Private ruling: GST and Division 81 fees and charges
Date of advice: 6 April 2017
Published: September 2017

Ruling: Q1: Are charges you levy for the supply of an agreement document consideration for a taxable supply and subject to goods and services tax (GST)? | A1: Yes, the charges you levy for the supply of an agreement document are consideration for a taxable supply and subject to GST.

Relevant facts and circumstances: You are an Australian government agency. You are registered for GST. You levy a charge for your supply of an agreement document.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 81-10 | A New Tax System (Goods and Services Tax) Act 1999 section 9-5

Reasons for decision: Summary: The payment of fees or charges to which section 81-10 of the GST Act applies is treated as not being the provision of consideration and as a result, the supply is not subject to GST. Subsection 81-10(1) of the GST Act states that a payment, or the discharging of a liability to make a payment, is not the provision of consideration to the extent that the payment is an *Australian fee or charge that is of a kind covered by subsection (4) or (5). 'Australian fee or charge' is defined in section 195-1 of the GST Act to mean a fee or charge (however described), other than an Australian tax, imposed under an Australian law and payable to an Australian government agency. Subsection 81-10(4) of the GST Act covers a fee or charge if the fee or charge relates to or relates to an application for the provision, retention, or amendment of a permission, authority or licence (however described) under an Australian law. Subsection 81-10(5) of the GST Act covers a fee or charge paid to an Australian government agency if the fee or charge relates to the agency doing any of the following: (a) recording information (b) copying information (c) modifying information (d) allowing access to information (e) receiving information (f) processing information or (a) searching for information. Practice Statement Law Administration (General Administration) PS LA 2013/2 (GA ) sets out the administrative approach the Australian Taxation Office (ATO) will take on and from 1 July 2013 where Australian government agencies determine the GST classification of supplies that they will make for which Australian fees or charges are received as consideration. Appendix A of the Practice Statement shows a diagram of the law and regulations as a guidance to determine whether a supply by a government agency is subject to GST. The diagram is reproduced below for the determination of the GST status of the fee or charge that you levy for your supply of an agreement document. The following reasons for the GST treatment are as follows: | Detailed Reasoning - A) Is the item an Australian fee or charge?: The fee levied by you for an agreement document will be an Australian fee or charge if it is (a) imposed under an Australian law and (b) payable to an Australian government agency. Based on the information you provided, it is accepted that the fee or charge you levy for the supply of an agreement is a fee or charge imposed under an Australian law. You are an Australian government agency. It is therefore accepted that the fee or charge for the supply of an agreement is an Australian fee or charge. | Detailed Reasoning - B) Does subsection 81-10(1) apply?: For the agreement fees or charges to be covered under subsection 81-10(1) of the GST Act and to not be consideration for a supply, the agreement fees or charges must be an Australian fee or charge that is covered by subsection (4) or (5). Subsection 81-10(4) of the GST Act states: (4) This subsection covers a fee or charge if the fee or charge: (a) relates to; or (b) relates to an application for: The provision, retention, or amendment, under an *Australian law, of a permission, exemption, authority or licence (however described). As the fee or charge that you levy, for your supply of the agreement, is a fee or charge that relates to an application for your provision under an Australian law of a permission or licence, then subsection 81-10(1) of the GST Act applies. | Detailed Reasoning - C) Does regulation 81-10.01 apply?: Where subsection 81-10(1) of the GST Act applies to your fee or charge, it will be exempt from GST. However, subsection 81-10(2) of the GST Act provides that the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations) can prescribe some fees and charges to be treated as the provision of consideration for a supply. Regulation 81-10.01 lists those fees and charges which constitute consideration for a supply and therefore will be subject to GST where the other requirements of a taxable supply are met. The two relevant paragraphs under subregulation 81-10.01(1) are: (g) a fee or charge for a supply of a non-regulatory nature; (h) 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. Paragraph 81-10.01(1)(g) ensures that the non-regulatory activities of government are subject to GST. The Explanatory Statement to the A New Tax System (Goods and Services Tax) Amendment Regulation 2012 (N0.2) (the Explanatory Statement), explains that this paragraph applies to goods and services for which fees are imposed where the consumer is provided with something that lacks a regulatory character. That is, the fee or charge does not arise under an Australian law which is intended, for example, to regulate behaviour, ensure consumer protection and ensure compliance with certain standards. The Explanatory Statement further provides that the paragraph applies even though it may be the sole responsibility of a government agency to supply the goods or services for which the fees are imposed, and such supplies are in the public interest. The term 'regulatory' is also explained in the Explanatory Statement to capture 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. You put forward an alternative view that there are no regulations that require you to actually supply the agreement document. You provided that you supply the agreements as a matter of convenience and cost control and that both parties can agree to refer the drafting of such agreements to an external lawyer who can bill either you or the other party. You argued that the fees for the provision of the agreement document are non-regulatory in nature and therefore the fee or charge is covered under paragraph 81-10.01(1)(g). Under reasons B) above, it was established that the fee or charge for the supply of the agreement is a fee or charge which relates to an application for your provision under an Australian law of a permission or licence. As such subsection 81-10(1) of the GST Act applies to the fee or charge. Where the fee or charge is not regulated at all and not imposed under any Australian law, then the fee or charge will not meet the definition of 'Australian fee or charge' as per reasons A) above. Therefore, the alternative view put forward is not accepted and paragraph 81-10.01(1)(g) of the GST Regulations does not apply in this instance. Paragraph 81-10.01(1)(h) of the GST Regulations ensures that those supplies made by government in competition with the private sector are subject to GST. The Explanatory Statement provides the example of certification activities where authorised private certifiers are authorised by government agencies to perform activities that form part of a regulatory process. In this example, the fee or charge will be consideration for a supply that is subject to GST. The Explanatory Statement explains that this ensures competitive neutrality between supplies made by government and non-government agencies. As your supply of the agreement document can also be provided by a non-government agency, then paragraph 81-10.01(1)(h) applies. As paragraph 81-10.01(1)(h) of the GST Regulations applies, the fee or charge will be the provision of consideration and will be subject to GST unless it is a prescribed fee under regulation 81-15.01 by virtue of section 81-15 of the GST Act. | Detailed Reasoning - D) Does regulation 81-15.01 apply?: The payment of fees or charges to which section 81-15 of the GST Act applies is treated as not being the provision of consideration and as a result, the supply is not subject to GST. Section 81-15 of the GST Act states that the GST Regulations may provide that the payment of a prescribed Australian fee or charge, or of an Australian fee or charge of a prescribed kind, or the discharging of a liability to make such a payment, is not the provision of consideration. Paragraph 81-15.01(1)(d)) of the GST Regulations provides that for section 81-15 of the GST Act, the following kind of Australian fee and charge is prescribed: ● a fee or charge to compensate an Australian government agency for costs incurred by the agency in undertaking regulatory activities Section 81-15 covers those costs that are incurred by the Australian government agency in doing its regulatory activities that may not be covered under section 81-10. The Explanatory Statement explains that paragraph 81-15.01(1)(d) ensures that fees and charges which are for services provided on a cost recovery basis by government agencies, and relate to activities that are regulatory in nature, are not treated as the provision of consideration and therefore do not give rise to a taxable supply. It is accepted that the fee or charge that you levy for the recovery of the costs for the drafting of the agreement, is a fee or charge to compensate you in your regulatory role. As such, paragraph 81-15.01(1)(d)) of the GST Regulations applies to the fee or charge for the supply of the agreement document. | Detailed Reasoning - E) Paragraphs 81-10.01(1) (a), (b), (c), (d), (e), (f) or (h) apply: As the fee or charge is covered by both paragraph 81-15.01(1)(d)) of the GST Regulations (D) and paragraph 81-10.01(1)(h) of the GST Regulations (E), the tiebreaker rules in subregulation 81-15.02(2) would apply to make the fee or charge the provision of consideration. As you make the supply for consideration, and the supply is made in the course or furtherance of your enterprise, and the supply is connected with Australia and you are registered for GST, your supply satisfies the requirements of a taxable supply under section 9-5 of the GST Act. Therefore the fee or charge for the supply of the agreement document will be subject to GST. Please refer to the diagram for the reasons set out from A) to E).