Private ruling: GST and amounts paid to a government agency
Date of advice: 7 July 2016
Published: August 2016

Ruling: Q1: Does the Agency make a supply for consideration under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) to the licenced private insurers (insurers) for or in response to, the amounts insurers will pay pursuant to a state Act (State Act) ? | A1: No, on the facts provided, the Agency will not make a supply for consideration under section 9-5 of the GST Act and therefore you will not make a taxable supply on which goods and services tax (GST) is payable. | Q2: Does the Agency make a supply for consideration under section 9-5 of the GST Act to a statutory body for or in response to, the amount the statutory body will pay pursuant to the State Act? | A2: No, on the facts provided, the Agency will not make a supply for consideration under section 9-5 of the GST Act and therefore you will not make a taxable supply on which GST is payable.

Relevant facts and circumstances: • You are an Australian government agency and are registered for GST. You will make supplies connected with the indirect tax zone in the course of your enterprise. Those supplies will not be GST-free or input taxed. • Pursuant to a State law, you are to administer an insurance scheme (Scheme) which provides support care for those eligible persons who sustained certain types of injury. • In administering the Scheme you are also to administer a Fund which will hold moneys : • received by way of the levy imposed under the State law • received or recovered by you in connection with the Scheme, and • income derived from the investment of the Fund. • The Scheme operates in conjunction with other insurance schemes. One of the other insurance schemes governs the liability of insurers whilst the other is managed by a statutory body. • Under the State law you will assume a liability previously covered by the insurer's insurance policy. You will also be responsible for assessing the treatment, care and support needed by participants and making payments in relation to treatment, care and support of the Schemes participants. • Pursuant to the State law amounts are to be transferred into the Fund by the operators of the other two insurance schemes (i.e. the insurers and the statutory body).

Relevant legislative provisions: 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 Section 9-15 and

Reasons for decision: Summary: Under the State law it does not matter whether a supply or supplies exist or not because the transfer of the liability to you and the extinguishment of the insurer's liability as well as the other activities you will undertake are affected by the State law and are independent of and not contingent upon any financial exchange between the insurers. The liability transferred to you would arise irrespective of whether the amounts were paid by the insurers by the operation of statute. As such, there is no relevant nexus between the transfer of responsibilities and the undertaking of other activities and the amounts paid by the insurers. For these reasons there will not be any supply for consideration made by you to the insurers in relation to the amount, to be paid by them. It follows, that as an essential requirement for a taxable supply under paragraph 9-5(a) of the GST Act is not satisfied, the amount received by you from insurers into the Fund pursuant to the State law is not consideration for a taxable supply made by you on which GST is payable. At paragraph 55 of GSTR 2012/2 the Commissioner recognises that some arrangements do not involve the making of any supply and explains that if no supply has been made a key element of the definition of a taxable supply under section 9-5 of the GST Act is not satisfied. As noted above our view is that the Scheme gives rise to acts or things to be undertaken by you which may satisfy the statutory definition of a supply. However, unless there is a sufficient nexus between a payment and the supply, there is no taxable supply under the arrangement. The responsibilities assumed by you under the Scheme are independent of and not contingent upon any financial exchange between the statutory body and you. As such, there is no relevant nexus between the undertaking of those responsibilities and the transfer of amounts into the Fund. For these reasons there will not be any supply for consideration made by you to the statutory body in relation to the amount to be transferred. It follows, that as an essential requirement for a taxable supply under paragraph 9-5(a) of the GST Act is not satisfied, the amount transferred from the statutory body into the Fund pursuant to the State law is not consideration for a taxable supply.

Reasons for decision: You are registered for GST and supplies (if any) made by you under the Scheme are in the course of an enterprise that you carry on and are connected with the indirect tax zone. | The issue that arises under section 9-5 of the GST Act, in the present case, is whether the amounts to be paid into the Fund by the insurers and the statutory body involve a supply for consideration made by you (paragraph 9-5(a) of the GST Act). | The GST liability in relation to such amounts paid into the Fund turns on identifying: | • one or more supplies made by the entity receiving the amounts (you) | • amounts that are consideration (a payment, act or forbearance), and | • a sufficient nexus between the amount of money and the supply. | The definition of 'supply' provided by subsection 9-10(1) of the GST Act includes 'any form of supply whatsoever'. | The Commissioner of Taxation (Commissioner) examines the concept of 'supply' in Goods and Services Tax Ruling: supplies (paragraphs 71 to 79 GSTR 2006/9). To characterise supplies and analyse more complex transactions the Commissioner has set out a number of propositions. Proposition 5 provides that to 'make a supply' an entity must 'do' something. | Under the State law you will assume a liability covered by the insurer's insurance policy. You will also be responsible for administering the Scheme and the Fund, assessing the treatment, care and support needed by participants and making payments in relation to treatment, care and support of the Schemes participants. | Given the broad definition of 'supply', although you may not 'do' anything in relation to the transfer of the liability to you, other activities such administering the Scheme and the Fund do involve you doing something which answer the definition of a supply under section 9-10 of the GST Act. | Nexus between supply and consideration | The Commissioner has considered the concept of 'nexus' between supply and consideration in GSTR 2006/9 and in Goods and Services Tax Ruling GSTR 2012/2: financial assistance payments. | Paragraphs 15 and 16 of GSTR 2012/2 explain that for a financial assistance payment to be consideration for a supply there must be a sufficient nexus between the financial assistance payment made by the payer (in your case the insurers and the statutory body) and a supply made by the payee (you). | Subsection 9-15(1) of the GST Act provides that consideration includes any payment, or any act or forbearance, in connection with, in response to or for the inducement of a supply of anything. In identifying the character of the connection, the word 'for' ensures that not every connection between supply and consideration meets the requirements for a taxable supply. That is, merely having any form of connection of any character between a supply and a payment of consideration is insufficient to constitute a taxable supply.