Private ruling: Payments for the Levy as Consideration for a Taxable Supply
Published: August 2013

Ruling: Q1: From 1 July 2013, are payments for the Levy made to you consideration for a taxable supply? | A1: No, from 1 July 2013, payments received by you for the Levy is not consideration for a taxable supply.

Relevant facts and circumstances: You are registered for GST. You levy an annual charge at a specified rate on all rateable properties within your local government area for the general purposes of additional waste costs. This annual charge is levied separately from other waste management services such as kerbside collection. Ratepayers are not provided with a direct service from providing payment for the Levy, as the charge is only levied to provide and maintain waste management infrastructure as well as to cover waste costs that are in addition to the general waste collection services. The charge results in a general benefit being provided to the community at large and to regional visitors in the local government area. You are a Local Government Authority empowered under the Local Government Act (LG Act) to: (a) provide goods, services and facilities and to carry out activities, appropriate to the current and future needs of local communities and of the wider public (b) maintain responsibility for administering the regulatory systems under the LG Act, (c) to manage, improve and develop the resources of their local government areas, and (d) to oversee the allocation of the local government's finances and resources. You were granted the power to make fees and charges for these additional waste costs and waste management infrastructure costs under the LG Act. There is no distinction between domestic and non-domestic for the purposes of this charge as the funding goes towards providing the infrastructure and additional waste costs to service both categories of ratepayer. The charge is enforceable by law via the LG Act. You may sell property to collect outstanding rates as provided by the LG Act.

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 9-39 | 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 81-5 | A New Tax System (Goods and Services Tax) Act 1999 section 195-1 | Income Tax Assessment Act 1997 section 995-1

Reasons for decision: Summary: Subsection 7-1(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that GST is payable on taxable supplies. Under section 9-40 of the GST Act, an entity must pay the GST payable on any taxable supply that it makes. An entity makes a taxable supply under section 9-5 of the GST Act if: (a) it makes the supply for consideration (b) the supply is made in the course or furtherance of an enterprise that it carries on (c) the supply is connected with Australia, and (d) it is 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 issue that arises under section 9-5 of the GST Act is whether the Levy paid by your residents to you is consideration for a taxable supply. 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 taxes, fees and charges. Australian Tax Section 81-5 of the GST Act considers the effect of the payment of a tax. It states: 81-5 Effect of payment of tax Australian tax not consideration A payment, or the discharging of a liability to make a payment, is not the provision of *consideration to the extent the payment is an *Australian tax. Regulations may provide for exceptions However, a payment you make, or a discharging of your liability to make a payment, is treated as the provision of *consideration to the extent that payment is an *Australian tax that is, or is of a kind, prescribed by the regulations. For the purposes of subsection (2), the *consideration is taken to be provided to the entity to which the tax is payable, for a supply that the entity makes to you." Currently, there are no regulations that prescribe the payment of an Australian tax to be the provision of consideration. The term 'Australian tax' is defined in section 195-1 of the GST Act as: "Australian tax means a tax (however described) imposed under an *Australian law." The term 'Australian law' is defined by section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) and relevantly includes a State law. An Australian law includes Acts and law making powers which are delegated by parliaments, such as regulations, by-laws, proclamations and orders made under Acts. You derive your authority to impose rates and annual charges under the LG Act. Therefore, rates and charges are imposed under an Australian law for the purposes of Division 81 of the GST Act. The term 'Australian government agency' is defined by section 995-1 of the ITAA 1997. 'Australian government agency' means: (a) the Commonwealth, a State or Territory; or (b) an authority of the Commonwealth or of a State or a Territory. For the purposes of Division 81 of the GST Act, it is accepted that you come within the definition of an Australian government agency. The usual description of a tax, as cited in the High Court case of Roy Morgan Research Pty Ltd v CMR of Taxation [2011] HCA 35 ( Roy Morgan ), as per Latham CJ in Matthews v Chicory Marketing Board (Vic ) (1938) 60 CLR 26, is that it is: ..a compulsory exaction of money by a public authority for public purposes, enforceable by law, and is not a payment for services rendered … The Levy is a charge imposed on all rateable properties in your local government area. The landowner is liable under the LG Act to pay the Levy to you and the LG Act provides recovery options where these charges are unpaid. Therefore, the Levy is a compulsory exaction of money that is enforceable by law. The charge is levied by a local government (public authority) and legislation empowers you to enforce their payment, as opposed to being payment for services rendered. The Levy is levied on all land owners by incidence of their ownership of land in a local government area. The Levy is only indirectly linked with the provision of waste services in that it provides a benefit to the community at large as well as visitors by funding waste infrastructure. We consider that the Levy satisfies the usual description of a 'tax' as cited in the High Court case above, hence, we consider the Levy to be a payment of an Australian tax for the purposes of section 81-5 of the GST Act. Therefore, the payment of the Levy is not consideration for a taxable supply by you and is exempt from GST.