Private ruling: GST and appropriations
Date of advice: 1 September 2016
Published: November 2016

Ruling: Q1: Are the fees you received under the Agreement with another government related entity, subject to goods and services tax (GST)? | A1: No, the fees you received under the Agreement with another government related entity are not subject to GST because the fees are not the provision of consideration under subsection 9-17(3) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). | Q2: Are the additional administration fees you will charge, in addition to the fees payable by another government related entity under the Agreement, subject to GST? | A2: No, the additional administration fees you will charge, in addition to the fees payable by another government related entity under the Agreement, are not subject to GST because the administration fees are not the provision of consideration under subsection 9-17(3) of the GST Act.

Relevant facts and circumstances: You are a government related entity. You are registered for GST. You provide services to other government related entities. The government related entities are registered for GST. The provision of your services is managed through the Agreement with other government related entities. You provided us with a list of the other government related entities. You provided a copy of one of the Agreements you made with one of the government related entities. You advised that this Agreement is the standard agreement that you use with each of the other government related entities. You attach the relevant schedules to the Agreement depending on the type of services that are being provided. Each of the schedules above cover: • the scope of the services that are being provided • what services are included and what are not included • customer and provider obligations • payment amounts and payment scheduling • key performance indicators • business critical components of the service, and • list of confidential information. The fees you charge for the services are on a cost recovery basis and in most cases you do not even recover the full costs and sometimes makes a loss. The payment of the fees are to cover general expenses such as the portion of rental costs, stationery, fleet, legal costs, personnel services, management accounting, accounts processing and financial reporting. The payments made to you are paid from each agency's yearly budget, appropriated from Treasury. These are appropriated under the relevant appropriation bill. You provided us a copy of this appropriation bill. Additional administration fee You have not charged an additional administration fee as yet. You will be including this fee in addition to the service agreement fee. You would like to know the GST status of this fee if it was to be included. The additional administration fee is to cover your administration costs in managing the agreements, for example, to recover your costs from sending out the invoices and handling the agreement. The fee is not for profit, that is, you will not make a profit out of charging this additional fee. It is mainly charged on a cost recovery basis. The additional administration fee will depend on the particular Agreement, for example, an Agreement may require the issue of several invoices and this in turn will require extra time to manage and to handle, so you will recover the costs of this extra time. The additional administration fee is not calculated before the service agreement but only calculated after costs are realised and calculated. For example, an Agreement with an initial service fee of $10,000 will be charged an additional administration fee of approximately 5-10%. However, if you later realise that this particular agreement requires the issuing of several monthly invoices then this in turn will require additional personnel time. The additional administration fee is charged so you can recover the extra administration and handling costs incurred for this Agreement. This additional administration fee will be paid from the other government entity's appropriation funding.

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 9-17(3)

Reasons for decision: Summary: Unless otherwise stated, all legislative references in this Ruling are to the A New Tax System (Goods and Services Tax) Act 1999. On the facts provided, the fees received by you under the Agreement and the additional administration fees to be charged under the Agreement, satisfy the requirements of subsection 9-17(3) of the GST Act. That is: a) you are a government related entity and you received the fees from other government related entities in connection with your supplies of services under the Agreement b) the payment of the fees for the services under the Agreement is covered by an appropriation bill, and c) the payment of the fees for the services under the Agreement is calculated on the basis that the sum of the payment relating to your supply of the services and anything you receive from another entity in connection with the supply does not exceed your anticipated or actual costs of making the supply. That being the case, the fees charged by you under the Agreement to other government related entities, are not the provision of consideration. Consequently, the services you provide under the Agreement are not taxable supplies under section 9-5 of the GST Act. It follows that no GST is payable by you in relation to the service fees and additional administration fees.