Private ruling: GST and a levy included in a payment.
Published: June 2012

Ruling: Q1: Will GST apply to the levy included in a payment under a legal instrument? | A1: No, GST will not apply to the levy as the levy is not consideration for a taxable supply.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. The legal instrument is administered by the Commissioner appointed under the legal instrument and is an Australian government agency. One of the objects of the legal instrument is to ensure the provision of fair and appropriate payments, and the payment of certain expenses in connection with the state. The legal instrument is, to 'finance' these payments. An individual is required to pay a levy amount under the legal instrument. The levy amount is a specified percentage of another payment payable by the individual under the legal instrument. An individual pays the levy amount to the Commissioner. Where an individual has not paid the levy amount in whole or in part, they commit an offence and are subject to a penalty (in addition to the requirement of paying to the Commissioner any unpaid levy amount).

Relevant legislative provisions: Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). | Division 81 of the GST Act. | Section 81-5 of the GST Act. | Section 195-1 of the GST Act. | Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) | A New Tax System (Goods and Services Tax) (Exempt taxes, fees and charges) Determination 2011 (No.1) | Summary | The levy paid by an individual to the Commissioner is an Australian Tax and not consideration for a taxable supply and is therefore, not subject to GST. | Detailed reasoning | You are liable for GST on taxable supplies that you make. Section 9-5 of the GST Act provides that you make a taxable supply if you make a supply for consideration, the supply is made in the course or furtherance of an enterprise that you carry on, the supply is connected with Australia and you are registered for GST. However, the supply is not a taxable supply to the extent it is GST-free or input taxed. Division 81 of the GST Act was amended from 1 July 2011. As a transitional measure those Australian taxes, fees and charges currently not subject to GST under the A New Tax System (Goods and Services Tax) (Exempt taxes, fees and charges) Determination 2011 (No.1) (Treasurer's Determination) will remain not subject to GST prior to 1 July 2012 and thereafter assessed under the changes made. | The GST treatment of all new Australian taxes, fees and charges that are not currently listed on the Treasurer's Determination will be assessed under the changes made, with effect from 1 July 2011. | The levy amount payable is a new Australian tax, fee or charge not previously being subject to the Treasurer's determination. | It needs to be determined if the levy is consideration for a supply under section 9-5 of the GST Act taking into account Division 81 of the GST Act. Section 81-5 of the GST Act states: | Section 81-5 Effect of payment of tax | Australian tax not consideration | (1) A payment, or the discharging of a liability to make a payment, is not the provision of *consideration to the extent the payment is an *Australian tax. | Regulations may provide for exceptions (2) However, a payment you make, or a discharging of your liability to make a payment, is treated as the provision of *consideration to the extent the payment is an *Australian tax that is, or is of a kind, prescribed by the regulations. | (3) For the purposes of subsection (2), the *consideration is taken to be provided to the entity to which the tax is payable, for a supply that the entity makes to you. | (* Asterisked terms are defined in the Dictionary in section 195-1 of the GST Act.) Australian Tax | Section 195-1 of the GST Act defines 'Australian tax' as follows: | Australian tax means a tax (however described) imposed under an Australian law. | '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). Section 995-1 of ITAA 1997 provides that 'Australian law' means 'a Commonwealth law, a State law, or a Territory law'. These types of law are respectively defined in section 995-1 of the ITAA 1997 as a law of the Commonwealth, of a State or of a Territory. The term Australian law would encompass Acts and law making powers which are delegated by parliaments, such as regulations, by-laws, proclamations and orders made under Acts (Goods and Services Tax Ruling GSTR 2011/2). | The State Authority derives its authority to impose the levy under the legal instrument. The legal instrument comes within the definition of an Australian law for the purposes of Division 81. | Tax | 'Tax' is not defined in the GST Act. However, the meaning of 'tax' has been considered by the High Court. For example, in Roy Morgan Research Pty Ltd v Commissioner of Taxation ; [2011] HCA 35; (' Roy Morgan Research '). the High Court (per French CJ, Gummow, Hayne, Heydon, Crennan, Kiefel and Bell JJ) referred to a number of earlier cases on the question of the meaning of a 'tax'. The reasons for decision at paragraph 36 refer to the classic description of a tax cited by Latham CJ in Matthews v Chicory Marketing Board (Vict) (1938) 60 CLR 263, in describing a particular levy as 'plainly a tax': It is a compulsory exaction of money by a public authority for public purposes, enforceable by law, and is not a payment for services rendered … | Compulsory exaction of money | An individual is required to pay the levy under the legal instrument. If this is not done then they commit an offence and are subject to a penalty in addition to paying to the Commissioner any unpaid levy amount. Therefore, these charges are compulsory exactions of money. | By a public authority for public purposes | The State authority is an Australian government agency and is therefore, a public authority. | In Roy Morgan Research at paragraph 25 the High Court in discussing Municipal Council of Sydney v Commonwealth (1904) 1 CLR 208; (1904)10 ALR (CN) 29 observed that it is not the case that an impost by federal law cannot be a tax unless it is received by the Commonwealth and so attracts section 81 of the Constitution. | The levy is for the community. It is considered that the levy is for public purposes. | Enforceable by law | As stated above an offence is committed that is subject to a penalty if the levy is not paid. Therefore it is considered that the levy is enforceable by law. | Not a payment for services rendered | It was discussed in Air Caledonie International v Commonwealth (1988) 165 CLR 462 that in order to be classified as a fee for service rather than a tax, the fee or charge must be exacted for particular identified services provided or rendered individually to, or at the request or direction of, the particular person required to make the payment. | In the case of Workcover Corporation Of South Australia v Olifent (1997) - BC9702316, the full bench of the Supreme Court had to consider whether the provisions of the Workers Rehabilitation and Compensation Act 1986 (SA), which required that employers make monthly payments into a central workers compensation fund administered by a public authority, was a tax. The functions and activities undertaken by the State authority in respect of making payments to individuals do not constitute services provided by the State authority to individuals who are required to pay the levy amount. | If the activities undertaken by the State authority resulted in payments paid to individuals who are (or was or has been) employees of other individuals it may be characterised as a payment for a service. It is not a particular service rendered by the State authority to the individuals in return for the latter paying the levy amount. | For GST purposes, the levy amount payable or paid by individuals under the legal instrument is an Australian tax and is not consideration for a taxable supply under section 9-5 of the GST Act.


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