Waverley Council and Commissioner of Taxation
Document type: Decision Impact Statement
Venue: Administrative Appeals Tribunal (2008/2920)
Judgment date: 19 June 2009
Date published: 17 September 2009
Decision outcome: Favourable

Summary of decision:
Outlines the Tax Office's response to this case which concerned: the GST treatment of a credit card administration fee imposed by a local council when a credit card is used to pay council charges; and the onus of proof provisions in s.14ZZK of the TAA 1953

Overview of facts:
The taxpayer ("the Council") is a local government authority under the Local Government Act 1993 (NSW) ("the LG Act"); and an Australian government agency within the meaning of that term in section 195-1 of A New Tax System (Goods and Services Tax) Act 1999 ("the GST Act"). Under section 608 of LG Act the Council may charge an approved fee for any service, product or commodity it provides, including services in connection with its regulatory functions (such as applications for or granting of approvals, or making inspections or issuing certificates). | At the relevant time the various fees and charges imposed by the Council included fees for residential parking permits (residential parking fees) and beach parking permits (beach parking fees), development applications and building applications (building and development application fees); and animal registration fees (animal registration fees) etc under various enabling NSW Acts. | The building and development application fees, animal registration fees and residential parking fees were specified in A New Tax System (Goods and Services Tax ) ( Exempt Tax, Fees and Charges) Determination 2006 , issued by the Minister for Revenue and Assistant Treasurer on 26 June 2006 pursuant to section 81-5(2), GST Act (Treasurer's Determination). The beach parking fees are not specified in the Treasurer's Determination. Specified fees and charges are not subject to GST. | When a fee or charge imposed by the Council is paid by credit card, the Council charges the payer of the fee or charge an additional sum equal to 1.1% of the total fees or charges being paid for by credit card (credit card fee). | In February 2007 the Council requested that the Commissioner make an assessment of the net amount due by the Council for the tax period of October 2006 under section 105-5(1), Schedule 1, Taxation Administration Act 1953 (Administration Act). On 28 February 2007 the Commissioner issued a notice of assessment of net amount for the period of October 2006 (the assessment) in the amount of $237,152/Cr (assessed net amount), being a refund of that amount payable to the Council. | On 13 March 2007 the Council objected to the assessment on the basis that the assessed net amount should be reduced to $237,150/Cr, being a refund of $2 less than the refund in the assessment (proposed net amount). | The Council applied to the Tribunal for a review of the objection decision on 30 June 2008 after the objection was disallowed by the Commissioner. | Issues decided by the Administrative Appeals Tribunal | Proper GST treatment of the credit card administration fee | The Council argued that, based upon Division 81 of the GST Act, because it was an "Australian government agency" as defined and the credit card fee was imposed by it under section 806 of the LG Act, the credit card always attracts GST. The Council argued that this must be the case because the credit card fee was not specified in the Treasurer's Determination which specified fees and charges that are not subject to GST. | The Commissioner submitted that the credit card fee is not itself an "Australian tax, fee or charge", but rather that it was part of the fee for the underlying supply that the credit card is being used to pay. | The Tribunal affirmed the objection decision under review, concluding that the credit card could not be a stand-alone fee in itself - it is really part of the fee for the underlying supply. There is one payment and one supply. | Burden of proof - taxpayer dissatisfied because assessment too low | The Tribunal agreed with the Commissioner's view that, in circumstances where the applicant is asserting that an assessment is too low, the onus is on the applicant to prove that the taxation decision concerned should not have been made or should have been made differently under s 14ZZK(b)(iii), rather than under s 14ZZK(b)(i) which puts the onus on the applicant to prove that the assessment is excessive. | In this case, the Tribunal concluded that the Council failed to prove that the Commissioner's assessment was wrong.

Issues decided:
Proper GST treatment of the credit card administration fee: The Council argued that, based upon Division 81 of the GST Act, because it was an "Australian government agency" as defined and the credit card fee was imposed by it under section 806 of the LG Act, the credit card always attracts GST. The Council argued that this must be the case because the credit card fee was not specified in the Treasurer's Determination which specified fees and charges that are not subject to GST. The Commissioner submitted that the credit card fee is not itself an "Australian tax, fee or charge", but rather that it was part of the fee for the underlying supply that the credit card is being used to pay. The Tribunal affirmed the objection decision under review, concluding that the credit card could not be a stand-alone fee in itself - it is really part of the fee for the underlying supply. There is one payment and one supply. | Burden of proof - taxpayer dissatisfied because assessment too low: The Tribunal agreed with the Commissioner's view that, in circumstances where the applicant is asserting that an assessment is too low, the onus is on the applicant to prove that the taxation decision concerned should not have been made or should have been made differently under s 14ZZK(b)(iii), rather than under s 14ZZK(b)(i) which puts the onus on the applicant to prove that the assessment is excessive. In this case, the Tribunal concluded that the Council failed to prove that the Commissioner's assessment was wrong.

ATO view of decision:
Proper GST treatment of the credit card administration fee | The Tribunal's decision confirms the Commissioner's view that a credit card fee forms part of the consideration for the underlying supply and its GST attributes are determined by reference to the attributes of the amount for the underlying supply that the credit card is used to pay (see ATO ID 2008/116 and Issue 15.1 of the Financial services - questions and answers (available on the Tax Office website)). The Tribunal's decision further confirms that Division 81 of the GST Act does not operate to require that the credit card fee be treated as a stand alone fee. | The Tribunal's reasoning confirms that a practical and common sense approach to the interpretation of the GST law should be adopted. In applying the GST law, a result that amounts to a triumph of form over substance would not promote the 'practical and fair business operation' of the tax and would not accord with the commercial reality of the arrangement. | Burden of proof - taxpayer dissatisfied because assessment too low | The Tribunal's decision confirms the Commissioner's view that, in circumstances where the taxpayer is asserting that the assessment is too low, the question of onus of proof falls to be considered under s 14ZZK(b)(iii), and not s 14ZZK(b)(i). That is, the onus is on the taxpayer to prove to the Tribunal that the taxation decision concerned should not have been made or should have been made differently.

Administrative treatment:
Implications on current Public Rulings & Determinations | None.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 9-5 9-15 9-20 45-5 81-5 81-10 195-1 Taxation Administration Act 1953 14ZZK(b)(i) 14ZZK(b)(iii) Local Government Act 1993 (NSW)
Case references: CTC Resources NL v Commissioner of Taxation [1994] FCA 947 94 ATC 4072 48 FCR 397 27 ATR 403 Saga Holidays Ltd v Commissioner of Taxation [2006] FCAFC 191 156 FCR 256 2006 ATC 4841 64 ATR 602 Sterling Guardian Pty Limited v Commissioner of Taxation [2005] FCA 1166 2005 ATC 4796 60 ATR 502 220 ALR 550 Brady King Pty Ltd v Commissioner of Taxation [2008] FCAFC 118 2008 ATC 20-034 69 ATR 670 Re AGR Joint Venture and Commissioner of Taxation [2007] AATA 1870 2007 ATC 2692 70 ATR 466
Subject references: GST credit card administration fee imposed by a local council whether GST payable whether a stand-alone fee for a stand-alone service or part of the payment for the underlying thing being paid for onus of proof review by the Administrative Appeals Tribunal
Other references: A New Tax System (Goods and Services Tax) (Exempt Taxes, Fees and Charges) Determination 2006