input taxed.

Division 99 deals with deposits held as security for the performance of an obligation. Security deposits and bonds are required by the Council for a variety of reasons, such as for security against potential damage to footpaths and roads (in connection with building and development) or to the Councils property (in relation to the hire of a Council hall for a function).

Where the deposit or bond is refunded in full there are no GST consequences. Where the amount is forfeited, the payment is applied to the underlying supply (the obligation that has not been satisfied) with the appropriate GST treatment applicable 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.

Goods and Services Tax Ruling GSTR 2006/2 Goods and services tax: deposits held as security for the performance of an obligation provides the Commissioners view on the operation of Division 99 and discusses the characteristics of a security deposit to which Division 99 applies. GSTR 2006/2 also explains the special rules for the attribution of GST on taxable supplies relating to security deposits in more detail.

The following South Australian Acts were considered in preparing this Ruling: • Land and Business (Sale and Conveyancing) Act 1994 (SA) • Local Government Act 1999 (SA) • Local Government (Elections) Act 1999 (SA) • Development Act 1993 (SA) • Dog and Cat Management Act 1995 (SA) • Freedom of Information Act 1991 (SA) • Road Traffic Act 1961 (SA).

Sections 35, 36 and 188 of the Local Government Act 1999 (SA) state: 35 Corporate status (1) A council is a body corporate with perpetual succession and a common seal. (2) A council bears the name assigned to it under this Act. (3) A council consists of the members appointed or elected to the council in accordance with this Act or the Local Government (Elections) Act 1999 . 36 General powers and capacities (1) A council- (a) has the legal capacity of a natural person and, in particular- (i) may enter into any kind of contract or arrangement; and (ii) may sue and be sued; and (iii) may act in conjunction with another council or authority, or a person; and (b) has the other powers and capacities conferred by or under this or another Act; and (c) has the power to do anything necessary, expedient or incidental to performing or discharging its functions or duties or to achieving its objectives. (2) A council may act outside its area- (a) to the extent considered by the council to be necessary or expedient to the performance of its functions; or (b) in order to provide services to an unincorporated area of the State. (3) A council should, in the arrangement of its affairs, take reasonable steps to separate its regulatory activities from its other activities. (4) A council must not do anything inconsistent with a law of the State or Commonwealth. 188 Fees and charges (1) A council may impose fees and charges- (a) for the use of any property or facility owned, controlled, managed or maintained by the council; (b) for services supplied to a person at his or her request; (c) for carrying out work at a persons request; (d) for providing information or materials, or copies of, or extracts from, council records; (e) in respect of any application to the council; (f) in respect of any authorisation, licence or permit granted by the council; (g) in respect of any matter for which another Act provides that a fee fixed under this Act is to be payable; (h) in relation to any other prescribed matter. (2) Fees or charges under subsection (1)(a), (b) or (c) need not be fixed by reference to the cost to the council. (2a) Fees or charges under subsection (1)(d) must not exceed a reasonable estimate of the direct cost to the council in providing the information, materials, copies or extracts. (3) A council may provide for- (a) specific fees and charges; (b) maximum fees and charges and minimum fees and charges; (c) annual fees and charges; (d) the imposition of fees or charges according to specified conditions or circumstances; (e) the variation of fees or charges according to specified factors; (f) the reduction, waiver or refund, in whole or in part, of fees or charges (4) If- (a) a fee or charge is fixed or prescribed by or under this or another Act in respect of a particular matter; or (b) this or another Act provides that no fee or charge is payable in respect of a particular matter, a council may not fix or impose a fee or charge in respect of that matter. (5) Fees and charges may be fixed, varied or revoked- (a) by by-law; or (b) by decision of the council. (6) The council must keep a list of fees and charges imposed under this section on public display (during ordinary office hours) at the principal office of the council. (7) If a council- (a) fixes a fee or charge under this section; or (b) varies a fee or charge under this section, the council must up-date the list referred to in subsection (6) and take reasonable steps to bring the fee or charge, or the variation of the fee or charge, to the notice of persons who may be affected.