Private ruling: Application of GST to fees associated with the registration and regulation of a particular industry
Published: May 2013

Ruling: Q1: Is the supply by the entity of registering and regulating a particular industry exempt from goods and services tax (GST) under Division 81 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) from 1 July 2013? | A1: Yes, the supply by the entity of registering and regulating the particular industry is exempt from GST under Division 81 of the GST Act from 1 July 2013.

Relevant facts and circumstances: The entity is a statutory authority responsible to a Minister of the State. The entity was established under a State Act to provide for the registration and regulation of members of a particular industry. The entity charges fees for the registration and regulation of that industry. The entity is a government agency and is registered for GST. The fees are currently exempt from GST as they are specified in the A New Tax System (Goods and Services Tax) (Exempt Taxes, Fees and Charges) Determination 2011 (No. 1) (the Treasurer's Determination).

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 subsection 7-1(1) | A New Tax System (Goods and Services Tax) Act 1999 section 9-5 | A New Tax System (Goods and Services Tax) Act 1999 section 9-10 | A New Tax System (Goods and Services Tax) Act 1999 subsection 9-10(2) | A New Tax System (Goods and Services Tax) Act 1999 subsection 9-15(1) | A New Tax System (Goods and Services Tax) Act 1999 section 9-40 | A New Tax System (Goods and Services Tax) Act 1999 Division 81 | A New Tax System (Goods and Services Tax) Act 1999 section 81-10 | A New Tax System (Goods and Services Tax) Act 1999 section 81-15 | A New Tax System (Goods and Services Tax) Act 1999 section 195-1 | A New Tax System (Goods and Services Tax) Regulations 1999 regulation 81-15.01 | A New Tax System (Goods and Services Tax) Regulations 1999 paragraph 81-15.01(1)(f) | Income Tax Assessment Act 1997 section 995-1

Reasons for decision: Summary: Subsection 7-1(1) of the GST Act provides that GST is payable on taxable supplies. Under section 9-40 of the GST Act, you must pay the GST payable on any taxable supply that you make. You make a taxable supply under section 9-5 of the GST Act if: you make the supply for consideration the supply is made in the course or furtherance of an enterprise that you carry on the supply is connected with Australia, and you are registered or required to be registered for GST. However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. The meaning of 'supply' is given in section 9-10 of the GST Act and in addition to the general words 'any form of supply whatsoever' includes, under subsection 9-10(2) of the GST Act, a supply of goods, services and an entry into an obligation to do anything, etc. The registration and regulating of an industry would come within the definition of a supply under section 9-10 of the GST Act. The term ' consideration' is defined in subsection 9-15(1) of the GST Act as including any payment, or any act or forbearance in connection with, or in response to or for the inducement of a supply of anything. On the facts provided, the entity is registered for GST and the registering and regulating of the particular industry is made in Australia in the course or furtherance of carrying on its enterprise. There are no provisions under Division 38 or Division 40 of the GST Act which would make this supply GST-free or input taxed. The issue that arises under section 9-5 of the GST Act is whether the entity's supply is for consideration, that is, is the fee charged by the entity consideration for its supply of registering and regulating the industry. Item 8 in the table to section 9-39 of the GST Act provides that there are special rules relating to taxable supplies under Division 81 of the GST Act in relation to the payments of fees and charges. Division 81 of the GST Act Payments of fees and charges generally constitute consideration and if the requirements of section 9-5 of the GST Act are satisfied, the payment will be for a taxable supply on which GST is payable. Under subsection 81-10(1) of the GST Act, Australian fees and charges of a kind covered by subsections 81-10(4) and (5) of the GST Act are not the provision of consideration. Australian fee or charge The term 'Australian fee or charge' is defined in section 195-1 of the GST Act 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. (*asterisked terms are defined in section 195-1 of the GST Act) Subsection 81-10(4) of the GST Act covers those fees and charges that relate to, or relate to an application for the provision, retention or amendment, under an Australian law, of a permission, exemption, authority or licence (however described). In addition, subsection 81-10(5) of the GST Act covers those fees and charges paid to an Australian government agency if the fee or charge relates to the agency doing any of the following: · recording information · copying information · modifying information · allowing access to information · receiving information · processing information, and · searching for information. As a payment which is covered by subsections 81-10(4) or (5) of the GST Act is not consideration, the supply to which it relates is not a taxable supply on which GST is payable. This is the case unless the payment is of a kind covered by subsections 81-10(2) or (3) of the GST Act which provide that certain Australian fees or charges that are of a kind prescribed by regulation are treated as the provision of consideration for a supply. These supplies will be taxable where the requirements of a taxable supply under section 9-5 of the GST Act are satisfied. Conversely, section 81-15 of the GST Act provides that where an Australian fee or charge is prescribed by regulation, the payment of the fee or charge is not the provision of consideration. Australian law The term 'Australian law' is defined in section 195-1 of the GST Act as having the meaning given by section 995-1 of the Income tax Assessment Act 1997 (ITAA 1997) which states: Australian law means a *Commonwealth law, a *State law or a *Territory law. An Australian law includes Acts and law making powers which are delegated by parliaments such as regulations, by-laws, proclamation and orders made under Acts. The Act in this case is a State law. Australian government agency Section 195-1 of the GST Act defines the term "Australian government agency' as having the meaning given by section 995-1 of the ITAA 1997 which states: Australian government agency means: the Commonwealth, a State or a Territory; or an authority of the Commonwealth or of a State or a Territory. The entity is a government agency for the purposes of the GST Act. It is accepted, on the facts that the fees paid to the entity for the registration and regulation of the industry is an Australian fee or charge and it is therefore, necessary to consider whether the payment of the fees is of a kind covered by subsections 81-10(4) or (5) of the GST Act. A payment that is covered by subsections 81-10(4) or (5) of the GST Act is not consideration and as such, the supply to which it relates is not a taxable supply on which GST is payable. It is necessary to consider whether the fee paid to the entity relates to an application for the provision of a permission to undertake particular work. The term 'relates to' requires a nexus, link or connection between the fee and the provision of the permission. Hill J in HP Mercantile Pty Ltd v FC of T 2005 ATC 4571 considered the meaning of the term 'relates to' and said that some real or substantial connection is required although it may be direct or indirect. What is required is a relevant connection and not merely a remote link. In the present case, the fees are paid by members of the industry to the entity so that they can be registered. When the entity assesses the requirements and registers a member, it is considered to be providing permission to that member to undertake their occupation. Therefore, there is a real connection between the fees paid and the permission such that the fee can be said to relate to the permission. As such, it is accepted that fees paid to the entity for the registration and regulation of members of the industry relates to an application for the provision of a permission that would be granted under an Australian law by a relevant authority and as such, is a fee of a type covered by subsection 81-10(4) of the GST Act. Accordingly, the payment of the fees is not the provision of consideration to the extent that it is covered by subsection 81-10(4) of the GST Act and the supply by the entity will be exempt from GST from 1 July 2013. GST Regulations The application of regulation 81-15.01 of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations) is also of relevance to the issue in this case. Regulation 81-15.01 of the GST Regulations sets out those fees and charges that are prescribed for section 81-15 of the GST Act and which do not constitute consideration. Paragraph 81-15.01(f) of the GST Regulations refers to 'a fee or charge for a supply of a regulatory nature made by an Australian government agency'. The term 'regulatory nature' is not defined in the GST Regulations or the GST Act. The Explanatory Statement (ES) to the A New Tax System (Goods and Services Tax) Amendment Regulation 2012 (No.2) states: The term 'regulatory' captures those supplies made by a government agency, where that agency is legislatively empowered to make the relevant supply and the supply is to satisfy a regulatory purpose. In some instances, although the consumer acquires something that may be of intrinsic value to the consumer, the acquisition is made in the context of satisfying a regulatory requirement of an Australian law… The Act in this case is a State law. The entity is a government agency. It can, therefore, be argued that the entity's supply is of a regulatory nature and is covered by paragraph 81-15.01(1)(f) of the GST Regulations. As such, this supply would be exempt from GST by virtue of section 81-15 of the GST Act. Therefore, the supply by the entity is exempt from GST under Division 81 of the GST Act from 1 July 2013.