Private ruling: Application of Division 81 of the GST Act to waste management charges
Published: June 2013

Ruling: Q1: Is goods and services tax (GST), payable, from 1 July 2013, on waste management charges imposed by a local council for waste management services? | A1: No, GST is not payable, from 1 July 2013, on waste management charges imposed by the local council for waste management services.

Relevant facts and circumstances: The local council (the Council) is registered for GST. Under the relevant legislation, the Council imposes various rates and charges on residents including general rates, special rates and waste management charges (WMC) for waste management services. The Council provides rural residents with waste transfer stations to take their domestic waste to. The Council then collects and transports the waste from the transfer stations to a land fill site. All the residents must pay the WMC as part of their rates notice. The WMC relates to the management of domestic waste which is a basic function of the Council. The Council considers that the WMC is wholly in respect of the Council's provision of waste management services and not merely for the provision and use of the transfer stations. The residents do not pay an extra fee at the transfer stations as the cost is covered by the WMC. All they require when they dispose off their waste at the transfer stations is their ID or a copy of their rates notice. However, non-residents wishing to use the transfer stations are required to pay a minimal fee as they do not pay any WMC. The WMC is not specifically listed in the A New Tax System (Goods and Services Tax) ( Exempt Taxes, Fees and Charges) Determination 2011 (No.1) (the Treasurer's Determination). However, to date, the Council has been treating it as exempt from GST as 'local government rates and charges' under an item in the Treasurer's Determination. It is the Council's view that paragraph 81-15.01(1)(a) of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations) applies and in particular, makes reference to paragraph 23 of Class Ruling CR 2013/19 on GST treatment of waste management services supplied by NSW councils (CR 2013/19) which provides examples of supplies of collection of waste that are exempt from GST. The Council refers to the fourth dot point in that paragraph which states 'waste management services to a collection point where a group of rural landowners take their domestic waste to a common area that is not a waste disposal facility, for pick up'. The Council is also of the view that the waste transfer stations, in this case are 'waste transfer facilities' and not 'waste disposal facilities'. The Council has advised that there are no non-government agencies that provide waste transfer facilities in that area.

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 81-10 | A New Tax System (Goods and Services Tax) Act 1999 subsection 81-10(2) | A New Tax System (Goods and Services Tax) Act 1999 subsection 81-10(3) | 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 paragraph 81-10.01(1)(a) | A New Tax System (Goods and Services Tax) Regulations 1999 paragraph 81-10.01(1)(b) | 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)(a) | A New Tax System (Goods and Services Tax) Regulations 1999 paragraph 81-15.01(1)(f) | A New Tax System (Goods and Services Tax) Regulations 1999 regulation 81-15.02 | 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: · it makes the supply for consideration · the supply is made in the course or furtherance of an enterprise that it carries on · the supply is connected with Australia, and · 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 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 services. The provision of waste management services 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 a supply of anything. On the facts provided, the Council is registered for GST and the provision of waste management services 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 the provision of waste management services GST-free or input taxed. The issue that arises under section 9-5 of the GST Act is whether the Council provides waste management services for consideration, that is, is the WMC paid by the residents to the Council consideration for the Council's supply of waste management services to the residents. 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. | Detailed Reasoning - Division 81 of the GST Act: GST does not apply to payments of taxes, fees and charges that are excluded from GST by Division 81 of the GST Act or by regulations. It is accepted that the WMC is not a tax. It is a fee or charge. Although it is compulsory for all the residents to pay the WMC, it is paid for an identified service by the Council of waste management services. A tax, on the other hand, is a compulsory payment that is not paid for any identified service. As the WMC is not a tax, section 81-5 of the GST Act will not apply. 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. | Detailed Reasoning - 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) | Detailed Reasoning - 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, proclamations and orders made under Acts. The legislation in this case is an Australian law. | Detailed Reasoning - 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: (a) the Commonwealth, a State or a Territory; or (b) an authority of the Commonwealth or of a State or a Territory. It is accepted, for the purposes of this ruling that the Council comes within the definition of an Australian government agency. 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). 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 anything in relation to information kept by the agency. 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. In this case, subsections 81-10(4) and (5) of the GST Act are not relevant as the payment of the WMC does not relate to the provision of a permission, etc and neither is it paid to the Council for doing anything in relation to information that it keeps. Of relevance is section 81-15 of the GST Act which 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. | Detailed Reasoning - GST Regulations: As section 81-15 of the GST Act is relevant, the application of regulation 81-15.01 of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations) is also relevant. 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 except where paragraphs 81-10.01(1)(d) and 81-10.01(1)(h) of the GST Regulations also apply to those fees and charges. Paragraph 81-10.01(1)(d) of the GST Regulations provides that a fee for the use of a waste disposal facility constitutes consideration. Similarly, paragraph 81-10.01(1)(h) of the GST Regulations provides that a fee or charge for a supply by an Australian government agency, where the supply may also be made by a supplier that is not an Australian government agency constitutes consideration. In this case, the Council submits that the waste transfer stations it provides for the residents to use are waste transfer facilities in substitution for conventional kerbside collection. The Council is of the view that the waste transfer stations are not waste disposal facilities as contemplated by paragraph 81-10.01(1)(a) of the GST Regulations. It states that paragraph 23 in CR 2013/19 which provides examples of supplies of kerbside collection of waste that are exempt from GST due to paragraph 81-15.01(1)(a) of the GST Regulations is relevant and, in particular, it refers to the fourth dot point that states 'WMS to a collection point where a group of rural landowners take their domestic waste to a common area, that is not a waste disposal facility, for pick up'. As such, the Council submits that paragraph 81-10.01(1)(a) of the GST Regulations does not apply to the payment of the WMC in this case. However, paragraph 25 in CR 2013/19 states: The following are examples of supplies that are not exempt under Division 81 but are taxable supplies where the requirements of section 9-5 are met: · WMS that Council provides in a competitive market, or that may be provided by duly accredited or authorised private sector suppliers (regardless of whether the WMS are compulsory or not); and · fees and charges in relation to waste disposal sites, garbage tips and refuse transfer stations. These include: - general, recycling and green waste; - rural waste facility access cards; and - issuing of new or replacement keys to waste disposal sites. The Council has advised that to the best of its knowledge there are no non-government agencies/suppliers of waste transfer stations in that area. As such, paragraph 81-10.01(1)(h) of the GST Regulations does not apply to the payment of the WMC. Supplies of refuse transfer stations are referred to in the second dot point above as not being exempt under Division 81 of the GST Act. It is considered that waste transfer stations are refuse transfer stations. An issue to consider is whether the collection of waste from the waste transfer stations by the Council is considered to be kerbside collection of waste for the residents. Paragraph 81-15.01(1)(a) of the GST Regulations provides that a fee or charge for the kerbside collection of waste or the supply, exchange or removal of bins or crates used in connection with kerbside collection of waste does not constitute consideration. The explanatory statement to the A New Tax System (Goods and Services Tax) Amendment Regulation 2012 (No.2) (ES) states the following in relation to fees and charges for the kerbside collection of waste: Item [4] - paragraph 81-15.01(1)(a) and subregulation 81-15.01(2) This paragraph and subregulation ensure that fees and charges for the kerbside collection of waste are not treated as the provision of consideration and therefore do not give rise to a taxable supply under Division 81. Kerbside waste collection fees are often, but not always, covered by general council rates. It is intended that all fees and charges for kerbside collection of waste are not consideration for a supply, so that these services are exempt from GST. This is regardless of whether the fees paid in relation to the service are compulsory or optional as kerbside collection waste is a basic activity of local government. Kerbside collection includes a regular waste collection service conducted by an Australian government agency where, for practical reasons, the waste must be collected from inside the property boundary of the ratepayer, such as a waste service for residents of a high-rise residential complex. However, additional waste collection undertaken by a commercial entity is not considered to be kerbside collection even though it may be collected from the kerbside in some circumstances. Examples of Australian fees and charges that will fall within this paragraph include, but are not limited to: · Fees for kerbside collection of green waste as part of the normal kerbside waste collection stream; · Fees for supply, exchange or removal of bins or crates used in connection with kerbside waste, including recyclables; and · Fees for removal of waste from high rise residential apartments where residents have paid for this on their rates notice. It is the ATO's view that the provision of waste transfer stations by the Council for use by the residents is not considered to be kerbside waste collection as explained by the ES. Therefore, the WMC that is imposed by the Council is not covered by paragraph 81-15.01(1)(a) of the GST Regulations. There is another fee or charge that is prescribed for section 81-15 of the GST Act by virtue of regulation 81-15.01 of the GST Regulations that may be relevant to the WMC. Paragraph 81-15.01(1)(f) of the GST Regulations provides that 'a fee or charge for a supply of a regulatory nature made by an Australian government agency' is prescribed for section 81-15 of the GST Act. The term 'regulatory nature' is not defined in the GST Regulations or the GST Act. The ES 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… As determined above, the relevant legislation in this case is an Australian law. It is also accepted that the Council is a government agency for the purposes of this ruling and its functions are set out in the relevant legislation. Under the legislation, the Council is required to impose various rates and charges on its residents including a WMC for waste management services. It is compulsory for all the residents to pay the WMC which is a charge for waste management services and not merely for the use of a waste disposal facility. Non-residents pay an amount for the use of a waste disposal facility when they dispose their domestic waste at the waste transfer stations but residents do not. Therefore, the ATO considers that the provision of waste management services by the Council to rural residents who pay the compulsory WMC is a supply that 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, from 1 July 2013, GST is not payable on the WMC that is imposed by the Council for the supply of waste management services.