Private ruling: GST treatment of Emergency Services Levy under Division 81 of the A New Tax System (Goods and Services Tax) Act 1999
Published: February 2013

Ruling: Q1: Are contributions (the levy) that are payable by several entities to you subject to goods and services tax (GST)? | A1: No.

Relevant facts and circumstances: You are a state government agency. You are registered for GST. You have responsibility for particular activities in certain emergencies and incidents. To assist with funding your operations, you receive levy amounts from several entities. The levy is imposed under statute, and is used to fund your costs in respect of remaining on standby to respond to emergencies. Relevant legislation imposes the contributions and advises the total amount of contributions to be paid, as well as who is liable to pay the contributions and the proportion of their contributions. You have entered into a Memorandum of Understanding (MOU) with various other agencies performing similar activities. Under the MOU, one of these agencies collects and distributes the levy on behalf of you and the other agencies. The MOU sets out the responsibilities of the parties. In particular the agencies are responsible for informing the collecting agency of new debtors and the calculation of contributions payable by relevant entities. The MOU provides that the agencies will receive a weekly distribution from the collecting agency in proportion to the amounts collected on behalf of each agency. Contributions payable by the entities are currently specified in the A New Tax System (Goods and Services Tax) (Exempt Taxes, Fees and Charges) Determination 2011 (No.1) (the Determination). You have therefore treated the levy as not subject to GST.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 Section 9-5 | Division 81 | A New Tax System (Goods and Services Tax) Regulations 1999 Division 81

Reasons for decision: Summary: Summary Division 81 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) operates to exempt the levy charges imposed from being consideration for any supply that you may make. Therefore no taxable supply is made and GST is not payable on these charges. Detailed reasoning Background GST is payable on taxable supplies. Section 9-5 of the GST Act provides that you make a taxable supply if: (a) you make the supply for consideration; and (b) the supply is made in the course or furtherance of an enterprise that you carry on; and (c) the supply is connected with Australia: and (d) you are registered or required to be registered. However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. Also, relevant to your circumstances, chapter 4 of the GST Act contains special GST rules that apply in particular circumstances. The special rules modify the application of the basic GST rules. Rules in Division 81 of the GST Act provide that certain payments to Australian government agencies are not the provision of consideration. The application of this Division must be considered in your circumstances. When the GST was introduced the Commonwealth, states and territories agreed that the GST would apply to the commercial activities of government at all levels, but that the non-commercial activities of government would be outside the scope of the GST. Division 81 of the GST Act gives effect to this agreement. Until 1 July 2011, various exemptions were set out in detail in the Determination. As a transitional measure, fees and charges listed in the Treasurer's determination as at 30 June 2011 remain exempt until 1 July 2013. Currently the relevant charges are specified in the Determination and are therefore exempt from being subject to GST until 1 July 2013 by virtue of sub regulation 81-15.01(1)(h) of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations). Division 81 of the GST Act was amended as of 1 July 2011. The amended legislation continues the intention that regulatory charges that do not relate to particular goods or services will be exempt from GST. In this context, Division 81 of the GST Act allows entities to self assess the GST treatment of a payment of an Australian fee or charge in accordance with certain principles. Australian tax, fee or charge It is necessary to determine whether the fees or charges described meet the specific requirements of an Australian fee or charge before the further substantive requirements of Division 81 (and the regulations made under Division 81) can be considered. An Australian fee or charge is a fee or charge (however described), imposed under an Australian law and payable to an Australian government agency (section 195-1 GST Act). An Australian law means a Commonwealth, state or territory law. Australian government agency means the Commonwealth, a state or territory, or an authority of the Commonwealth or of a state or territory (section 195-1 GST Act, as defined by reference to section 995-1, Income Tax Assessment Act 1997 (ITAA 1997)). Australian government agency has the meaning given by section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997). This in turn provides that Australian government agency means the Commonwealth, a State or a Territory, or an authority of the Commonwealth or of a State or a Territory. We consider that under this definition you are an Australian government agency. We consider that you impose the relevant charge, and are given the authority to do so under relevant legislation (a state law, and therefore an Australian law). You then assign the right to collect the payment to another agency to collect it on your behalf. In these circumstances we still consider that the payment is made to you. However, we note in addition that the payment is made to an agency that is also an Australian government agency, and therefore satisfies the requirements of the legislation that the fee be paid to an Australian government agency. Therefore, as you impose a fee under a state law and the fee is payable to an Australian government agency this will meet the requirements of an Australian fee or charge. Payment of the Australian fee or charge is not consideration Section 81-15 of the GST Act provides that regulations may be made with the effect that payment a prescribed Australian fee or charge, or an Australian fee or charge of a prescribed kind, is not the provision of consideration. Such regulations have been made under the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations)(see regulation 81-15.01). We consider that sub regulation 81-15.01(d) is particularly relevant in your circumstances. This provides that a fee or charge to compensate an Australian government agency for costs incurred by the agency in undertaking regulatory activities does not constitute consideration. The fee or charge provides funding for your operations which include the management of emergencies and responding to certain incidents. We consider that these activities are pursuant to your duties under your legislation, and are of a regulatory nature. The term 'regulatory' captures those activities of a government agency, where the agency is legislatively empowered to undertake those activities and they are for a regulatory purpose 1 . You are authorised under the Act to take measures anywhere in the State for protecting persons from injury or death and property from damage, whether or not a relevant incident is involved. Therefore you are required to protect the community at large. The charges do not relate to particular goods or services, and are therefore not intended to be subject to GST. We therefore consider that this meets the requirements that the fee or charge is for funding your regulatory activities. Examples given in the Explanatory Statement of fees that are considered to be exempt under this sub-regulation include, but are not limited to, fees charged in carrying out statutory duties, fees for false fire alarms and fees and charges in relation to hazardous material incidents. We consider that the contributions that are required to be made to you are of this nature. This confirms that they are appropriately treated as being exempt from being consideration under this sub-regulation and therefore under Division 81 of the GST Act. Conclusion As we consider that the amount is payment of an Australian fee or charge under this sub-regulation and therefore not consideration, it is not necessary to consider whether it is also exempt under any other sub-regulation or whether it could also be characterised as an Australian tax. Similarly, it may be arguable that the consideration does not have sufficient connection to any supply made by you, or that you do not actually make any supply at all by fulfilling your statutory obligations for the general community. However, we do not consider it necessary to explore these further. By all of this reasoning the outcome is the same as already described, being that GST is not payable.

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