Private ruling: GST and landfill waste charges
Published: December 2012

Ruling: Q1: Is the entrance fee to a landfill site the consideration for a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: Yes, the entrance fee to a landfill site is the consideration for a taxable supply under section 9-5 of the GST Act. Consequently, you are liable to pay goods and services tax (GST) on the supply. The consideration is not reduced by you determining the entrance fee in a way that takes into account the recovery of amounts payable by you as landfill levy under a state environment protection law (EP Act) and as a 'liable entity' under the Clean Energy Act 2011 (CE Act) .

Relevant facts and circumstances: You are a local governing body. You operate landfill sites and you are registered for GST. You make taxable supplies allowing access to the sites for customers to deposit various waste types. You charge customers entrance fees at the gates of the sites. You have advised that you are required to pay the landfill levy under the EP Act. You have advised that the carbon price mechanism (CPM) applies in relation to your sites and you are a 'liable entity' under Subdivision B of Part 3 of the CE Act. You have advised that you determine your entrance fees in way that takes into account the recovery of amounts payable by you as landfill levy and in relation to the CPM of CE Act. Section 4 of the CE Act provides, in so far as is relevant, the following simplified outline of the Act: 4 Simplified outline The following is a simplified outline of this Act: · This Act sets up a mechanism to deal with climate change by encouraging the use of clean energy. · The mechanism begins on 1 July 2012, and operates on a financial year basis. · The mechanism is administered by the Clean Energy Regulator. · If a person is responsible for covered emissions of greenhouse gas from the operation of a facility, the facility's annual emissions are above a threshold, and the person does not surrender one eligible emissions unit for each tonne of carbon dioxide equivalence of the gas, the person is liable to pay unit shortfall charge. · …. Section 5 of the CE Act contains the following relevant definitions 5 Definitions In this Act: · facility has the same meaning as in the National Greenhouse and Energy Reporting Act 2007 . Note: See also section 311 (transitional). · landfill facility means a facility for the disposal of solid waste as landfill, and includes a facility that is closed for the acceptance of waste. liable entity means: · a person who, under a provision of this Act, is a liable entity; or · a person who, under the Opt-in Scheme, is a liable entity. Section 23 of the CE Act contains the following relevant provisions in relation to landfill facilities: Subdivision B-Landfill facilities 23 Liable entity for landfill emissions-person who has operational control of a landfill facility Scope (1) This section applies if: (a) either: (i) a landfill facility was under the operational control of a person throughout an eligible financial year; or (ii) a landfill facility was under the operational control of a person for a number of, but not all, days in an eligible financial year (the control days ); and (b) the facility passes the threshold test set out in subsection (4) or (5) for the eligible financial year; and (c) the total amount of covered emissions from the operation of the landfill facility: (i) if subparagraph (a)(i) applies-during the eligible financial year; or (ii) if subparagraph (a)(ii) applies-during the control days; has a carbon dioxide equivalence of a particular number of (2) …. Liable entity (3) For the purposes of this Act, the person is a liable entity for the eligible financial year. (4) ……

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 9-5 | A New Tax System (Goods and Services Tax) Act 1999 section 9-40 | A New Tax System (Goods and Services Tax) Act 1999 Division 81 | A New Tax System (Goods and Services Tax) Act 1999 subsection 81-5(2)

Reasons for decision: Summary: The entrance fee to a landfill site is the consideration for a taxable supply under section 9-5 of the GST Act. The consideration is not reduced by you determining the entrance fee in a way that takes into account the recovery of amounts payable by you as landfill levy under the EP Act and as a 'liable entity' under the CE Act | Detailed Reasoning - Detailed reasoning: Section 9-40 of the GST Act provides that an entity must pay GST on any taxable supply that it makes. Under section 9-5 of the GST Act, an entity makes a taxable supply if: · the entity makes the supply for consideration · the supply is made in the course or furtherance of an enterprise that the entity carries on · the supply is connected with Australia, and · the entity 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. If all the requirements of section 9-5 of the GST Act are satisfied, a supplier is making a taxable supply and is liable to pay GST to the ATO on all supplies made, unless they are GST-free or input taxed. The first requirement of a taxable supply to be satisfied is that there is a supply for consideration. In your case, you charge customers entrance fees at the gates of your landfill sites for allowing access to deposit various types of waste. You have advised that you determine your entrance fees in a way that takes into account recovery of amounts payable by you in relation to operating the sites. Specifically, the amounts you contemplate recovering pertain to the following items: · you are required to pay a landfill levy under the EP Act, and · the CPM applies in relation to your sites and you are a 'liable entity' under Subdivision B of Part 3 of the CE Act. You have asked us to examine if the way in which you determine your entrance fees, by taking into account the cost to you of the landfill levy and CPM amounts payable by you, has the effect of reducing the consideration for the taxable supplies you make to an amount that is less than the entrance fees. In particular, you have asked us to have regard to whether Division of 81 of the GST Act, which is about payments of certain Australian taxes, fees and charges that are not treated as consideration for supplies and are excluded from the GST, is relevant to ascertaining the amount of the entrance fee which is treated as the consideration for your supplies. In other words the entrance fee includes costs to you of providing the service such as the landfill levy you pay under the EP Act and the CPM. If these costs are not subject to GST, you want to know whether you should also exclude the amount of these costs when calculating the GST payable by your customers when you charge the entrance fee. | Detailed Reasoning - Division 81: The former Division 81 of the GST Act was replaced with a new Division 81 by the Tax Laws Amendment (2011 Measures No. 2) Act 2011 (the amending Act). In accordance with an application provision in the amending Act (item 16 of Schedule 4): · the new Division 81 applies in relation to the payment (or the discharging of the liability to make a payment) relating to any Australian tax, or any Australian fee or charge (tax, fee or charge), imposed on or after 1 July 2011. · however, if the tax, fee or charge is imposed before 1 July 2013, former Division 81 continues to apply (is 'grandfathered'), provided the payment is of a kind specified by a legislative instrument (a Division 81 Determination) made for the purposes of former subsection 81-5(2) of the GST Act, and in force immediately prior to 27 June 2011. The Division 81 Determination, the A New Tax System (Goods and Services Tax)(Exempt taxes, fees and charges) Determination 2011 (No. 1) , which lists all Australian taxes, fees and charges that are not treated as consideration (with the effect that supplies to which they relate are not subject to GST) was grandfathered for two years. Therefore, taxes, fees and charges that are imposed prior to 1 July 2013 and are currently listed in the Determination are not subject to GST for the transitional period until 30 June 2013. From 1 July 2013, any supplies to which they relate will be assessed against the provisions of the new Division 81. Division 81 of the GST Act only applies to the payment (or the discharging of the liability to make a payment), of Australian taxes, fees or charges by the entity who is liable for the tax, fee or charge under the provisions of the applicable Australian law. In your case, you have advised that you are required to pay the landfill levy under the EP Act. You have also advised that the CPM applies in relation to your landfill sites and you are a 'liable entity' under Subdivision B of Part 3 of the CE Act. Your liabilities to pay these amounts arise in relation to the application of these Australian laws to your operation of the sites. Division 81 of the GST Act does not apply to an amount, for the recovery of a tax, fee or charge, which is included in the final price charged to customers for a supply by an entity which is legally liable for the tax, fee or charge. The final price of a good or service typically reflects the costs that go into producing it. The costs can be affected by many factors, including taxes, fees and charges for which an entity is liable. Division 81 of the GST Act does not apply to the amounts you have calculated as being for the recovery of these costs which you include in the final price you charge customers for access to your sites. Your customers are not liable for the landfill levy and CPM amounts payable by you under the EP Act and in relation to the CE Act. Determining your entrance fees in a way that takes into account the recovery of these amounts for which you are liable does not make your customers liable under those Australian laws. Therefore, your method of determining your entrance fees does not have the effect of passing on these legal liabilities to your customers. These amounts are costs to you of doing business. Consequently, Division 81 of the GST Act does not apply in relation to these costs of doing business, which you take into account in determining your entrance fees, and is not relevant to ascertaining the amount of the consideration for your supplies. | Detailed Reasoning - Consideration for supply: However, your customers pay entrance fees for use of the landfill sites. Therefore, it is necessary to examine whether the fee a customer pays is the consideration for a taxable supply. Relevant guidance is provided in Goods and Services Tax Determination GSTD 2000/10 which is about whether outgoings payable by a tenant under a commercial property lease are part of the consideration for the supply of the premises. In particular, paragraph 7 of GSTD 2000/10 explains that, if a single supply is made under the lease, the payment of the outgoings by the tenant is not a payment for a supply that has the same character as the supply made by a third party to the landlord. Paragraphs 8 and 9 discuss circumstances where a supply to the landlord is not subject to GST because of Division 81 of the GST Act and state: 8. Payment by the landlord of local council rates, land tax or water charges may not be subject to GST because of the operation of Division 81. If the tenant is required under the terms of the lease to reimburse the landlord's expenditure on an 'Australian tax, fee or charge' listed in the determination made by the Treasurer under subsection 81-5(2) of the GST Act, this is not the 'payment of [an] Australian tax, fee or charge' by the tenant and Division 81 does not apply to the tenant's reimbursement of the rates, land tax or other charges. If the tenant makes payment directly to the entity levying the tax, fee or charge, this payment will be consideration for the supply of the premises not payment for a supply that the entity levying the tax, fee or charge makes to the tenant. Therefore Division 81 does not apply to payments for the supply by a landlord under a lease and the payment of the tax, fee or charge by the tenant forms part of the consideration for the supply of the premises. In your circumstances, it is considered the principle contained in this guidance in GSTD 2000/10 applies so that the full amount of the entrance fees received from customers (without reduction for any part thereof which is intended to recover landfill levy and CPM amounts payable by you in relation to operating the sites) is the consideration for the supply of allowing access to the site. Therefore, the entrance fee to the site is the consideration for the supply. The facts state all the other requirements under section 9-5 of the GST Act for a taxable supply are met. There are no provisions of the GST Act that apply to make the supply GST-free or input taxed. Accordingly, the entrance fee is the consideration for the taxable supply you make and you are liable to pay GST to the ATO on the supply. | Detailed Reasoning - Additional information: Subsection 81-10(2) of the GST Act provides that a fee or charge may be prescribed by the regulations as being a fee or charge that constitutes consideration. Fees for the use of a waste disposal facility are covered by subregulation 81-10.01(1)(d) of the A New Tax System,(Goods and Services Tax) Regulations. This means that payment of the entrance fees is specifically treated as consideration for a supply.

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