Claiming GST paid on water termination fees: rules to be amended

The Government has announced it will make amendments to the termination fee rules applying in the Murray Darling Basin to allow operators to add GST to termination fees.

The termination fee rules came into full effect on 1 September 2009 and provide a uniform approach across the Murray-Darling Basin to setting termination fees. Under the Water Act 2007, the Minister is required to obtain and have regard to advice from the ACCC on making or amending water charge rules, including the termination fee rules. The Minister for Sustainability, Environment, Water, Population and Communities, Tony Burke, said he had accepted advice from the ACCC recommending amendments to the termination fee rules to allow operators to recover GST from irrigators. Terminating irrigators can claim GST paid on termination fees as an input tax credit, providing they are registered for GST and the GST claim is related to their business activities.

The proposed Water Charge (Termination Fees) Amendment Rules 2010 amend the Water Charge (Termination Fees) Rules 2009, which relates to termination fees in the Murray-Darling Basin. The amendments commence on the day after they are registered on the Federal Register of Legislative Instruments.

Under the amendments, the definition of total network access charge has been amended to explicitly exclude any amount of GST from the calculation of the charge.

Rule 7 has been amended to amend the calculation of termination fee to provide that where GST is payable in respect of a taxable supply relating to the termination or surrender of the whole or part of a right of access, termination fees may be increased by an amount not  exceeding the GST payable in respect of that taxable supply.

Further information regarding the termination fee rules including the proposed amendments, a summary of the amendments, and the ACCC's advice can be found on the Dept of Sustainability, Environment, Water, Population and Communities website.

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