ATO ID 2001/133: GST and Stamp Duty
Date of decision: 6 June 2001
Business line: Indirect Tax

Issue
Is the entity, a hire company, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it hires out goods to a customer in exchange for a fee that includes an amount on-charged by the entity for stamp duty incurred in the course of making the supply?

Decision
Yes, the entity is making a taxable supply under section 9-5 of the GST Act when it hires out goods to a customer in exchange for a fee that includes an amount on-charged by the entity for stamp duty incurred in the course of making the supply.

Facts
The entity is a hire company. The entity pays stamp duty to a State government in the course of its enterprise. As the stamp duty incurred by the entity is listed in the A New Tax System (Goods and Services Tax) (Exempt Taxes, Fees and Charges) Determination 2001 (Determination), it is not subject to goods and services tax (GST) by virtue of subsection 81-5(2) of the GST Act. The entity hires out goods to a customer in exchange for a monetary fee. Included in that monetary fee is an amount on-charged by the entity to its customer for the stamp duty paid by the entity to a State government. The entity is registered for GST. The supply is made in the course or furtherance of the entity's enterprise and is connected with Australia.

Reasons for decision
Summary: Under section 9-5 of the GST Act, an entity makes a taxable supply if: In this case, the entity is registered for GST and the supply is made in the course of the entity's enterprise and is connected with Australia. As such, it is necessary to consider whether the entity is making a supply to its customer for 'consideration' as per the requirement in paragraph 9-5(a) of the GST Act. Paragraph 9-15(1)(a) of the GST Act provides that 'consideration' includes any payment in connection with a supply of anything. In this case, the entity has received consideration from its customer in the form of a monetary fee. However, subsection 81-5(2) of the GST Act states that the payment of any Australian tax, fee or charge that is specified in a written determination of the Treasurer is not the provision of consideration. In this case, the stamp duty incurred by the entity is specified in a written determination of the Treasurer, namely the Determination. However, it is considered that taxes, fees and charges incurred by a supplier in the course of its enterprise are 'business costs'. When a supplier on-charges a business cost to its customers, the business cost loses its character as a tax, fee or charge for the purposes of the Determination. Therefore, in this case, when the entity on-charges the cost of stamp duty incurred to its customer, the customer is no longer paying stamp duty to a State government but rather they are paying for a business cost of the entity. As such, the payment by the entity's customer amounts to consideration under paragraph 9-15(1)(a) of the GST Act, because the payment does not come within the scope of subsection 81-5(2) of the GST Act. Therefore, the entity is making a supply for consideration under paragraph 9-5(a) of the GST Act. In this case, the entity is registered for GST and the supply meets the other positive limbs of section 9-5 of the GST Act. Furthermore, as the supply is neither GST-free under Division 38 of the GST Act, nor input taxed under Division 40 of the GST Act; the entity is making a taxable supply under section 9-5 of the GST Act.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 9-5 paragraph 9-5(a) section 9-15 paragraph 9-15(1)(a) section 9-75 Division 38 Division 40 subsection 81-5(2)
Related public rulings and determinations: Goods and Services Tax Determination GSTD 2000/10
Other references: A New Tax System (Goods and Services Tax) (Exempt Taxes, Fees and Charges) Determination 2001
Subject references: Goods & services tax GST free GST miscellaneous GST ministerial determinations GST special rules GST payment of taxes GST supplies & acquisitions GST consideration Taxable supply