EXPLANATORY STATEMENT
Select Legislative Instrument 2011 No. 127
Issued by authority of the Assistant Treasurer
A New Tax System (Goods and Services Tax) Act 1999
A New Tax System (Goods and Services Tax) Amendment Regulations 2011 (No. 2)
Section 177-15 of the A New Tax System (Goods and Services Tax) Act 1999 (the Act) provides that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.
The Regulations are a legislative instrument for the purposes of the Legislative Instruments Act 2003.
Subsection 81-10(1) of the Act prescribes that the payment of certain Australian fees and charges is not treated as the provision of consideration for a supply, and therefore is exempt from GST. Subsection 81-10(2) of the Act allows the payment of certain fees and charges prescribed by regulation to be treated as the provision of consideration for a supply.
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 and the non-commercial activities of government would be outside the scope of the GST.
Under the Intergovernmental Agreement on Federal Financial Relations (IGA) the Parties agreed that Division 81 of the GST Act will exempt Australian taxes, fees and charges from GST in accordance with the following principles:
• taxes that are in the nature of a compulsory impost for general purposes and compulsory charges by the way of fines or penalties will be exempt from GST;
• regulatory charges that do not relate to particular goods or services will be exempt from GST, including:
– fees and charges levied on specific industries and used to finance particular regulatory or other activities in the government sector; and
– licences, permits and certifications that are required by government prior to undertaking a general activity.
The Regulations are intended to ensure that the GST treatment of particular goods and services supplied by Australian Government agencies is consistent with the principles contained in the IGA. The Regulations, in conjunction with the amendment to Division 81, are intended to carry on the GST treatment of particular classes of Australian taxes, fees and charges that are currently provided under the A New Tax System (Goods and Services Tax)(Exempt taxes, fees and charges) Determination 2011 (No. 1).
The fees and charges specified in the Regulation do not fall within the principles contained in the IGA and are therefore not intended to be exempt from GST.
The Regulations commenced on the same day as the accompanying legislation commenced; on 1 July 2011.
These Regulations have been made in accordance with procedures agreed to by the Commonwealth and the States and Territories, in accordance with the A New Tax System (Managing the GST Rate and Base) Act 1999.
A preliminary assessment of the compliance costs of the Regulations found the expected compliance costs for taxpayers to be low. Accordingly, a Regulation Impact Statement was not required and has not been prepared.
Formal public consultation was undertaken because the Regulations impact on the operation of the GST law. However, the Regulations have no revenue effects.
Overview
The A New Tax System (Goods and Services Tax) Amendment Regulations 2011 (No. 2) were enacted to ensure consistency in the GST treatment of certain goods and services supplied by Australian government agencies. These regulations were introduced to align with the principles set forth in the Intergovernmental Agreement on Federal Financial Relations (IGA) regarding the exemption of Australian taxes, fees, and charges from GST. The Commonwealth, States, and Territories agreed that GST would apply to commercial activities of government while non-commercial activities would be exempt. These regulations were made under the authority of the Assistant Treasurer and in accordance with the A New Tax System (Managing the GST Rate and Base) Act 1999. They commenced on 1 July 2011, the same day as the accompanying legislation, and were developed through agreed procedures among the Commonwealth and the States and Territories. The regulations aim to maintain the GST treatment of specific classes of Australian taxes, fees, and charges, excluding those that do not fall within the IGA principles and thus are not intended to be exempt from GST.
Scope and Application
The A New Tax System (Goods and Services Tax) Amendment Regulations 2011 (No. 2) pertains to the regulation of Goods and Services Tax (GST) under the A New Tax System (Goods and Services Tax) Act 1999. These Regulations are concerned with the GST treatment of certain fees and charges levied by Australian Government agencies, aiming to align with the principles set forth in the Intergovernmental Agreement on Federal Financial Relations (IGA). They specifically address the GST implications of fees and charges that do not adhere to the IGA's exemption principles, thus not being exempt from GST. The Regulations came into effect on 1 July 2011, alongside the accompanying legislative changes, and are intended to ensure consistent GST treatment of certain classes of Australian taxes, fees, and charges. The geographic reach of these Regulations is nationwide, applying to all entities and persons involved in the specified transactions across Australia.
Key Provisions
The main operative sections of the A New Tax System (Goods and Services Tax) Amendment Regulations 2011 (No. 2) concern the specific fees and charges that are treated as the provision of consideration for a supply, thus subject to GST. Section 177-15 of the A New Tax System (Goods and Services Tax) Act 1999 (the Act) authorises the Governor-General to make regulations as necessary to implement the Act. Under subsection 81-10(2) of the Act, the Regulations prescribe certain fees and charges that are to be treated as the provision of consideration for a supply, thereby subjecting them to GST. This contrasts with the exemption outlined in subsection 81-10(1) for certain Australian fees and charges that are not treated as the provision of consideration for a supply.
The Regulations impose obligations on the parties involved to ensure compliance with the GST law. Specifically, they require Australian Government agencies to treat certain specified fees and charges as subject to GST, aligning with the principles set out in the Intergovernmental Agreement on Federal Financial Relations (IGA). The IGA outlines that taxes in the nature of a compulsory impost for general purposes and compulsory charges by the way of fines or penalties are exempt from GST. Conversely, regulatory charges that do not relate to particular goods or services are also exempt, including fees levied on specific industries to finance regulatory activities and government-required licenses or certifications. The Regulations aim to ensure that the fees and charges specified do not fall within these exemption principles and, therefore, are not intended to be exempt from GST.
The Act imposes various offences, penalties, and civil or criminal consequences for non-compliance with the GST law. Under the A New Tax System (Goods and Services Tax) Act 1999, penalties can include both civil and criminal sanctions. Civil penalties may involve fines up to a significant amount, depending on the severity and nature of the offence. Criminal penalties can include imprisonment, particularly for serious or repeated offences. The specific maximum penalties are detailed within the Act, with the intent to enforce compliance and deter non-compliance through both deterrent and punitive measures.