Private ruling: Goods and services tax (GST) treatment of trade waste charges
Published: May 2013

Ruling: Q1: Are your fees subject to GST? | A1: No.

Relevant facts and circumstances: · You are registered for GST. · You are established under relevant state legislation. · You are a government owned statutory corporation. · You operate a waste management program. · You monitor and licence the removal of waste from business in order to keep waste out of the sewerage system. · If a business discharges greasy wastewater it must use an appropriate trap and become part of your program. · Businesses become part of the program when they sign a permit with you. · As part of the permit, you keep track of the waste, and how often the waste must be removed from it. · You charge fees associated with the program. · You have advised that you charge an administration fee that is a fixed flat fee charged quarterly. This is intended to cover the cost of computer systems, office and staff to administer the program. · You have also advised that you charge an inspection fee. This is a fixed fee based on the size. This is intended to cover the cost of activities undertaken as a result of a customer not servicing their trap, and includes the cost of staff visiting the site. · The fees and charges described are not currently listed as exempt in the A New Tax System (Goods and Services Tax)(Exempt Taxes, Fees and Charges) Determination 2011 (No 1) (Cth) (the Determination).

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 Division 9 | Division 38 | Division 81

Reasons for decision: Summary: Division 81 of the GST Act applies such that a payment of the administration fee or inspection fee is not the provision of consideration for a supply. Therefore you do not make a taxable supply in relation to the payment, and the transactions are not subject to GST. Detailed reasoning | Detailed Reasoning - Background: GST is payable on taxable supplies. Section 9-5 of the 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, a supply is not a taxable supply to the extent that it is GST-free or input taxed. Also, relevant to your circumstances, chapter 4 of the GST Act contains special GST rules that apply in particular circumstances. The special rules modify the application of the basic GST rules. Rules in Division 81 of the GST Act provide that certain payments to Australian government agencies are not the provision of consideration. The application of this Division must be considered in your circumstances. When the GST was introduced the Commonwealth, states and territories agreed that the GST would apply to the commercial activities of government at all levels, but that the non-commercial activities of government would be outside the scope of the GST. Division 81 of the GST Act gives effect to this agreement. Until 1 July 2011, various exemptions were set out in detail in the A New Tax System (Goods and Services Tax) (Exempt Taxes, Fees and Charges) Determination 2011 (No. 1) (the Treasurer's determination). As a transitional measure, fees and charges listed in the Treasurer's determination as at 30 June 2011 remain exempt until 1 July 2013. The fees considered in this ruling are not covered by the Determination, as they are not being implemented until 1 July 2013. However, you have other Australian taxes, fees or charges that are listed on the determination. Division 81 of the GST Act was amended as of 1 July 2011. The amended legislation continues the intention that regulatory charges that do not relate to particular goods or services will be exempt from GST. In this context, Division 81 of the GST Act allows entities to self assess the GST treatment of a payment of an Australian tax or an Australian fee or charge in accordance with certain principles. In particular section 81-5 of the GST Act provides that the payment of an Australian tax is not consideration, and section 81-10 of the GST Act considers that the payment of certain Australian fees and charges are not consideration. Regulations pursuant to Division 81 have also been made that specifically include or exempt certain payments from being the provision of consideration (see regulations 81-10.01 and 81-15.01 of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations). | Detailed Reasoning - Australian fee or charge: As a starting point, it is necessary to determine whether the fees or charges described meet the specific requirements of an Australian tax, fee or charge before the further substantive requirements of Division 81 of the GST Act and the regulations made under Division 81 of the GST Act can be considered. An Australian fee or charge is a fee or charge (however described), imposed under an Australian law and payable to an Australian government agency (section 195-1 GST Act). An Australian law means a Commonwealth, state or territory law. Australian government agency means the Commonwealth, a state or territory, or an authority of the Commonwealth or of a state or territory (section 195-1 GST Act, as defined by reference to section 995-1, Income Tax Assessment Act 1997 (ITAA 1997)). Australian government agency has the meaning given by section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997). This in turn provides that Australian government agency means the Commonwealth, a State or a Territory, or an authority of the Commonwealth or of a State or a Territory. You are established by state legislation. In particular that Act provides that you are a statutory government-owned corporation. This means that you are further governed by other state legislation. This legislation provides that you are not the State and that you do not represent the State except by express agreement of your voting shareholders or any other Act provides expressly otherwise. However, while this states that you do not represent the State, we do not consider that the above section precludes you from being the State, or an authority of the State, under the terms of the GST Act. You are carrying out the relevant business or functions that would otherwise be carried out by the State. We also note that the portfolio Minister has power to give you directions in the public interest. You are also subject to public finance and audit requirements, and statutory reporting requirements. Furthermore, you currently have other Australian taxes, fees or charges that are listed on the Treasurer's determination. We therefore accept that in these circumstances you therefore meet the definition of an Australian government agency for the purposes of Division 81 of the GST Act. Your own establishing legislation gives you the authority to impose fees and charges for, or in connection with, any service or thing supplied or provided by you in the exercise of your functions under that legislation. This Act is a state law, and therefore is an Australian law. As the fees and charges in question are imposed under an Australian law and payable to an Australian government agency we therefore consider that the fees or charges are Australian fees or charges. It is therefore necessary to consider whether payment of the fees or charges is consideration under Division 81 of the GST Act. | Detailed Reasoning - Administration fee: The administration fee is a fixed flat fee charged quarterly. This is intended to cover the cost of computer systems, office and staff to administer the program. The charge can be characterised as a fee that relates to the retention of a permission or authority. It is therefore not consideration under section 81-10 of the GST Act (see subsections 81-10(1) and 81-10(4)). As discussed, regulations have also been made that specifically exempt certain payments from being the provision of consideration. Sub regulation 81-15.01(d) of the GST Regulations provides that a fee or charge to compensate an Australian government agency for costs incurred by the agency in undertaking regulatory activities does not constitute consideration. Sub regulation 81-15.01(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 also not consideration. The word 'regulatory' is not defined in the GST Act or the Regulations. However, the Explanatory Statement (ES) to A New Tax System (Goods and Services Tax) Amendment Regulation 2012 (No.2) 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" Generally where only Government organisations have the legislative authority to do certain things, it will be regulatory in nature. The Explanatory Statement goes on to provide examples including a compulsory inspection fee for a building, a fee for the supply and fitting of a compulsory device to a vehicle. You are responsible for monitoring and licensing the removal of waste in order to keep waste out of the sewerage system. We consider that your activities in relation to that are regulatory activities. The administration fee is for, or compensation for, your regulatory activities. Therefore the charge is not subject to GST. To avoid any doubt, we note that the waste transporters will charge the customer and transport the waste to a licensed waste facility. They will also charge for the treatment of the waste at the facility. These fees are not GST-free as they are not Australian fees or charges (as they are not payable to an Australian government agency). We also note that a fee for the use of a waste disposal facility is consideration for a supply under regulation 81-10.01 of the GST Regulations even if it is payable to an Australian government agency. | Detailed Reasoning - Inspection fee: This fee is a fixed charged based on size. This is intended to cover the cost of activities undertaken as a result of a customer not servicing their trap, and includes the cost of staff visiting the site. We consider that the nature of the inspection fee is the same as the administrative fee. That is, it can be characterised as a fee that is necessary for (and therefore relates to) the retention of a permission or authority to have and use the trap. It is also a fee or charge that is for a supply of a regulatory nature or that compensates you for costs incurred in undertaking your regulatory activities. Therefore the fee or charge is not consideration. Therefore the missed service inspection charge is not subject to GST.