Private ruling: payment for the maintenance of a specified area of land
Published: February 2012

Ruling: Q1: Is a payment to you of a contribution, for the maintenance of a particular area of land a provision of consideration for a taxable supply? Advice/Answers Yes, the payment to you, for the maintenance of a particular area of land, is a provision of consideration for a taxable supply.

Relevant facts and circumstances: You are registered for GST. You own and control an area of land. You maintain the grounds which are extensive. You request a 'voluntary' contribution from users of the grounds to maintain a specific area of those grounds. These contributions are listed in your schedule of fees for users of your grounds You provided an extract of those pages. You provided a copy of your brochure which provides a description of the maintenance work undertaken, for which the voluntary contribution is made. There is no application form or documentation covering the maintenance provided other than the brochure. Usually a staff member explains the maintenance plan to the user. You issue a receipt for the initial payment and generate an invoice as renewals fall due. You currently treat the maintenance as a taxable supply. The maintenance work undertaken is the same whether or not you receive a contribution from the user. You do not carry out any additional activities that you do not carry out throughout the rest of the area. Although not legally obliged to, you give priority to the frequency of your maintenance of sections for which you receive contributions. For example, weather conditions may dictate that you cannot carry out scheduled maintenance work for the entire area in a particular period of time. In that event you may defer your maintenance of some sections that contain only areas for which you have received no contribution from users. You provide a pro-rata refund when a user terminates their maintenance request early. No refund is made where maintenance is not carried out due to weather conditions. Your contentions: You made the following contentions; "Paragraphs 53 to 61 of GSTR 2006/9 Goods and Services Tax: Supplies (the ruling) consider the proposition that, generally, a recipient and an acquisition exist for every supply. In paragraph 54, the ruling states that the definition of the term 'recipient' suggests that there is a supplier, a recipient and that something is passed from the supplier to the recipient. In paragraph 55 of the ruling, it is stated that the supplier and the recipient must be different entities and that the recipient has to be identified, as you cannot make a supply to the world at large. You own and control an area of land. You carry out all the maintenance work relating to that area of land. Consequently, the supply of maintenance work is to yourself. The supplier and the recipient of the goods and services are the same entity. The world at large (i.e. the contributor or members of the public) receives the benefit of the supply. Hence, there is no supply of goods, or services, to any contributor, in return for their contribution. The contribution is not consideration for the following: a provision of advice or information; a grant, assignment or surrender of real property; a creation, grant, transfer, assignment, or surrender of any right; a financial supply; a release from an obligation; or an entry into an obligation to refrain from any act, or to tolerate an act, or situation. More particularly you contend that the contribution is not consideration for an entry into an obligation to do anything. One could argue that you enter into an obligation to carry out maintenance work at or near a specific area of land, in return for the contribution made. If this proposition were true, the contribution would be consideration for a practice that you effect, regardless of contribution. This is because, in the normal course of your operations you carry out the same maintenance work, throughout the area of land, regardless of whether you receive a contribution for an area of land in a particular area. Hence the proposed obligation is to carry out a nullity. If for whatever reason, you do not, or cannot, carry out your intention of providing maintenance, the contributor has no recourse. Your practice does not include a refund of any of these contributions, in these circumstances. Your practice is to provide a pro-rata refund to a contributor, in the event that the contributor cancels his maintenance. You do this merely as an expression of goodwill, on a case-by-case basis, because you have no legally binding obligation to do so. Where appropriate, you give some priority to the maintenance of those areas of land that you have received a contribution for, over those areas that have not. You do not advise contributors of this priority, generally. This priority is merely an expression of goodwill. You have no legally binding obligation to do so. You contend that you enter into no obligation to the contributors to the maintenance service in return for their contributions. In summary you contend there is no supply, in terms of section 9-10 of the GST Act. As there is no supply and the contributions are outside the scope of the GST Act, there can be no taxable supply." Further literature obtained from your website Ground maintenance: Maintenance plans for the periodic care of a particular area are available and start from a specified amount.(GST inclusive) annually.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 sections 9-5, 9-10, 9-15.

Reasons for decision: Summary: GST is payable on taxable supplies. Therefore, a payment is subject to GST if it is consideration for a supply and that supply is a taxable supply. Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (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. Paragraph 9-5(a) of the GST Act requires that you make a supply for consideration. There are three questions that are relevant to determining whether there is a supply for consideration: o is there a supply o is there consideration, and o does that necessary relationship exist between the supply and the consideration? Essentially, a supply is something that passes from one entity to another. The supply may be one of particular goods, services or something else that is reflected in an agreement by one party to do something for another. Supply is defined under section 9-10 of the GST Act. The definition includes an entry into, or release from, an obligation to do anything; or to refrain from an act; or to tolerate an act or situation but excludes a supply of money unless the money is provided as consideration for a supply that is a supply of money. Consideration is defined under section 9-15 of the GST Act. The definition extends beyond payments to include such things as acts and forbearances. A payment will be consideration for a supply if the payment is in connection with, in response to or for the inducement of the supply. In the preamble to your application, you state that you request a 'voluntary' contribution from users to maintain a specific area of land. The GST treatment of the 'voluntary contribution' or 'contribution' (payment) depends primarily on whether it represents consideration that has the relevant connection with a supply by you under your maintenance plans (MP). Therefore, the starting point in determining the GST treatment of the payment is whether the first test in section 9-5 of the GST Act is satisfied. Paragraphs 104 to 108, of GSTR 2006/9 Goods and services tax: supplies , provide guidance on supply and consideration. In particular; 106. … Paragraph 9-5(a) states that 'you make the supply for consideration'. If read alone, 'making a supply for consideration' arguably suggests the existence of enforceable obligations, be they written or oral, between the supplier and recipient. However, this is not an absolute prerequisite to making a supply for consideration. 107. The definition of consideration in section 195-1 states: consideration, for a supply or acquisition, means any consideration within the meaning given by section 9-15, in connection with the supply or acquisition. Hence, consideration for a supply is defined as being any consideration in connection with a supply. Consideration in section 9-15 relevantly means: (1) Consideration includes: (a) any payment, or any act or forbearance, in connection with a supply of anything; and (b) any payment, or any act or forbearance, in response to or for the inducement of a supply of anything. (2) It does not matter whether the payment, act or forbearance was voluntary ... The Commissioner takes the view that the words 'in connection with the supply or acquisition' in section 195-1, and the phrases 'in connection with a supply of anything' and 'it does not matter whether the payment, act or forbearance was voluntary' in section 9-15 mean that there does not have to be an enforceable relationship for there to be a sufficient nexus between the supply and a payment. Nor does the consideration have to be agreed in advance. 107A. In the Full Federal Court decision of TT-Line Company Pty Ltd v. Federal Commissioner of Taxation ,41A Edmonds J confirmed that given the express statement in subsection 9-15(2), there does not have to be an enforceable entitlement to receive a payment for that payment to be characterised as consideration.41B 108. For GST purposes you may still make a supply in the absence of enforceable obligations, provided there is something else, such as goods, services or some other thing, passing from the supplier to the recipient.42 For the supply to be a taxable supply there must also be consideration and a sufficient nexus between the supply and the consideration.43 The Ruling considers 'sufficient nexus' further in paragraph 180. 41A [2009] FCAFC 178; 2009 ATC 20-157; 74 ATR 771 41B See paragraph 47 of the judgment of Edmonds J. In your case, in relation to the MP, the following facts and information provided by you and obtained from your website are pertinent in determining whether the payment made for the MP is consideration for a supply of goods or services by you: The MP brochure states: 1. 'Maintenance plans are intended to cover individual areas.' · this indicates that the payment is to cover an individual's specific area not, as you contend, the grounds at large. 2. 'Maintenance is intended at least a specified number of times a year… as a part of our normal maintenance routines for the grounds' · this indicates that the maintenance of a (paid) area is separate to the maintenance for the grounds but is done at the same time. 3. 'Maintenance of certain grasses on relevant identified area' · this indicates maintenance to a specific area. The remaining maintenance items set out in the MP could well be generic in nature to all Areas of the grounds. You contend that the plans are a statement of intent (or expectation); they are not legally binding obligations. If, for whatever reason, you do not, or cannot, carry out your intention, the contributor has no recourse. Nonetheless, you seek the payment on the basis that you will carry out maintenance services on specific areas. These services are in fact carried out. You also advised that you give priority to the frequency of your maintenance of certain areas, for which you receive contributions under a MP. In addition, your current price list document lists the cost of the maintenance plan as a charge, not a voluntary contribution. Further, you seek the payment, with one of your staff explaining the maintenance plan over the telephone, or in person. This indicates that the contributors that agree to make payment for the MP do in fact expect that they are receiving some additional service from you in exchange for that payment. As renewals fall due you generate invoices for payment of another annual fee. In the sample invoice you provided it is clearly stated under description that the charge is for ground maintenance of a specified area. There is no indication given to the recipient of the invoice the amount sought represents a voluntary contribution to the general upkeep of the grounds. Rather, it reinforces that you will continue to make the supply of maintenance services in exchange for payment of the amount stated. Therefore, you are making a supply for consideration. On the facts provided, you will satisfy the remaining criteria of section 9-5 of the GST Act. In your factual situation, there is no section of the GST Act that will make your supply GST-free or input taxed. As such, the payment to you for the maintenance of a specified area of land under a maintenance plan, is a provision of consideration for a taxable supply.

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