ATO Interpretative Decision
ATO ID 2005/25 (Withdrawn)
Goods and Services Tax
GST and the dairy adjustment levy on flavoured milk supplied by a wholesaler
FOI status: may be released
||This ATO ID is withdrawn because the dairy adjustment levy enacted under the Dairy Produce Act 1986 was terminated by Dairy Adjustment Levy Termination Act 2008 effective from 23 February 2009.
||This document has changed over time. View its history.
Status of this decision: Decision withdrawn 22 September 2017.
|CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.|
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If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Under section 9-70 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) does the entity, a wholesaler that makes a taxable supply of flavoured milk, include the amount of the dairy adjustment levy (DAL) when calculating the goods and services tax (GST) payable on its supply?
No, the entity does not include the amount of the DAL when calculating the GST payable on its taxable supply of flavoured milk.
The entity is a wholesaler. The entity makes taxable supplies of flavoured milk to a retailer.
The DAL is a scheme administered by the Commonwealth Department of Agriculture, Fisheries, Forestry - Australia (AFFA), and is levied on all retail sales of liquid dairy products. The levy rate is 11 cents per litre. The retailer is liable for the DAL, but AFFA collects the amount for the DAL through the processor as collection agent for the Commonwealth. The processor adds this amount onto the price they charge the entity, to recoup the amount of the DAL. Similarly, the entity is a collection sub-agent for the Commonwealth in the collection process and adds an amount onto the price they charge the retailer to recoup the amount for the DAL they paid to the processor.
Reasons for Decision
Subdivision 9-C of the GST Act sets out how much GST is payable on a taxable supply. Under section 9-70 of the GST Act, the amount of GST on a taxable supply is calculated as 10% of the value of the taxable supply.
The value of a taxable supply is 10/11th of the price, where the price is the sum of:
- so far as the consideration is expressed as an amount of money, the amount (including any GST component), and
- where the consideration is not expressed as an amount of money, the GST inclusive market value of that consideration (section 9-75 of the GST Act).
Consideration includes any payment, act or forbearance, in connection with, in response to or for the inducement of a supply of anything (section 9-15 of the GST Act).
The retailer is liable for the DAL, but AFFA collects the amount for the DAL through the processor as collection agent for the Commonwealth. The processor adds this amount onto the price they charge the entity, to recoup the amount of the DAL. Similarly, the entity is a collection sub-agent for the Commonwealth and adds an amount onto the price they charge the retailer to recoup the amount for the DAL they paid to the processor.
The DAL is the retailer's liability and AFFA collects the DAL from the retailer by using the wholesaler and processor as collection agents. As such, when the retailer pays the amount of the DAL that is added onto the entity's price, it is not a payment made in connection with the entity's supply of the flavoured milk, rather it is a payment of the DAL liability to the Commonwealth. Therefore, the amount is not consideration for the entity's supply of the flavoured milk.
Accordingly, the DAL is not included in the price when working out the value of the supply under section 9-70 of the GST Act and as such, the entity does not include the amount of the DAL when calculating the GST payable on its taxable supply of flavoured milk.
|Date of amendment
|22 April 2013
||Section 9-15 added
Date of decision: 16 August 2004
A New Tax System (Goods and Services Tax) Act 1999
Related ATO Interpretative Decisions
ATO ID 2002/533
Goods and services tax
GST supplies & acquisitions
Siebel/TDMS Reference Number: 4180954
Business Line: Indirect Tax
Date of publication: 21 January 2005