GST treatment of Australian fees or charges under Division 81 of the A New Tax System (Goods and Services Tax) Act 1999

This practice statement applies on and from 1 July 2013 to Australian government agencies [1] self-assessing the GST classification of supplies under section 81-10 of the A New Tax System (Goods and Services Tax) Act 1999 . [2] It applies to Australian fees or charges [3] listed in the A New Tax System (Goods and Services Tax) (Exempt Taxes, Fees and Charges) Determination 2011 (No. 1) (Treasurer's determination) which are received as consideration for the supplies they make.

Australian government agencies encompass local municipal and shire councils, state and territory entities, and Commonwealth entities.

The treatment in this practice statement applies to Australian government agencies that self-assess Australian fees or charges as being 'exempt' [4] in accordance with the Treasurer's determination. If an Australian fee or charge that receives this treatment is subsequently considered not to be exempt, the Commissioner will require the treatment to be changed prospectively.

It does not apply to Australian government agencies in self-assessing: (a) Australian taxes - subsection 81-5(1) applies to these items; and (b) Australian fees or charges not listed in the Treasurer's determination.

Division 81 provides the GST treatment of Australian taxes and Australian fees or charges received by Australian government agencies for supplies that they make.

Division 81 was amended with effect from 1 July 2011 to enable Australian government agencies to self-assess the GST treatment of Australian taxes and Australian fees or charges. Regulations 81-10.01, 81-15.01 and 81-15.02 of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations), [5] were introduced to make certain Australian fees or charges: • consideration for a supply and subject to GST; [6] or • not consideration for a supply and exempt.

The Division 81 amendments including the GST regulations are intended to largely maintain the GST treatment of the Australian taxes, fees or charges provided by the Treasurer's determination.

The Treasurer's determination made for purposes of Division 81 ceases to have effect on and from 1 July 2013. [7] Australian government agencies as a result need to self-assess the GST treatment of all the fees and charges previously listed in the Treasurer's determination.

On and from 1 July 2013, and subject to paragraph 10, the ATO will take the administrative approach that: (a) if an Australian government agency classifies Australian fees or charges listed on the Treasurer's determination as being 'exempt' in accordance with the Treasurer's determination, the Commissioner will not disturb the treatment retrospectively; (b) if an Australian fee or charge that is treated as 'exempt' is subsequently considered not to be 'exempt', the Commissioner will require the treatment to be changed prospectively.

Australian fees or charges that will not be eligible to receive this treatment are those Australian fees or charges: (a) listed on the Treasurer's determination that are regarded as being consideration for a supply under regulation 81-10.01 of the GST regulations; [8] or (b) in respect of which the Commissioner has issued a private ruling to an entity or issued a public ruling (including a Class Ruling).

Australian government agencies should self-assess Australian taxes and Australian fees or charges not listed on the Treasurer's determination by using Division 81 and regulations 81-10.01, 81-15.01 and 81-15.02 of the GST regulations.

Australian government agencies must self-assess their GST obligations in relation to Australian taxes and Australian fees or charges using Division 81 and the GST regulations.

Up until 30 June 2011, Division 81 operated by treating a payment of any Australian tax, fee or charge as consideration for a supply unless it was of a kind specified in a legislative instrument by the Treasurer (the Treasurer's determination) made for the purposes of former subsection 81-5(2).

Former subsection 81-5(2) provided that the payment of an Australian tax, fee or charge of a kind specified in a Treasurer's determination, or the discharging of a liability to make such a payment, was not the provision of consideration and hence was not subject to the GST.

Division 81 was amended with effect from 1 July 2011 to enable government agencies to self-assess the GST treatment of Australian taxes and Australian fees or charges.

On and from 1 July 2011, Division 81 operates as follows: (a) the payment of an Australian tax [9] will be 'exempt' under subsection 81-5(1); or (b) an Australian fee or charge will be 'exempt' under subsection 81-10(1) if it is of a kind to which subsections 81-10(4) and (5) apply.

However, regulations can be made with the effect of treating a payment of an Australian tax, or the discharging of a liability to make such a payment, as the provision of consideration for a supply, which may be a taxable supply if the requirements of section 9-5 are satisfied. [10]

Also, regulations can be made with the effect of treating a payment of an Australian fee or charge, or the discharging of a liability to make such a payment, as: (a) the provision of consideration for a supply, which may be a taxable supply if the requirements of section 9-5 are satisfied [11] - regulation 81-10.01 of the GST regulations has been made specifying particular Australian fees or charges that are consideration for a supply; and (b) not the provision of consideration for a supply and therefore 'exempt' [12] - regulation 81-15.01 of the GST regulations has been made specifying particular Australian fees or charges that are not consideration for a supply.

Tie-breaker rules exist if regulations 81-10.01 and 81-15.01 of the GST regulations both apply. Under the tie-breaker rules: (a) If paragraph 81-10.01(1)(g) and regulation 81-15.01 apply, the fee or charge is not the provision of consideration for a supply under subregulation 81-15.02(1). The supply is therefore 'exempt'. (b) If paragraphs 81-10.01(1)(a), (b), (c), (d), (e), (f) or (h) and regulation 81-15.01 apply, the fee or charge is the provision of consideration for a supply under subregulation 81-15.02(2). The supply may be a taxable supply if the requirements of section 9-5 are satisfied. (c) However, if the fee or charge is specified in the Treasurer's determination and was imposed before 1 July 2013, the fee or charge is not the provision of consideration under subregulation 81-15.02(3). The supply is therefore 'exempt'.

The operation of the legislation and the GST regulations is represented in a diagram at Appendix A to this Practice Statement.

Treasurer's determination is a legislative instrument developed for the purposes of former subsection 81-5(2) that specified Australian taxes, fees and charges that are not consideration for a supply, and therefore exempt from GST.

Despite the repeal of former subsection 81-5(2), the application provisions in the Tax Laws Amendment (2011 Measures No. 2) Act 2011 provided that the Treasurer's determination continued to have effect until 30 June 2012. The GST treatment for Australian fees or charges covered by the Treasurer's determination was maintained until 30 June 2013 by paragraph 81-15.01(1)(h) of the GST regulations.

The explanatory memorandum to Tax Laws Amendment (2011 Measures No. 2) Bill 2011 that amended Division 81 states that the process of updating the Treasurer's determination placed an administrative burden on all levels of government. The Treasurer's determination was made bi-annually and extended to approximately 700 pages of taxes, fees or charges. The amendment was intended to reduce this burden by allowing government agencies to self-assess.

The amendment also provides increased certainty by allowing Australian government agencies to treat eligible items as exempt from the time that they are introduced rather than some later time when they are listed in a Treasurer's determination.

Prior to the amendments, to determine the GST treatment of a fee or a charge, Government agencies simply needed to consult the Treasurer's determination.

Some Australian government agencies expressed concerns that the amended Division 81 and the GST regulations that applied from 1 July 2011 did not provide the same certainty of GST treatment for Australian fees or charges that existed prior to the amendments. These concerns were reduced by the publishing of amended GST regulations that applied on and from 1 July 2012 and that extended the operation of the existing Treasurer's determination to 30 June 2013.

The administrative treatment in this Practice Statement provides increased certainty that Australian government agencies have sought in order to administer their GST obligations in respect of Australian fees or charges.

For Australian fees or charges not covered by the administrative treatment under this Practice Statement, an Australian government agency should self-assess by applying the rules of Division 81 and regulations 81-10.01, 81-15.01 and 81-15.02 of the GST regulations.

If an Australian government agency is uncertain of the GST treatment of an Australian fee or charge, they are encouraged to seek a private ruling.